2007 By the Numbers

Not all the numbers, but some significant ones.

As we ring out the year, the price of gas averages $2.98 per gallon in the US, up 64 cents from a year ago. The price of oil is $96.93 per barrel, up from $55.95 at the end of 2006.

Gold is selling for $840 an ounce, up 32 percent in the last year and the Euro’s worth $1.47, up 11 percent.

Now, here’s a curious thing. If you look at global oil supply and demand numbers on the federal government’s Energy Information Administration’s home page (scroll down, there’s a link to an Excel sheet for “world oil balance” in the lower left corner) you’ll see the new numbers were posted 12 Dec.

I’ve been watching this sheet for a couple years and this is the first time stats have been updated with only the supply side numbers (for the 3rd quarter ’07) and no demand numbers.

If you look at the world supply/demand numbers by quarter, you’ll see the average daily supply has lagged behind demand for three straight quarters (since 3rd quarter ’06) and maybe four, once the 3Q07 demand numbers are posted.

I’ve never before seen demand exceed supply for three quarters in a row. I’ll also note world production hit a peak in 3Q06 at a daily average of 85.14 million barrels/day.

The oil companies and the governments tell use there’s plenty of “unconventional oil” out there, so we shouldn’t worry about supply. I agree, sort of. What we’re probably seeing here is the lag time it takes to get all that nasty tar sand and shale oil production up and running.

(I could go on at length about how polluting and greenhouse gassing these sources are, but that’s for another day.)

There’s no doubt in my mind the nations/companies pumping conventional oil have been lying about their reserves and those reserves seem to be declining at a rate more precipitous than most anticipated.

So I’m thinking about three trend lines 1) decline of conventional oil fields, 2) expansion of unconventional fields and 3) demand curve, given the steady appetite of the west and the burgeoning appetite of the east.

We may not see peak oil in our lifetime, but if demand outstrips supply and supply never catches up, it’s the same thing.

Demand destruction is the factor yet to be realized.

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