Sunday, June 12, 2005
the crude war
the crude war
The Cold War is over, but the Crude War has just begun. It is not an arms race, it's an oil race. America and China - the biggest and the fastest growing economies - are now in a race to secure supplies of crude oil and natural gas all over the world. This new Crude War will keep energy prices high, and drive energy stocks higher.
"Absent adequate supplies of natural gas...there is no readily apparent means to meet the incremental needs of the U.S. economy over the next 5 to 7 years - raising serious questions as to how the growth of the U.S. economy will be sustained during the remainder of this decade...
I'm quite surprised at how little attention the natural gas problem has been geting, because it is a very serious problem." - Alan Greenspan, Federal Reserve Chairman
Global demand continues to grow unabated and supplies are dwindling. We are on an unsustainable track straining the world's supplies, which must eventually push prices much, much higher. Chinese firms are building extensive business connections in energy around the world: investing in Iran, partnering with Brazilian state oil firm Petrobas, planning acrude oil pipeline in Columbia, proposing a $2 billion dollar in vestment in northern Alberta, and increasing already huge stakes in some of the world's largest resource companies. As China's demand pushes international prices higher, America will need to pay the spot price. But America's "ace up the sleeve" is an estimated 315 billion barrels of oil recoverable in Canada in the oil sands of Alberta.
The days of cheap energy are gone forever. The American consumer will continue to bear the financial brunt of America's uncontainable energy crisis. Americans use an average of 25 barrels of oil per capita per year. Chinese use 1.3 barrels and India uses less than 1. The U.S. represents 5% of the world population yet consumes 25% of the world's oil supply.
As the world's largest oil fields lose their production, Canada and particularly Alberta is ramping-up. With oil now trading well above $35 a barrel even the heavy oil in Alberta's oil sands is economic. Keep in mind that, right now, Canada is the largest supplier of crude oil to the U.S.
Americans are likely to pay more but the supply for America will not dry up. This new Crude War is a race for oil supply. Our "neighbor to the north" might well be what helps the U.S. win the race.