Saudi production up a tad for July.

With the Saudis posting prices and letting their clients buy all they want at the posted prices, this shows marginal global net demand has yet to fall off, and, in fact increased a bit.

And, if Saudi excess capacity isn’t as high as the 12.5 million bpd reported a relatively small supply disruption could result in an immediate spike in price.

10 Responses

  1. Warren–I appreciate your deep understanding of all the Macro happenings in Europe and elsewhere, but for the layperson, we just really need to know what to do with our money the next ten years. Are we going to see more shenanigans and 40% stock market swings?

  2. After the LIBOR thing I’m kind of wondering what the source is for these numbers? It seems a little hard to believe that there has been no decrease in demand.

  3. Why no long term focus on this? Isn’t oil a leash on economic production. Either a substitute and/or more out of less (efficiency) is needed to prevent a cap on economic output, no?

    I read a good article with a conclusion that alternative energy and fuel efficiency improvements are in the best interest of oil companies because if methods such as those allow us to get 50% more output from the same level of fossil fuels would be a situation implying that oil could go up 50% in price without harming economic growth. So higher oil prices would be sustainable for oil companies. They would sell the same amount but gain 50% high prices.

      1. @Gary,

        Let’s say the average miles per gallons are 20. Let’s say that after adopting more fuel efficient vehicles, the average increases to 30. If during that 50% efficiency increase, fuel prices went up 50%, would people’s budgets be changed? No, they would spend the same dollar amount as before to do the same thing. So if the overall economy was able to achieve X amount of efficiency and/or move to cheaper alternatives to produce the same amount of output, then nothing would change from an X increase in fuel as far as the percentage of output going to the traditional fuel companies, I would think.

      2. @Crake,

        Note, I know reality is more detailed than my simple example above and there are many more usage for fuel than just commuter driving but for simplicity I used that example and I think the same math/logic holds.

      3. @Crake,

        yeah – but in order to adopt more fuel efficient vehicles – people actually have to buy them. Also – they have to be produced – that uses oil.
        Also – yes – oil is used in producing pretty much anything. So oil price rise would definitely cause inflation. Unless there is severe depression and demand goes down a lot.

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