I’ve written before about how we need to pay attention to how China is securing oil reserves all over the globe.
China isn’t the only huge country in the midst of a rapid escalation in oil consumption. According to Platts in the second quarter of 2010 India overtook Japan as in terms of energy consumption. India is now consuming over 3.1 million barrels of oil per day which is slightly more than Japan and only a third of China’s 9 million barrels a day.
Now I’m going to show you some numbers that should help the lightbulb go off in every investors brain. Oil demand is going to increase, it is unavoidable. It might not be a straight line, but it is going to go up and up.
Population by country Per Wikipedia
China – 1,339,117,000
India – 1,186,790,000
United States – 310,000,000
Motor Vehicles Per 1,000 People Per Wikipedia
China – 128
India – 12
United States – 765
Daily Oil Consumption Per Country
China – 9 million barrels per day
India – 3.1 million barrels per day
United States – 20.6 million barrels per day
I really don’t think I need to say much more at this point. You have 2.5 billion people in China and India that use in total half as much oil as 300 million people in the United States. That isn’t per capita, that is in total. Small percentage increases in per capita oil consumption in China and India will make huge differences in total global oil consumption.
And what makes this a big problem is that we have very little spare oil producing capacity in the world currently and that current level of production can’t be increased as we are having a difficult enough time just maintaining it as the giant oilfields discovered decades ago produce less and less oil each year.
All it is going to take is for demand to slightly outstrip production capacity to create another oil spike like what we saw in 2008. It seems likely we are headed for a future of frequent oil price spikes followed by oil price induced recessions.
So I’m doing what the Chinese are doing. I’m loading my portfolio with cheap oil reserves while I can.
Here are my favorite ideas:
ATP Oil and Gas (best bet for near term price appreciation)
Petrobank (Extremely cheap with homerun potential)
Sandridge (Clear path to oil production growth)
Petrobakken (Growth, yield and share repurchases)
Stone Energy (Trading at 1X cash flow for no good reason)
Several other articles of interest