Is the US breaking its heroin-like attachment to oil? Maybe.
In America, people are using more fuel-efficient cars, more ethanol. and less oil. According to the FT "The country’s foreign oil dependency is expected to fall from 60 per cent to 50 per cent in 2015."
If other projections about the oil industry are any indication, once a prediction covers a period of more than a year, there is a 100% chance that it will be wrong.
The debate about what the effects of demand in China, India, and the rest of the developing world will do to prices will go on indefinitely. The net increase in the need for gas and diesel for transportation and petroleum by-products for infrastructure means that the demand for crude in these regions will undoubtedly rise even if a recession slows their economies.
Use in the US may not drop further and could rise again, if the price of corn used in ethanol continues to spike or if there is a strong economic recovery benefiting industries including autos and aviation.
The trouble is more likely to be on the supply side of the books. The Saudis may have increased output, but do they have much more to give? There is at least anecdotal evidence that the older fields in Russia, the Middle East, and Mexico are past their best yields. New deposits are found, but perhaps less frequently than in the past. A very large pool located off Brazil was discovered within the last year. Once it is tapped, it will make the country one of the largest exporters.
Forecast oil use, and, by indirection, prices, is not unlike guess the temperature in Riyadh at noon twenty years from now.
Douglas A. McIntyre
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