Jan 092012
 
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Throughout 2011, those who study and invest in oil predicted that oil would be tight in the second half of 2012 and take off in 2013. Of course there are a number of other possibilities but no good ones.

We are producing more oil than before, mostly with deep water drilling and fracking with chemicals deep in the earth but demand for oil is also rising and will outpace production. Just consider the 600 billion or more Chinese and Indians who will demand the lifestyle of  middle class Americans over the next three decades. If it weren’t for the lawless bunch that caused the global collapse in 2008, we would now be having a problem with oil shortage and high prices. Now we will have that and still have the global banking problem, the housing problem, the national debt problem, and for the U.S. and other developed nations, a permanent unemployment problem.

There are reasons why a number of  oil forecasters predict oil will become a growing  problem, starting this year.

China’s number one priority is to secure large sources of oil to continue making junk for export to America and to supply its citizens with enough to run 240,000,000 more vehicles by 2035. And don’t forget India. One source says we can have one billion more vehicles globally by 2035. That’s a major hurdle with no solution at the moment.

China is frantically roaming the world, buying up oil and other resources to have when shortages arrive. Fatih Birol, chief economist for the International Energy Agency (IEA), says that China”s “growing need to import fossil fuels to meet its rising domestic demand will have an increasingly large impact on international markets.”

The Chinese are busy accessing oil and other liquids from our neighbor to the north.  The reporter complains that “while we sort out where we stand, Chinese money keeps buying up Canadian oil (scroll down to number 6 article) and gas reserves.”

And in the United States, which is a nation that depends heavily on imported oil and is headed for oil shortfalls soon, Korea, China and India have launched a shopping trip for oil, natural gas and liquids.

Recently, companies from…these three countries…have bought land in the oil-rich states of Texas, Colorado and Wyoming.” (Reuters) And we will need our resources, possibly as soon as next year, if Iran does something stupid. This is an example of “free trade”. Nations don’t count in a corporate-run world. It’s all about the deal. In addition, China is building refineries and is in the process of constructing a large emergency reserve, which will put upward pressure on the price of oil. India, also, is building up a large petroleum reserve.

In the Middle East, oil-exporting countries (OPEC) have  added $10.00 per barrel as a cost of social spending on their citizens, in order to keep them from the same fate as Libya’s former leader.

Sabine Schels, senior director and global commodity strategist, Bank of America Merrill Lynch Global Research, told CNBC “Political unrest is certainly part of why the oil price is getting so supported despite the decline in the macro environment.”

And “if energy exploration and development in the Middle East falls below $67 billion annually…the IEA says “consumers could face a near-term rise in the oil price to $150/barrel.” Despite the sluggish economy, the growing demand from the “emerging countries” will continue to push the price up.

SAUDI ARABIA AND OTHER OIL PRODUCERS MAY NOT BE ABLE TO MEET CUSTOMER OIL DEMANDS

A huge problem in the Middle East oil exporting countries is that they also have an exploding population and they are having to divert oil to manage a large population living in a desert atmosphere. Again, the demand for vehicles will mean more oil for domestic use and less to export. And they have to build water resources and provide air-conditioning.

Reuters reported (April 25, 2011) that the growing number of citizens of Saudi Arabia and Kuwait are using larger amounts of subsidized gasoline for that drive through the desert.

“In Saudi Arabia oil consumption has climbed 50% in the last decade to an estimated 2.7 million barrels a day. Saudi Aramco, the national oil company, projects that demand could hit 8.3 million barrels a day by 2030.

“In 2010 Saudi Arabia exported 7.5 million barrels a day. Add in estimated spare capacity of 2.8 million barrels a day. And then to the very scary math: If Saudi consumption rises to 8.3 million barrels a day, the country will consume almost all of the 10.3 million barrels a day it has in exports and spare capacity.”

Another example: “Oil consumption in Kuwait is rising so fast that it will have to start reducing oil exports within a decade, according to the Brookings Institution.” See here.

Now Iraq: Just to clear this up. Iraq was an illegal war. Bush had planned that invasion before he was elected and that was on the agenda the first security meeting in January of 2001. A Shia religious leader, early in the war, said that they would wait until the Americans go home and then they would settle who rules Iraq, the Sunnis or the Shias.

The bombing attacks on the Shias by the Sunnis are underway. This was predicted. Now what will Iran do to help the Shia? And not mentioned in the regular press much, but Iraqi Christians are being killed and driven out of Iraq.

Iraq has a large oil field. Construction is underway and oil is flowing. What will be the threat for the fields? It would seem that Iraq could be a bit of a problem. Would America return if the situation got out of hand? And do it all again. I don’t think so.

As far as oil prices, many see the price going up as 2012 comes to an end. How much depends on a lot of factors. But we know that by 2035, 75 percent of currently operating oil fields won’t be producing anymore. And there aren’t any more large oil finds out there so far. Demand will be up. And it looks like supply will have a problem keeping up.

And remember that over 6000 products can’t be made without oil, including antihistamines.