Oil Still Moves the Economy

Oil prices have dropped roughly 22.55% since their peak in April, spurning the idea that the global oil supply is weakening as a result of a combination of a lack of demand from China and an excess in production, according to experts.

The end of oil, however, may not be in sight according to some oil experts such as Josh Young, CIO of Bison Interests, who claims that China resembles Japan from the 1980s and 90s at this point in its growth.

To begin with: China is still suffering from a real estate and construction decline at the same time that oil supplies are high as a result of more efficient production in the United States, resulting in an excess of roughly 300,000 barrels per day. Much of that surplus came from a desire to have favorable election conditions in 2022, and yet has persisted to 2024.

“Better a diamond with a flaw than a pebble without.”
Confucius

And while the price has risen since then and is much higher than it was pre-pandemic, consumption of oil fueled by Chinese economic growth was expected to rise higher than it has. Japan was in a similar condition where their economy was struggling, and yet their oil consumption was still growing around 35%.

China, however, has still not caught up to American oil consumption and that has really been a big story for oil. Americans consume about 13 barrels per year, where the average Chinese citizen consumes about 3 to 4.

The Future of EV in the Emerging Market Economy

“The lamp burns bright when wick and oil are clean.”
Ovid

The worldwide push for electric vehicles to replace oil-guzzlers still has a tremendous gap to close before consumers are ready to jump on the bandwagon and put their money where the politics are. For one thing, steady electric power is not a guarantee in much of the world, including China and India, the countries with the highest population.

India’s GDP growth of 7% gives investors the impression that growth will eventually catch up in the energy sector as well, as more growth means more goods and people being moved, and that means more energy consumption. That can’t be done yet in India entirely on an electric grid so oil will have to be the stopgap solution.

Oil production, however, in Venezuela and Colombia are down as a result of their hectic political and economic landscapes. Iran is unable to fill the global demand, and the United States, though capable of doing so, may choose to return to a more energy-averse position over the next four years depending on their own political and economic landscape.