The Big Picture

« New Column up at Real Money (9/28/04) | Main | WSJ & Barrons pick up Oil comments »

Global Crude Oil Demand & Gasoline

Wednesday, September 29, 2004 | 09:55 AM

I've been talking about the extent of global demand for Crude outside of the US; This chart demonstrates that perfectly:

Global Oil Consumption
click for larger chart

chart courtesy of Chart of the Day

The trend in China and India is clearly higher; I expect this pace to be maintained at the very least, and potentially accelerate later this decade.

There also seems to be a theory circulating that Oil and Gasoline are uncorrelated; This chart (from this morn's NYT shows that not to be hardly true over the long term:

Oil and Gasoline Divergement?
click for larger chart

chart courtesy of NYT

While there are occasional divergments, they are hardly the typical pattern. Instead, we see they are temporary and mostly modest -- except recently. While there are several unconvincing explanations for this, I expect that eventually, the two will reconverge. The unusually rapid rise in Oil and the longer lag in gasoline is a condition that cannot continue undefinitely. One will have to move towards the other.

Here's a quick excerpt from the times piece:

As the price of crude oil flirts with $50 a barrel, gasoline prices are heading up again, ending an unusual period in which gasoline prices were falling even as oil prices rose.

Crude oil and gasoline prices began moving in opposite directions in June, a conundrum that was a pleasant surprise for motorists in the peak summer holiday season.

Last week, however, gasoline prices jumped 5.1 cents a gallon, to a national average of $1.917 a gallon, still below the record average of $2.06 a gallon in May but 33 cents higher than a year ago, the Energy Department said. If crude oil prices keep going up, as many oil industry officials predict, gasoline prices are expected to keep climbing as well, as is the price of home heating fuel.

Finally, we look at this chart of the recent run-up in Oil. The WSJ notes that it pulled gasoline higher, and we are likely to heating oil and natural gas prices rise next.

Bubbling Up: Along for the Ride
click for larger chart

Source:
Chart of the Day
http://www.ChartoftheDay.com

With Oil Near $50 a Barrel, Gas Prices Start to Inch Up
SIMON ROMERO
New York Times, September 29, 2004
http://www.nytimes.com/2004/09/29/business/29gasoline.html

Bubbling Up: Along for the Ride
WSJ Graphic

Oil at $50 Could Bring Sharp Pinch
By JON E. HILSENRATH, RAY A. SMITH and PATRICK BARTA
THE WALL STREET JOURNAL, September 29, 2004; Page A2
http://online.wsj.com/article/0,,SB109640240692530366,00.html