Oil Recovery Will Be a While...
October 22, 2008
– Comments (8)
Naked Capitalism mentions an oil stat that I think is extremely significant, along with some other significant facts.
First, demand fell from roughly 67 million barrels per day to 59 million barrels per day. That's what, about a 12% reduction! That is utterly enormous.
He also contrasts the China demand increasing at 7.8% per year, and I might add that to make sound even better some of oil bulls have gone on about the population of China. Well, China and India are using about 1/4 of what the US and Europe uses so a 2% drop there completely wipes out emerging economies increasing demand.
I didn't see, but also take into consideration that oil in China was highly subsidized, to the point that it was majorly stressing government and they saw what, a 20% price increase and that price is still highly subsidized.
When you actually look at China's numbers the demand growth isn't even close to 7.8%, but more like 4.1%. Right now they are building inventory, that means people aren't buying like they used to.
I think long term oil will be good, but I think there will be a few bad years before it turns around.
On a different topic, Bespoke has a chart of the 10 largest declines on the S&P.
I found it interesting to look at the years that they occurred. 1973 is when the last top 10 declines happened, meaning quite a few of us haven't exactly been through a bear like this.
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