05-24-2008
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Moderator
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Member Since: Aug 2004
Location: PA
Posts: 4,283
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Re: Oil hits $114/barrel - No end in sight.
This should have a much larger impact on oil companies and export nations than any ill-conceived short-term oil/gas boycott:
Quote:
A Record-Setting Change in Driving Habits
STRATFOR TODAY » May 23, 2008 | 2136 GMT
Car-loving Americans drove 11 billion fewer miles in March than they did a year earlier, the U.S. Department of Transportation reported May 23. The 4.3 percent decline is the first year-on-year decline since the 1979 oil shock, and the sharpest decline ever.
While Americans typically think of themselves as pressed for funds, in fact they have the most disposable income per capita of any of the major developed states. Adjusted for inflation, the average American’s disposable income has increased by more than $10,000 since the 1979 oil shock as estimated by the Bureau for Economic Analysis. There are more than 300 million Americans, and the sheer size of their collective purchasing power is simply mammoth.
Thus, Americans can rather painlessly absorb nearly any price increase for basic goods. But apparently there is a level at which they begin to adjust their behavior. Oil prices are now above $130 a barrel, twice what they were a year ago, and gasoline prices averaged $3.79 this week. Whether the decline in miles driven is happening because of high oil prices or slower economic growth — or more likely a combination of the two — is irrelevant.
The point is that it is happening and that will have results. The current economic situation is changing driving and spending habits on a long-term basis. For example, wretched sales of trucks and sport utility vehicles have a counterpoint in phenomenal sales of hybrid vehicles. These shifts to a more energy-efficient lifestyle are factors that will shape oil demand for a decade, and permanently reduce the demand of a culture that has traditionally been the oil producers’ best customer.
This is not to say that the May 23 statistical release will become known as the turning point in the market, but never forget that the United States uses more oil in absolute and per capita terms than any other country in the world. Without a shift in American behavior, it is difficult to see how the markets could ever undergo a fundamental drop. With that shift, it is difficult to see how — given time — they cannot.
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