The World Demand Growth Conundrum...

Mike Watkins (a frequent commenter here at TOD) has a piece out today that's an interesting read. Lots of information/charts and the like, especially on Chinese demand.

Here's a snippet:

"OPEC threw down the gauntlet a week ago, as promised then by OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, if prices remained high, the oil cartel would take some action. Even major producing nations such as Norway admit that only middle eastern sources have the ability to ramp up capacity in relatively (months) short time frames. If price stability, or indeed reduction, is the goal, the only meaningful action is of course to increase supply. The sixty-four thousand dollar question is, can they? And can they increase supply quickly enough to satisfy demand increases for this year and next?"

and, Mike, note how I spelled "conundrum." (*laugh* just playin...I owed you that for your assertion that I said $60/bbl "caused" the stock market to go down last week. If you look at the post more closely, the post says "the market dropped a good bit of value when oil went over $60/bbl." Correlation is not causality, and I believe that's what that language conveys.)

Go to the postings for today

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LOL my spell checker saves me most, but not all, of the time.

Agree with you that correlation is the right term for oil price/market effect. Its very strong at times. Big round numbers like 40, 50, 60 are worse - but the real issue is the direction of trend.

Earlier in the spring as crude was trending lower the intraday correlation between crude and stock markets all but disappeared except in especially volatile sessions. Stock indicies also dropped over much of the same period crude was heading down.

The bottom line is that other fundamentals take centre stage when oil is chopping sideways or trending down; when crude is trending higher, it assumes greater influence on market psyche. At least that's the observation I have made. I've run some numbers through analysis that back up the casual (but constant) observations mde day in day out.

ps, only semi-related to peak oil, just wait until people realize how high natural gas has held so far this year... just under double the average price in this season in 2003. Invest in sweaters for the winter?

Good article at the Independent Hamish McRae: Oil at $100 a barrel will do more to save the planet than all the wind farms in the world

Consider a world where oil remains not just at its present levels but rises above $100 and shows every sign of staying there. If we want to increase our living standards we would start to ask whether we want to spend our money on energy or on something more agreeable. Expensive energy would give a huge drive for people, companies and governments to save it wherever they possibly could.

More than this, if economies are to go on delivering better standards of living, the only way to do so will be to become "greener" - to do the opposite of China, which is using more energy per unit of output, by increasing output without increasing energy use.

What we cannot know is whether the oil price is already sufficiently high to force radical change. On the other hand we can be pretty sure that if it isn't, then it will go still higher. We shall, I suspect, see some brutal movements in energy prices in the next few years, particularly if the world is indeed close to the peak of its oil production.

Another interesting item GSPC strikes24-27 tcf gas in KG basin, among world’s largest

At present, India produces 80m cubic metres of gas per day. Of this, 65m cubic metres is available for commercial use. GSPC’s find will increase India’s total gas production to 100m cubic metres per day.

In other words, the Deendayal field alone will account for a fifth of India’s total gas production. Add to this the estimated gas production by Reliance, and India could more than double its output five years from now.

The above gas field would be equivalent to 4.5b barrels of oil. The conversion is 5487 cu ft of gas equals 1 barrel of oil