« Reply #33 on: August 30, 2005, 07:48:02 pm »
I was not laughing at you, I was laughing at the hella no comment and stuff. My apologies.
The fundamental argument for higher oil involves increasing demand and inelastic supply. Increases in consumption, mainly in India and China, are estimated to result in a 5% per year increase for Asia's total consumption. Although there is domestic production of oil, of course, spare capacity rests with OPEC countries, particularly the low-cost producer Saudi Arabia, which is estimated to have a quarter of the world's oil. Saudi Arabia is now pumping 11 million barrels of oil per day, almost full capacity, so every small increase in demand has a big impact on prices. With demand increasing and supply already allocated, the price of oil will continue to climb.
The fundamental argument for lower oil is that there is plenty of oil. Americans consume around 20 million barrels of oil per day. This is a huge amount, but increasing only very gradually, at around 1% per year. Europeans consume around 15 million barrels per day, but growth in European consumption is also relatively stable. Asia now consumes about 18 million bpd (with China alone consuming more than 6 million). Due to technological advances and new discoveries, the world's oil supply, rather than dwindling, actually grows year after year. Supply problems, therefore, are ultimately short term. In response to greater demand, new supply is brought online. And if no new supply comes online, then demand slackens. Some analysts also argue that speculation is currently driving the energy markets. Oil is a bubble, they say, akin to the South Sea bubble, or the Dutch Tulip Mania -- the result of speculation and greed.
