Cheap oil’s dead, Chevron blames developing countries

Chieftain of the Chevron reservation David O’Reilly predicated a few years back that low gas prices were unsustainable. Now that we’ve seen sustained skyrocketing prices at the pump, Wall Street Journal asked O’Reilly to ‘peer into the crystal ball again.’

He repeated his mantra: cheap oil is dead. Thus Americans can expect to be paying at least $4 at the pump from now on.

He went on to say that the increasing cost of gas is driving some to change their habits by buying a more fuel efficient vehicle. That trend won’t stymie prices though, says O’Reilly:

More people driving in more countries cancels out small efficiency gains elsewhere. Developing countries’ thirst for oil in particular knows no bounds, he said:

“Developing countries’ thirst for oil knows no bounds?” What about US ‘thirst for oil?’ After all, we’re the number one consumer…by 14 million barrels per day:

#1 United States: 20,730,000 bbl/day
#2 China: 6,534,000 bbl/day

It’s true that increasing demand from developing countries is putting pressure on limited supply. That said, it’s grossly unfair and hypocritical to peg them as culprits by saying that their demand ‘knows no bounds’ when we consume far more than they do.

I disagree with your “grossly unfair and hypocritical” statement. If the growth in demand from developing countries was not there, or remained at levels of the 90s, we would not have the spike the in the commodity market and the rate we are seeing. All things being equal, the US demand progression is rather constant and moderate by comparison. Consumption/Demand in India and China, while currently lower, is on pace to pass and exceed the US w/in the next 7-10 years. That massive demand growth is certainly a, if not the primary, factor in the outlook of a supply shortage.

It’s the sandbox rule, Tommy. You’ve got to share. What gives the US any more claim to this oil than, say, China?

They use far less than we do and while they have been using more lately, it seems a little, yes, hypocritical, to say that China can’t use so much oil when we use more than double what they do. I believe it’s a double standard to suggest that they limit their use when we don’t limit our use.