mefistofeles wrote:Although I'm sure there must be demand destruction at current prices consumption will probably stabilize if not increase.
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Sure there may be a reccession but here in the US at least people need to drive, whether its to work to visit friends or whatever. Right now its so cheap to drive in the US its just easier to drive distances greater than two miles,versus riding a bike or even public transit.
Enjoy the good times while they last.
This is the same kind of blinder logic that got people in trouble investing in oil early in 2008.
People who do not have money do not buy things. It isn't a matter of want or even need - you cannot drive around in a car if you can't put food on the table.
There is a LOT more demand destruction that can occur in the US as far as oil and gas are concerned.
If you have a hard time believing that, just go out this Friday night to the nearest big city. Go after about 8pm, see all the cars jamming the highways and major streets. Is there any *need*for these people to be driving around? I'd bet that 80% or more of those cars out on Fri/Sat night is purely discretionary driving, and likely half of the driving after 8pm on weekdays is discretionary.
Take a look at some of the massive declines that were being noted in early December :
http://www.aspousa.org/index.php/2008/1 ... ber8-2008/
Natural gas : "Between April and September,
gas consumption by industrial users dropped 14% to the lowest monthly figure since at least 2001.(12/6, #14)"
Japan : "Refiners in Japan, the world’s third-largest oil consumer, are cutting processing in December and probably in January to cope with bigger declines in fuel demand at home and abroad.
Nippon Oil plans to cut processing this month by 18 percent from a year ago after slashing the run rate by 25 percent in November. (12/3, #10)"
China : "Gasoline and diesel stockpiles belonging to China’s two oil giants, Sinopec Group and CNPC, hit record highs in October. (12/2, #6)"
http://www.cleanmpg.com/forums/showthread.php?p=178167
"US fuel consumption of all petroleum products fell by an almost unheard of 5.8 percent or 1.2 million barrels/day (bbl/d). Gasoline consumption is projected to decline by 320,000 bbl/d, or 3.4 percent through 2008 with the year-over-year decline estimated to fall another 0.5% through 2009."
Here's a little critical thinking applied to the above.
US oil consumption for the first 4-5 months of 2008 was slightly positive. In the last 8 months of 2008, enough demand was destroyed to cause a 3.4% decline in oil consumption for the year as a whole.
Right now, some of the oil producing nations are predicting a 12-14% decline in oil consumption in 2009. Given the way these people think (linear projection), I'd hazard a guess that oil consumption RIGHT NOW is probably 10-15% down.
So, if things don't get 'worse', then oil consumption is down 10-15%.
Things will get worse.
I think you will see oil demand fall by a healthy 25% or more from the peak by the final months of 2009.