Texas Energy Group
19019 Hwy 71 West
Spicewood TX 78669
Ph (512) 263-8106
Fx (512) 263-8136
Texas Energy Group
2621 Hwy 361, Ste D
Port Aransas TX 78373
Ph (631) 749-4990
Fx (3661) 749-4992
Ph (877) 893-6749
Fx (512) 263-8136
| Demand vs. Supply |
Global demand for oil & gas continues to rise, year after year. While the global demand has been rising at a rate of 2 to 3% per year, other parts of the world are experiencing demand growth of 10 times that rate. One such country is China, whose oil consumption has more than doubled over the past 10 years. A whopping 40% of the total growth in global demand for oil in the last four years has come from China. Last year, China imported 3.2 million barrels of oil per day. But it is now being estimated that china will use almost 8 million barrels per day in the coming year; a 20% increase over the previous year and 10 times the global growth rate. Moreover, China is experiencing a 40% leap in oil imports. This means that China has become a major to the United States for oil. And the same phenomenon is occurring in India, where their oil imports are expected to triple. China and India are the two largest nations in the world. And they are sucking up the world's spare oil capacity.
Unfortunately, there seems to be no end in sight to the ever-growing global demand for more oil. As the global population continues to climb, more and more countries are moving from "undeveloped" status to "developed." In doing so, the experience accelerated growth in industry, construction, and infrastructure. This draws more of the population toward cities, in search of a higher standard of living. And it all demands oil. More and more people around the world are asking, "What will it take to reduce demand?" There is a wide variety of opinions on the matter. But demand for oil will only decline with extreme conservation. Analysts thought $75 a barrel would force this level of conservation. But it didn't. Analysts thought $100 a barrel would prompt drastic conservation measures. It hasn't. They now wonder if it will take $150 or even $200 per barrel for us to finally take the drastic measures required to reduce oil consumption and demand. No one really knows. What we do know, however, is that oil is the lifeblood of modern civilization. And the global appetite for it is growing stronger by the day.
Basic Economics: Demand is rising.
D. King Hubbert was a prominent geoscientist who worked at the shell research lab in Houston, Texas from 1943 through 1964. Dr. Hubbert made several significant contributions to geophysics, but he is most famous for his studies on the capacities of oil fields and natural gas reserves. He predicted that the production from a well would resemble that of a bell curve. His theory was that each well's production eventually peaks and begins to decline. As wells within a field peak and decline, so too does the entire field. This eventually leads to the peak and decline of entire countries and ultimately, a peak in global production. He called it "Peak Oil", and his illustration became known as "Hubbert's Curve." He presented a paper on his theory to the American Petroleum Institute in 1956, in which he predicted that overall petroleum production in the United States would peak in the late 1960s to early 1970s. His prediction came true in 1971, and the U.S. petroleum production has been in a steady decline ever since. And the same fate has fallen on many other countries around the world.
"Peak Oil" does not imply that we will "run out" of oil. It is the point at which 1/2 of the world's oil has been extracted and worldwide production begins to decline. This phenomenon is occurring around the world. The number of new discoveries worldwide peaked in 1964 and has been declining for the past 43 years. Fortunately, technological advancements have enabled us to get more oil & gas from discoveries that have already been made. But we've been squeezing the oil-soaked sponge so hard for so long, that production rates are peaking and declining around the globe at an alarming rate. Of the estimated 100 oil-producing countries around the world, over 60% have peaked and are now in decline. Saudi Arabia, the world's 2nd largest producer, peaked in 2005. The United States is the 3rd largest producer in the world. Our production peaked in 1971. Iran is the world's 4th largest producer. It peaked in 1974. Mexico is the 6th largest producer in the world. Mexico's production peaked in 2004. The North Sea is the 7th largest producer in the world. The North Sea peaked in 2001. Of the 7 largest oil-producing regions in the world, all but 2 have peaked and are now in decline.
Although it is not widely known, Russia is now the world's largest oil producer. Their production is improving slightly, but their Alfa Bank production is stalling and they are believed to be the next to peak. Besides, considering our long, chilly relationship with Russia, it is not likely that they will become a major supplier to the U.S. The only other member of the top 7 that has yet to peak is China. Unfortunately, China's production only grew by 1.7% last year, which isn't nearly enough to offset their skyrocketing demand. China currently consumes 100% of its production and like the U.S., is now a major importer of oil. Their oil imports are expected to jump 40% this year.
|As global demand continues to outstrip global supply, oil prices have more than quadrupled over the past four years. But unlike a single year in which a hard frost in Florida can send orange juice prices higher, the supply and demand dilemma with oil & gas is expected to continue. World demand for more oil & gas continues to rise while world production levels cannot keep pace. It's basic economics.
RISING DEMAND + DECLINING SUPPLIES = HIGHER PRICES
The culmination of these two events leads us to one long-term opinion:
The price of oil will continue to rise.
Disclaimer: Information herein is not intended to be any form of solicitation. Information found on this page and throughout this entire website is neither an offer to buy or sell securities or other investments.
© Copyright 2013 Texas Energy Group, LLC
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