Monday, August 22, 2005

The picture that says it all about the oil crunch

The oil crunch is coming, and it's due to the western world refusing to abate the demand for oil. The demand for oil will eventually outstrip the supply of oil, the debate is "when".

The picture comes from this CNN article: Oil surges to $66 a barrel (Crude reaches another historic mark after demand agency forecast, refinery snags and Iran concerns; August 11, 2005: 4:11 PM EDT, CNN.COM)

All this year the price of oil has surged, and surged, and surged. It started out in the neighborhood of $30 per barrel, and has more than doubled this year as several considerations conspired to raise the price. Most of the cause is the continuing wars and tensions in the Middle East, and the news articles have also cited the various huricanes etc.

I think that beyond both of those is the simple fact that the western world, the U.S. primarily, has continued to demand more oil. Added on top of U.S. demand is the ramping up of industrialization in China, India and the other countries receiving outsourcing business. For example in China it used to be common to ride bicycles, and the populace is moving towards individual car ownership. They're doing so based on the American example, but perhaps not seeing the disastrous cost we are enduring because of individual car ownership. Not that America sees that cost, either.

In any case the picture speaks reams of information in such a simple graphic.

The first thing to notice is that demand is slightly outpacing supply. Hmmm, economics 101 says that's going to cause a rising price right there.

The second thing to notice is the imbalance between the suppliers, and the customers. The suppliers are all the OPEC countries, while the customers are the industrialized world, and the two sets of countries are disjoint. None of the industrialized countries are OPEC members.

Found at: Pictures are sometimes worth much more than a 1000 words...(or, "it's here")