bigpike: I don't believe demand destruction in the U.S. right now is severe enough to cause a secular trend revesal in crude oil. The reason why is that while the U.S. demand is not growing, the population is growing and the demand is basically flat, and the global demand keeps growing, especially in China and India (albeit at slightly slower rates than the extremely high rates in recent years) and from the OPEC countries that have high demand for oil for their domestic growth that has accelerated.
The demand destruction in the U.S. is overstated because the reality is that many more people talk about changing their energy consumption activities than are actually doing it because while gasoline is over $4, it has not risen enough to cause more than about 3-5% of the population to change. But the U.S. slowdown/recession is taking a couple of percentages off of the growth of China and some other countries.
I know that very few people have traded in their SUVs for economy cars in my neighborhood because they would take too big a loss. In fact, in my tract, not one of the two hundred or so SUVs have been traded in. They might drive a bit less though.
If gasoline goes up another 50% in the next year or two, then we could see more demand destruction.
Our whole economy is based upon fossil fuels and rising prices will hurt the economy so in that way there will be less demand and usage of fossil fuels but businesses still have to rely on it to move products and produce products.
BTW, supply is about to shrink if it has not already as production topped out at 85 million bpd globally a year or two ago and this year it may not quite get there.
So global production declines may affect oil prices more than U.S. reductions in demand (see Simmons' Twilight in the Desert book).
I don't think the U.S. or the world is quite ready for severe demand destruction, and that it won't occur for a few years yet but that it will eventually.
It takes time for a global recession to develop, especially when the BRIC countries are still growing strongly.
China and India and some other developing countries are still going to grow at 6-9% in the next 1-2 years, imho, and so that will prevent a global recession for a while.
But the U.S. stock mkt is in a bear mkt, with 3-5 months moves up and down, it appears.
jmho,
drbob |
