The International Energy Agency (IEA) projects a 36% increase in the world’s oil demand over the next 25 years.
But when we look at oil supplies today, there’s plenty already. Where is the demand going to come from? In a word: “Chindia.”
Here’s a chart of China and India’s combined daily oil imports:
That’s an enormous amount of oil imports. However, what’s more concerning is the growth rate. If nothing happens to the world’s economy to derail this trend, oil will become much more expensive.[ad#Google Adsense]In 1993, China imported oil for the first time in decades. As its economy grew, imports grew by an average 26% per year – a colossal amount.
To put that in perspective… in 1965, the U.S. imported 22% of its demand. We didn’t hit 50% imports until 1993. It took 27 years for us to import half our oil consumption.
China did it in just nine years.
China’s oil demand grew by 7% per year since it began importing oil in 1993. However, it has sped up since 2000. Over the last 10 years, its imports grew 16% per year. Today, imports make up 54% of China’s oil demand.
India is also consuming the world’s oil at a phenomenal rate. Since 2000, India’s imports have grown by 6% per year. Imports represent 76% of its total oil consumption today.
What we see, if we extend this trend 10 years out, is China and India’s combined oil consumption will be 30% of the forecast world oil production.
That’s an enormous problem, because it doesn’t leave much for the rest of us. There just isn’t that much new production coming online to meet the needs of the rest of the world. China and India are already grabbing as much as they can…
Since 2009, the three Chinese national oil companies (NOCs) spent over $30 billion on asset and corporate acquisitions. The China Export Import Bank loaned oil-rich Ghana $10.4 billion for infrastructure projects. At the same time, China Development Bank loaned the country $3 billion for oil and gas development.
China is paving the way to send lots of future oil production home. Already, the big three NOCs produce over 1 million barrels of oil per day outside of China.
In 2008, India’s national oil company announced plans to invest $52 billion in oil and gas projects at home and abroad. We recently saw Reliance Energy, a private Indian oil company, spend billions of dollars in the U.S. on joint venture projects.
Both countries are preparing for the future. We should do the same.
Higher oil prices mean we’ll pay more for everything from airfare to vegetable prices. Not to mention our daily commute costs will rise.
The solution is to hedge your bets by owning giant integrated oil companies like ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and ConocoPhillips (NYSE: COP).
These companies will benefit from the forecast trend. They’ll pass it on through growth and dividend payments.
— Matt Badiali[ad#jack p.s.]
Source: The Growth Stock Wire