Black Gold

In this post I am going to talk to you mainly about the demand side of the oil market. It is another one of those topics that can't be discussed thoroughly in one or two posts, but you have to start somewhere.

Whether it be common knowledge or not, Asia, specifically China and India, are growing and industrializing at an extreme pace. Their increase in demand for oil and other natural resources is souring. Right now I would like to focus on China and its demand for oil. From 2005 to 2006 China’s oil imports jumped a WOPPING 45%. If you were to put this on a basic graph you would see the extreme amount of exponential growth of this number. I did just that and came to the conclusion that at a growth rate of 45% /year, in 10 years, China will need approximately 1600 barrels of oil for every SINGLE barrel that they use today, and that’s just China!!! India is experiencing the same phenomenon. These numbers are a result of the Chinese people basically coming out of the dark ages. They are assimilating to western customs: buying cars, buying houses, and consuming resources like they have never done before.

Let's talk about the United States. When it comes to oil consumption per capita, we are the King. We dominate this statistic and have for a long time. There are two main reasons for this. The first is our life style. Americans love their gas guzzling SUV's, we are inept in the mass transportation department, and our day to day activities require huge amounts of energy. The other reason has to do with the U.S. military. The U.S. military is the single greatest energy/money consuming entity in the whole world. Iraq is not near and any end. The situation is hostile at best in Iran. The U.S. military wil run and run until we can't deficit spend to run it anymore.

Conslusion: China, India, and other countris in the process of mass industrialization are going to need huge amounts of oil and other natural resources to achieve their goals. The U.S. has several years to go before the military and/or American citizens cease to use the amount of energy that they do. This all means higher prices, and is why I'm invested in oil.

There will be a detailed piece on the supply side of the oil market coming soon.