Oil, the 21st Century dot.com boom

by Dave

Any short-term falls in oil prices will be merely blips in a long, relentless upward trend.
Finance Week UK

China today consumes as much crude oil per person as the US did in 1905, before mass production of the Model-C Ford and long before the advent of the jet engine,” points out Robin Batchelor, manager of BlackRock’s BGF World Energy fund. “If China and India were to increase their consumption per person to current US levels, these two countries alone would require 160 million barrels per day, more than twice the world’s supply of oil today.”

While, in theory, higher prices should dampen demand especially in emerging markets, this has so far failed to be the case. Russia’s demand remains healthy and car registrations are up around 60% year-on-year and show no sign of waning. On top of that Investec says 85% of global demand growth for oil over the next two years is from countries that are subsidising prices which includes the emerging giants of China, India and the Middle East. “China’s net subsidies are around $45bn a year (a figure which we believe is affordable). However, the two countries where we would question the sustainability of the subsidies on a long-term basis are Indonesia and India, although we would not expect India to reduce subsidies ahead of the election this year,” it adds.