Oil Bulls: Peak Oil? Try Peak Demand. 11 billion mile drop in March 2008.

Discussion in 'Economics' started by ByLoSellHi, May 28, 2008.

  1. Perfect Oil Storm Brewing in the U.S.
    by: Eric Fox posted on: May 28, 2008 | about stocks: DBO / DCR / OIL / USO


    Everyone talks mercilessly about Peak Oil, but is it time to introduce the concept of Peak Demand? At least in the United States? The Federal Highway Administration [FHWA], a part of the United States Department of Transportation [DOT], released its monthly "Traffic Volume Trends" report last Friday.

    The report showed that estimated vehicle miles traveled [VMT] on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. The report also said it was the first time March travel on public roads fell since 1979.

    The 11 billion mile drop in March 2008 compared to March 2007 was the sharpest yearly drop for any month in FHWA history.
    This report was first issued in 1942, so there is 66 years of data.

    The negative demand trends should continue in April and May since gasoline prices have moved up sharply from March.

    Predictably the market ignored the report, and no doubt oil bulls spent all weekend mining the data for something to support the bull case.

    The perfect storm seems to be brewing for Oil demand domestically right now. The main use of oil in the United States is for transport, and we are starting to see the effects of high gasoline prices on demand as people drive less. If that wasn't bad enough, ethanol production is starting to take market share from gasoline, leading to even less demand for oil.

    We put forth our opinion on the fundamentals for oil in our previous post on May 12.

    We still maintain that fundamentals don't support current prices for oil. Emerging economies don't matter. What matters is world wide supply and demand for the commodity, and as we stated earlier, a 5% drop in demand in the United States would translate to a decline in demand twice China's oil consumption growth last year.

    Read the Press Release.
  2. you fool. It's aggregate demand. Oil is used by every nation in the world for a lot of other things. To look at this one statistic is foolish.

    The fair price for crude oil is the current price. Which may change tomorrow by going up or down.

    And the BRIC will be the ones dictating future demand, not America.

    2.78 billion people and double digit GDP growth rates will kick the shit out of America as the main consumer of crude. If America were to stop all oil consumption today, I give the BRIC a decade to pick up the slack.
  3. Keep letting your opinion get in the way of the black and white numbers.

    For the hard of hearing (reading): "...a 5% drop in demand in the United States would translate to a decline in demand twice China's oil consumption growth last year."

    Good luck to you.
  4. blah, blah, blah.

    Or is it baaaa, baaaa, baaaa? Peak oil sheeple.


    World Oil Demand Flat, Prices Boom…

    The chief market strategist for one of the world's leading oil industry banks, David Kelly, of J.P. Morgan Funds, recently admitted something telling to the Washington Post, “One of the things I think is very important to realize is that the growth in the world oil consumption is not that strong."

    One of the stories used to support the oil futures speculators is the allegation that China 's oil import thirst is exploding out of control, driving shortages in the supply-demand equilibrium. The facts do not support the China demand thesis however.

    The US Government's Energy Information Administration (EIA) in its most recent monthly Short Term Energy Outlook report, concluded that US oil demand is expected to decline by 190,000 b/d in 2008. That is mainly owing to the deepening economic recession. Chinese consumption, the EIA says, far from exploding, is expected to rise this year by only 400,000 barrels a day. That is hardly the "surging oil demand" blamed on China in the media. Last year China imported 3.2 million barrels per day, and its estimated usage was around 7 million b/d total. The US , by contrast, consumes around 20.7 million b/d.

    That means the key oil consuming nation, the USA , is experiencing a significant drop in demand. China, which consumes only a third of the oil the US does, will see a minor rise in import demand compared with the total daily world oil output of some 84 million barrels, less than half of a percent of the total demand.

    The Organization of the Petroleum Exporting Countries (OPEC) has its 2008 global oil demand growth forecast unchanged at 1.2 mm bpd, as slowing economic growth in the industrialised world is offset by slightly growing consumption in developing nations. OPEC predicts global oil demand in 2008 will average 87 million bpd -- largely unchanged from its previous estimate. Demand from China , the Middle East , India , and Latin America -- is forecast to be stronger but the EU and North American demand will be lower.

    So the world's largest oil consumer faces a sharp decline in consumption, a decline that will worsen as the housing and related economic effects of the US securitization crisis in finance de-leverages. The price in normal open or transparent markets would presumably be falling not rising. No supply crisis justifies the way the world's oil is being priced today.

    Big new oil fields coming online

    Not only is there no supply crisis to justify such a price bubble. There are several giant new oil fields due to begin production over the course of 2008 to further add to supply.

    The world's single largest oil producer, Saudi Arabia is finalizing plans to boost drilling activity by a third and increase investments by 40 %. Saudi Aramco's plan, which runs from 2009 to 2013, is expected to be approved by the company's board and the Oil Ministry this month. The Kingdom is in the midst of a $ 50 billion oil production expansion plan to meet growing demand in Asia and other emerging markets. The Kingdom is expected to boost its pumping capacity to a total of 12.5 mm bpd by next year, up about 11 % from current capacity of 11.3 mm bpd.

    In April this year Saudi Arabia 's Khursaniyah oilfield began pumping and will soon add another 500,000 bpd to world oil supply of high grade Arabian Light crude. As well, another Saudi expansion project, the Khurais oilfield development, is the largest of Saudi Aramco projects that will boost the production capacity of Saudi oilfields from 11.3 million bpd to 12.5 million bpd by 2009. Khurais is planned to add another 1.2 million bpd of high-quality Arabian light crude to Saudi Arabia 's export capacity.

    Brazil 's Petrobras is in the early phase of exploiting what it estimates are newly confirmed oil reserves offshore in its Tupi field that could be as great or greater than the North Sea . Petrobras, says the new ultra-deep Tupi field could hold as much as 8 billion barrels of recoverable light crude. When online in a few years it is expected to put Brazil among the world's "top 10" oil producers, between those of Nigeria and those of Venezuela .

    In the United States, aside from rumors that the big oil companies have been deliberately sitting on vast new reserves in Alaska for fear that the prices of recent years would plunge on over-supply, the US Geological Survey (USGS) recently issued a report that confirmed major new oil reserves in an area called the Bakken, which stretches across North Dakota, Montana and south-eastern Saskatchewan. The USGS estimates up to 3.65 billion barrels of oil in the Bakken.

    These are just several confirmations of large new oil reserves to be exploited. Iraq , where the Anglo-American Big Four oil majors are salivating to get their hands on the unexplored fields, is believed to hold oil reserves second only to Saudi Arabia . Much of the world has yet to be explored for oil. At prices above $60 a barrel huge new potentials become economic. The major problem faced by Big Oil is not finding replacement oil but keeping the lid on world oil finds in order to maintain present exorbitant prices. Here they have some help from Wall Street banks and the two major oil trade exchanges—NYMEX and London-Atlanta's ICE and ICE Futures.
  5. Daal


  6. Pekelo


    Man, you are an idiot...

    It is pathetic when someone is actually proving himself wrong and of course doesn't realize it.
    It is not the demand that is peaking but the production, having been in a plateau since 2005. Of course eventually demand can not be bigger than production, so seemingly demand is peaking too, or what it is called demand destruction is happening by price increase.

    Oil's price is going to fluctuate in the short term, so drawing conclusions based on daily fluctuation is just stupid...
    #10     May 29, 2008