This
and other three texts below contain short summaries on the status
of the nation states that now have, and will in the future, the greatest
effect on oil prices. They have been kept separate from the body
of the report The
Future of Fuel Prices because they are essentially political
in nature.
In the last
ten years the world has gone through a period of unprecedented growth,
driven primarily by the U.S., China and India. The later two represent
the major growth sector for growing oil demand, while the older industrialized
west has greatly slowed in the rate of fuel usage for a variety of
reasons, not the least of which is improved efficiency and the transfer
of manufacturing to so-called third world.
Very high
oil prices over the last year or so are putting the brakes on China
and India. Both nations recognize that they cannot allow their unprecedented
growth in oil use to continue. Therefore, they have embarked on major
programs to improve efficiency plus development of other fuel sources.
These are coming rapidly into effect, motivated by too much of their
currency leaving the nation. Therefore, their rate of oil consumption
will not be as high as experts previously predicted, and this will
help to relieve upward oil price pressures. Other factors to slow their
oil consumption will include the fact the neither of these nations
have the road infrastructure needed to sustain previous levels of automobile
growth, for which a strong incentive to slow the rate of auto purchases
is emerging.
On the down
side, both these nations, particularly China, have made concerted efforts
to tie up future supply by means of long term contracts and other political
deals. A good example is China's recent deals with Castro over recent
Cuban finds, as well as Chinese deals with Iran. At one time I used
to fear these totalitarian nations, but time has a way of revealing
their inherent weaknesses. Essentially what we have is thieves making
deals with thieves. History is strewn with the wreckage of such deals
that tend to be short-lived. India has recently discovered that the
U.S. is not her enemy and China must mind her manners with her largest
customer, lest she have no money to even buy oil.
Back
to The Future of
Fuel Prices
Posted
September 27, 2006
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