Wednesday, December 29, 2010

going up?…….

On the topic of gas at $3.10, we are currently at historically high prices for this time of year.  While speculators might be involved, and demand in the U.S. is down, worldwide demand for oil is at an all time high and there really is no end in sight.

Many of you know I travel to China on a frequent basis.  Demand for raw materials, including oil, is growing exponentially in China.  For calendar year 2010, they will sell 17.5 million new cars, up from around 15 million last year.  Bill Starke would like to know that one dealership in Beijing sold 15,000 cars in November.  In fact, the Chinese government is now placing higher tariffs on new vehicles to slow down sales.

As emerging markets continue to mature, more and more pressure will be put on commodities, including oil.  The middle classes of China and India are now both larger than that of the U.S.  The sheer numbers involved in Asia are stunning.

Interestingly enough, significant efforts to find alternatives for oil are not happening in the "developed" United States, but in the emerging China, with over $1 trillion earmarked for renewable energy research and development.  Silicon Valley companies are now partnering with Chinese counterparts instead of the U.S. government, or U.S. investors because they are not only willing, but demanding new energy solutions.

While $3.10 seems expensive, it is only the tip of the iceberg.  The price will only go higher.


  1. You know what they say Tom, "what goes up, must come down"? Lets hope so!!!!

    Considering Canada is one of the largest suppliers of crude oil to the United States, our prices here are really no bargain either. For example: I have a recent gasoline receipt in front of me for 63.157 ltrs (3.78 ltrs in a
    US gallon) @ $1.156/ltr Total cost including a harmonized tax ($8.40) = $79.01 Cdn. funds. For the converted figure of 16.584 gallons @ $3.10/gal which you have quoted, total cost = $51.72 Yankie dollars....for the same gasoline! Also consider that our exchange rate was equal to the American dollar that day.

    Regarding the issue of crude oil; I have to agree with your observation that "worldwide demand for oil is at an all time high and there is really no end in sight" however in my humble opinion it will be the two Nations of the United States and China 'who will be really duking it out' as the wooing of the World's suppliers have already begun.

    In the case of Canada, examples of this are the presently proposed yet controversial U.S./Canada Keystone Oil Project plus China's recent investment in Canada's Oil Sands Research Program amounting to the sum of $16 billion and counting with the expectation they will have access to this resource.

  2. Hi Brenda,
    Since oil is a worldwide commodity, the highest bidder will get the sp(oil)s, unless countries like Canada start protecting their reserves for national security. I'm sensing that will be the next move. When that happens, look out.