Overpriced Oil!
It is obviously that we have an oil bubble, which is set to burst.
China and India are NOT the cause of oil price hike. China has bypassed Japan last year, as the second largest oil consumer in the world. However, Beijing relies on overseas producers for one-third of supplies and accounts for ONLY about seven percent of world oil demand. The truth is that we have to wait as late as 2025 for China to double its oil import, which would be 14% of this year’s oil consumption world wide. India consumes less than half of what China does. It would keep in that way. That’s why Steve Forbes said that increased demand from China and India counted for only a small part of oil price hike from $25-$30, 3 years ago.
In the meantime, oil inventories are built up. US Energy Department said in Nov 2 that commercial crude oil inventories rose 2.7 million barrels last week to total 319.1 million, which is 12% above the level a year ago. Gas price would go down as refinery capacity recovers. It has been gone down from $3 per gallon to $2.55 per gallon in gas stations near my home.
In its World Energy Outlook 2005, the International Energy Agency (IEA) predicts that oil price would drop back to $35 in 2010 and would rise a little bit to $39 in 2030. The recent high oil price is the direct results of underinvestment in oil production and the refinery sector. For 29 years, there is no single refinery ever built in US.
What would happen after oil bubble burst? We would have another stock bubble a decade down the road. This time, remember to cash everything out in time! 