Crude Oil Board

With the North Sea, Mexico and American fields all in terminal production decline, it seems to me that the current recession has taken some of the pressure off oil prices through demand destruction.

Question is: as China and India's economies recover and their middle class start buying more cars, demand will recover at a more rapid rate than supply is being replaced. Selling a million new cars in China involves the following demand(s) on oil supplies:

- fuel to drive them
- bitumen for roads to drive them on
- tyres
- plastic interiors
- wires, upholstery, computer components etc

Of the above, only the fuel has any current viable alternative, such as batteries. So even if the new cars in China are all plug-in hybrids getting 200mpg (extremely unlikely), there is still a MASSIVE strain on oil supplies for the rest of the components.

Since investment in new technology & offshore drilling has taken a hit in the last 12 months, is it safe to say that the industry faces a serious challenge to their ability to supply a recovering world economy?

Max, you're absolutely right. It's all in the numbers. The economy has slowed in China but it is not in a slump. They are already picking up the oil western nations in a recession have not consumed these last 2 years. But as soon as western demand for goods increases, Chinese workers will trade their bicycles for motorcycles or any other motorized vehicle. A billion-people nation doing this all at once will cause a rapid rise in demand that the oil industry will be challenged to cope with. Oil prices will then shoot up.

This short article summarises my point quite nicely:

http://www.energybulletin.net/node/50322

if you talking about Mexico, what about Nigeria, who largely depends on revenues generated from oil

At least Mexico has plenty of oil still. To put this in perspective, France, Italy and Germany have no oil yet they are far from being impoverished. Because these countries are innovative. Are you saying Mexico cannot be innovative like other countries? I believe Mexico can become innovative and not rely on oil revenue so much.

I am uncertain. I think you have a good point, however, may be failing to consider two things:

1) Asian societies rely primarily on motor scooters for inter-city transportation. Demand for cars is likely to only increase modestly over the long term, while demand for motor bikes and scooters will continue to grow steadily. Thus, demand for gas may not increase as you would think at first.

2) India's middle class may not be in the position to start purchasing cars rapidly enough to really spike demand there, either.

That being said, I may be 100% wrong. Nice post though, very thought provoking stuff.

And let's not forget Brazil and Russia- the remaining two BRIC nations