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Stock Ideas Investors Daily Edge The U.S. is by far the biggest user of oil in the OECD
Stock Ideas Investors Daily Edge The U.S. is by far the biggest user of oil in the OECD 
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| The U.S. is by far the biggest user of oil in the OECD |
| Tuesday, 17 June 2008 | ||||||||
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Don’t kill the messenger, but as high as crude prices are, they’re going to go higher. This despite the impact that the U.S. economic slump is having on oil demand. The U.S. is by far the biggest user of oil in the OECD (Organization of Economic Cooperation and Development) and the latest forecast has OECD consumption dropping by 240,000 barrels per day. The U.S. is using 400,000 fewer barrels per day than last year. Global consumption is slowing too. The International Energy Agency (IEA) says the world will be using 70,000 fewer barrels per day than in its last monthly report. This is the fifth month in a row that the IEA has reduced its oil use projections. But while global oil consumption is ratcheting down slowly but surely, crude production is declining faster. The IEA says in the same report that global crude production will drop by an additional 300,000 barrels per day. Right now, the world is consuming 86.77 million barrels per day. But supply stands at 85 million barrels. In other words, we have a supply deficit and it’s getting worse. And here’s some more bad news. As fast as gas prices are increasing, crude prices are going up even faster. If gasoline prices had kept up with the price of crude prices over the past year, gas prices would be over $5.00 right now. Believe it or not, crude prices aren’t going up forever. But gas prices will probably continue to lag behind crude prices on the way down, just like they did on the way up. I’m telling you this now so you don’t scream “bloody murder” when it happens. Now, if you want a scapegoat for why we’re spending a ridiculous $700 billion a year on oil imports, you can of course point your finger at our bumbling government. To say it has a wrong-headed energy policy would be implying that it has an energy policy of some kind, and that would be a gross exaggeration.
 From a lack of energy conservation policies to lax CAFE (corporate average fuel economy) standards, the U.S. government has blown it. The government doesn’t seem to realize it has put us in this situation. And, similarly, it has no idea how to get us out of it.But at least the U.S. government is not guilty of shielding consumers from the steep rise of fuel prices – like they’re doing in Asia and countries like Mexico and Egypt. It’s Asian growth that is driving oil consumption – not growth here or in Europe. And, not uncoincidentally, it’s in Asia where prices have crept rather than leapt higher this year. In China, Malaysia, Indonesia, Vietnam and other Asian countries, heavy subsidies have contributed to the sustained growth in oil consumption. Having said that, we’re the oil pigs. Not them. India consumes less than one barrel. China is over but not my much. The U.S. has the third highest per capita consumption. And given our large population, we’re by far the biggest users. Once these developing countries start to catch up to us in planes, trains and automobiles, global oil consumption needs will be much higher than they are. But how much higher? It’s a bit tricky when you’re projecting 10-20 years into the future. Next week I’ll give you my thoughts on what is waiting for us down the road, and who if anybody will be leading the next energy revolution. Good Trading, Andrew Gordon P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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