Saturday, September 19, 2009
Motor Gasoline Consumption Vs Commercial Distillate Consumption
The U.S. Department of Energy's E.I.A. provides data clearly showing that the U.S. total consumption of Petroleum Products will decline by 800,000 barrels per day ("bpd").
But the consumption of Gasoline in 2009 will eclipse 2008, ergo... ALL of the decline in petroleum consumption came from diesel fuel, jet fuel, and heating oil. It would seem consumers, tapped out as they are, do not see gasoline prices as high enough to make any changes in their driving habits. That would argue for much higher oil prices in any kind of expansion, particularly if you consider the number of cars being sold in the non-OECD countries. In fact, more cars will be sold in China than the U.S. in 2009. If gross world oil supplies do not rise, by mathematical necessity there will simply be less oil available to the U.S., and the competition for the remaining oil shipped on the world's oceans would intensify.
There is enough evidence to make a compelling case that the U.S. economy cannot long withstand Oil consumption in excess of 4% of GDP - or about $80 per barrel in today's dollars and GDP numbers. If this proves to be true, and if the competition for imported Oil continues to grow, it would seem that there will be some significant gyrations in economic output as inefficiencies are rung out of U.S. petroleum consumption. It would seem that with Oil currently trading at $72 per barrel that the U.S. is very close to having its economic expansion cut short. However, this does not mean that WORLD economic output will decline at $80 - but it probably does mean that that is the case for the big industrial importers - with the reverse being true for the Oil exporters.
The US$ trend simply does not support the deflationist argument. When investing or trading it is best not to deny what your own eyes are seeing - especially if you are on the wrong side of the trade.
Posted by The Short Story Man at 2:05 PM