Part 1 - The Problem
Prologue
Carbon
based fuel is the mainstay of the western economy. It fuels our power stations,
(coal), powers our vehicles (Petrol,
Deisel and LPG) and provides the raw materials for the plastics that we use in
our daily lives.
As
agriculture, Transport and Electricity are so intertwined with the price of
extracted hydro carbon substances it is reasonable to state that our economy
depends on a stable hydrocarbon pricing model to subsist.
Globally world
oil production equals 85,472,000 barrels per day. A Barrel (BBL) being 44
imperial gallons or approximately 200 litres.
|
|
That begs
the question, what would happen if an event occurs that drives the price of
fuel through the roof?
Two
occurrences this year have reached a tipping point from which there would
appear at first glance to be no recovery using current economic or technical
resources.
But again,
I get ahead of myself.
New Money
At the G8
Summit held in July last year in
Max Keiser
described the situation in an interview with Russia Today.
Last Friday,
(
Dominique Strauss-Kahn,
gave a speech entitled, an IMF for the Twenty-first Century,”
In which he
touched on the sensitive issue of the weakening US Dollar.
“A
longer-term question is whether a new global reserve asset is needed.
Certainly,
having several suppliers of reserve assets would limit the extent to which the
international monetary system as a whole depends on the policies and conditions
of a single, albeit dominant, country.
And one
day, the Fund might even be called upon to provide a globally issued reserve
asset, similar to—but in important respects different from—the SDR. That day
has not yet come. But I think it is intellectually healthy to explore these
kinds of ideas now—with a view to what the global system might need at some
time in the future.”
“One day”,
an interesting euphemism for “any day now, when the price of oil goes up too
much…….”.
By talking
about the issue, the IMF are admitting that a problem exists with the
Promising
to look at the situation may mollify
Why?
New car
sales in
In fact by
my calculations on Global car sales (based on 50 litres of petrol per car per
week) I calculate the end of May 2010 as being an interesting time for the
Petro-dollar.
Oil no
longed traded in Dollars? Deficit Spending, Printing, Monetizing Debt, The
Dollars Demise
In 2006,
the major consuming countries were:
|
Consuming
Nation 2006 |
Litres
Per Day |
Population
in millions |
Litres
P/Day P/Person |
%
of Table |
|
|
427,884,000.00 |
27,000,000.00 |
15.85 |
4% |
|
|
459,332,000.00 |
32,000,000.00 |
14.35 |
4% |
|
|
4,137,484,000.00 |
304,000,000.00 |
13.61 |
35% |
|
|
435,980,000.00 |
49,000,000.00 |
8.90 |
4% |
|
|
1,039,540,000.00 |
128,000,000.00 |
8.12 |
9% |
|
|
538,362,000.00 |
82,000,000.00 |
6.57 |
5% |
|
|
396,236,000.00 |
61,000,000.00 |
6.50 |
3% |
|
|
348,516,000.00 |
58,000,000.00 |
6.01 |
3% |
|
|
362,402,000.00 |
61,000,000.00 |
5.94 |
3% |
|
|
335,840,000.00 |
68,000,000.00 |
4.94 |
3% |
|
|
562,152,000.00 |
142,000,000.00 |
3.96 |
5% |
|
|
415,502,000.00 |
107,000,000.00 |
3.88 |
4% |
|
|
443,368,000.00 |
187,000,000.00 |
2.37 |
4% |
|
|
1,440,256,000.00 |
1,369,000,000.00 |
1.05 |
12% |
|
|
514,380,000.00 |
1,201,000,000.00 |
0.43 |
4% |
Source: http://en.wikipedia.org/wiki/Petroleum
Litres
per person per day
Not surprisingly,
consumption almost matches vehicle ownership.
Vehicles
per thousand people.
In 2009, 13.5 million new cars were sold in
At the same
time, in the
Automobile
industry consulting firm Sinotrust predicted that vehicle sales will reach
15.13 million units this year, with a year-on-year growth rate of 15.2 percent.
According
to the Ministry of Public Security, until the end of last year, almost 200
million Chinese people are able to drive a vehicle, making up about 15 percent
of the country's 1.3 billion population.
So if only
15% of Chinese people are currently driving autos, what will happen to the
price of oil when
|
Zhang
Gong, director of That
equals one car per 4.54 people or 286,433,333 cars in Each of
which may require as much as 200 litres of fuel per month. A quick
calculation of total Petrol production, 7.1 billion litres per day versus
China's daily requirement (once they have entered the “automobile age”) of
3.7 billion litres per day shows that even without growth in other countries,
the USA can no longer depend on it's fifty percent of all fuel produced
consumption requirement. |
|
If we
add-in just
We see that
although the quantities are not quite as high, there is strong growth.
China and
India, (12% and 4% of Global oil consumption in 2006) now represent close to 26%
of the world’s oil consumption, caused mainly by othe the Chinese and Indian
Governments offering financial stimulation packages encouraging people to buy
new cars.
Unfortunately,
they have succeeded.
Total World
Oil Production. 85472000 barrels/day
Total World
Petroleum Consumption. 85534000 barrels/day
Deficit – Daily 62000 barrels per day.
And based on just
As anyone who understands merchandising
knows, when you have a stockpile of a product with demand increasing and
supplies decreasing, you put the prices up.
Any way you
cut the pie, the world has a choice.
The IMF and
autosales in the emerging economies have decreed that there will be a change.
In the
western world since the nineties we have grown accustomed to living beyond our
means, after all, everyone has plastic.
In the
western world, we have stopped making things.
In the
western world we have interest groups whom heavily influence Governments.
In
In
Most
pay in cash, with sometimes the whole family coming into the dealership with
the money in hand.
The choices
would appear to be:
Convince
all of
(In
remove
reliance on oil immediately, or introduce a new currency.
Which of
these would be the less detrimental effect on our global economy?
Later this
week, I will attempt to answer this question,
Oh yeah, Sun Tzu, well, we’ll get to him.
References:
Address by
Dominique Strauss-Kahn, Managing Director,
International Monetary Fund,
At Bretton Woods Committee Annual Meeting
GM
Sells More Cars In China Than Back Home
By Bertel Schmitt
on
Chinese
auto market takes over US as world's largest
By Li
Fangfang (
Updated: 2010-01-09
Oil: Crude
and Petroleum Products - Energy Explained, Your Guide ...
Total World
Oil Production. 85472000 barrels/day. Total World Petroleum Consumption.
85534000 barrels/day. Retail Gasoline Price in Selected Countries ...
By Steve
Schifferes Thursday, 17 May 2007, 08:14 GMT 09:14 UK 
Globalisation reporter, BBC News, Liuzhou, Guangxi Province, China
Western
hypocrisy over India's Nano ignores global need for fewer cars
By Gwynne Dyer -
India
2009 Car Sales Rise Most in Three Years on Economy, Rates ...
