Undecided
03-21-04, 07:59 PM
“FOR the last 30 years, the price of oil has been the single most important determinant of the economy and the stockmarket.”... They claim that the oil price will soar above $100 a barrel (by the end of the decade)...Such a spike, they say, would drag the global economy into a severe recession
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On the face of it, oil consumers have much to worry about. On Wednesday March 17th, American light crude ended trading in New York at $38.18 a barrel, the highest closing price since October 1990, in the run-up to the first Gulf war. So far this year, consumers have paid an average price of $35 per barrel (based on American light crude), compared with $31 in 2003. Prices have been driven higher in the past week by concerns about terrorism in the wake of the Madrid bombings. Add to that worries about stocks in America: on Wednesday, the government released data showing that gasoline stocks fell last week by 800,000 barrels, to a level 5% below their five-year average, raising fears of a supply crunch (though crude stocks have risen slightly from their near-30-year lows in the winter).
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The same is true of China, which has a currency peg to the dollar and is thus fully exposed to the rising oil price, and has also, like many other developing countries, become much more reliant on oil in recent years as its economy has moved from agriculture to heavy manufacturing. Higher prices have not dented Chinese demand. In fact, China has just passed Japan to become the world’s second-largest oil consumer.
http://www.economist.com/agenda/displayStory.cfm?story_id=2516309
Not good news, some have been arguing that oil supply will not be able to satisfy demand in very short order. This imo at least is true, the world has a certain capacity for producing oil (don't confuse reserves with production). With most of the world's oil being within the realm of the Islamic world and with the increase in tensions (when does it ever decrease is the real question) her economies will begin to have what it never had before...options. Before the Middle East had only three real options to sell her oil, to Europe and to the America's or Japan. All of which are traditional allies of the United States, thus politically and economically these states are bound to the US foreign policy directly or not. The new world order is going to greatly destabilize this, and Americans will begin to feel it. Economically the US is a car country; no one can deny Americans like their cars. But Americans have a bad habit of buying big. This is best exemplified by the fact that if Carters gas restrictions, if not repealed by Reagan would have made the US independent of Middle East importations. But alas that sadly that opportunity has gone, and the US is now game to a massive game of money and power struggles with new powers. China as said in the article is now the world's second largest oil consumer. The Chinese are big because they had last year a 13% jump in car sales, and it's still growing. This is best shown in this quote:
China's oil demand is projected by EIA to reach 10.9 million bbl/d by 2025, with net imports of 7.5 million bbl/d, making it a major factor in the world oil market.
Indeed not only a major factor in the oil market but in the world economy. She can in theory at least greatly challenge American supremacy in the Middle East region. It is expected that China will base her carriers (which are being built now) in Pakistan in the port of Gwadar. America can pull off Iraq's because no other power can or has the will to stay in the region, but as shown before China will move in. But imo at least this will greatly change, Iran will become China's Saudi Arabia. Although personally I don't think the US will suffer too much, because nations like Japan, and the EU (I know it's not a nation) will transform into a green economy faster then the US, or China for that matter. Other states like India which is very close to the Middle East will also exhort power over these states. The economics and geo-politics of oil are interesting even to the most causal of observers.
Undecided
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On the face of it, oil consumers have much to worry about. On Wednesday March 17th, American light crude ended trading in New York at $38.18 a barrel, the highest closing price since October 1990, in the run-up to the first Gulf war. So far this year, consumers have paid an average price of $35 per barrel (based on American light crude), compared with $31 in 2003. Prices have been driven higher in the past week by concerns about terrorism in the wake of the Madrid bombings. Add to that worries about stocks in America: on Wednesday, the government released data showing that gasoline stocks fell last week by 800,000 barrels, to a level 5% below their five-year average, raising fears of a supply crunch (though crude stocks have risen slightly from their near-30-year lows in the winter).
----------------------------------------------
The same is true of China, which has a currency peg to the dollar and is thus fully exposed to the rising oil price, and has also, like many other developing countries, become much more reliant on oil in recent years as its economy has moved from agriculture to heavy manufacturing. Higher prices have not dented Chinese demand. In fact, China has just passed Japan to become the world’s second-largest oil consumer.
http://www.economist.com/agenda/displayStory.cfm?story_id=2516309
Not good news, some have been arguing that oil supply will not be able to satisfy demand in very short order. This imo at least is true, the world has a certain capacity for producing oil (don't confuse reserves with production). With most of the world's oil being within the realm of the Islamic world and with the increase in tensions (when does it ever decrease is the real question) her economies will begin to have what it never had before...options. Before the Middle East had only three real options to sell her oil, to Europe and to the America's or Japan. All of which are traditional allies of the United States, thus politically and economically these states are bound to the US foreign policy directly or not. The new world order is going to greatly destabilize this, and Americans will begin to feel it. Economically the US is a car country; no one can deny Americans like their cars. But Americans have a bad habit of buying big. This is best exemplified by the fact that if Carters gas restrictions, if not repealed by Reagan would have made the US independent of Middle East importations. But alas that sadly that opportunity has gone, and the US is now game to a massive game of money and power struggles with new powers. China as said in the article is now the world's second largest oil consumer. The Chinese are big because they had last year a 13% jump in car sales, and it's still growing. This is best shown in this quote:
China's oil demand is projected by EIA to reach 10.9 million bbl/d by 2025, with net imports of 7.5 million bbl/d, making it a major factor in the world oil market.
Indeed not only a major factor in the oil market but in the world economy. She can in theory at least greatly challenge American supremacy in the Middle East region. It is expected that China will base her carriers (which are being built now) in Pakistan in the port of Gwadar. America can pull off Iraq's because no other power can or has the will to stay in the region, but as shown before China will move in. But imo at least this will greatly change, Iran will become China's Saudi Arabia. Although personally I don't think the US will suffer too much, because nations like Japan, and the EU (I know it's not a nation) will transform into a green economy faster then the US, or China for that matter. Other states like India which is very close to the Middle East will also exhort power over these states. The economics and geo-politics of oil are interesting even to the most causal of observers.
Undecided