Stable Oil?

Really?

CNN/Money has an interesting article on the Oil Industry. If you buy in to what they’re saying, the message is that we’ve reached a stable point in the oil industry, but we’ve learned anew the lesson not to depend upon petrochemicals. [link to article]

“The energy intensity of the U.S. economy has actually dropped by about 2% a year every year since the early 1980s. In the next couple of years Deutsche Bank expects it to decline by around 3% as people buy more fuel efficient cars and respond in other ways to the high prices of 2004-2008 and as government conservation measures kick in.

“With economic growth expected to remain at a sluggish 2.5% or so over the next couple of years, that translates into an actual drop in U.S. oil consumption.

Apparently, this is what the US Government is saying, too.

The article raises the question about countries like China, who are emerging as first-world contenders. There’s an interesting take on that, too:

“by the time hundreds of million of Chinese are buying cars, the fleet could very well be all-electric.”

Could there be a softening of the geopolitical situation around petroleum?

“geopolitical flare-ups in oil-rich nations are much less apt to affect prices now that the world has the ability to produce much more oil than it is using. Indeed, this lack of spare capacity was an underlying reason oil prices got so high in 2008. That year, spare capacity hit a low of 1 million barrels a day, a mere tanker load away from demand exceeding supply.

“Now that number is almost 4 million barrels a day, and expected to grow to 4.5 million barrels a day by the middle of next year.

"There's so much spare capacity right now," said Armstrong, noting that oil prices in the $70 range are still high enough to insure new supplies are being brought online. "It's very difficult to see prices much higher."

A mere super tanker away from exceeding supply? Whoa. That’s some SERIOUS Just-In-Time manufacturing. No wonder the Somali pirates were getting $10M ransoms for hijacked tankers. If the supply now exceeds demand, the going rate for a hijacked tanker has just gone down, too, I bet.

Over at www.gasbuddy.com, I used their charting tools to show US gas prices (and my local market) over the past 72 months. The presumption is that we could expect prices to hold steady at 2005/2006 levels for a while.