Oil Production and Consumption

 

oilstock

Image via Taylor Russell

 

The first chart shows global oil production, by month, based on latest EIA data.  2014 saw significant production increases after fairly flat production in ’12 and ’13.

 

1-global oil productionGlobal crude oil production (source, EIA) – click to enlarge.

 

And just so we’re clear where nearly all the production gains came from … check 2005 and note global production (x-US / Canada) barely rises on the spiking price…but US / Canada production rockets 7mbpd over the period.

 

2-global-prod-ex-USGlobal crude oil production plus production ex US and Canada (source, EIA) – click to enlarge.

 

A close up of US / Canadian production (below).

 

3-US-Canada-productionCombined US and Canadian production (source, EIA) – click to enlarge.

 

The below chart highlights the falling consumption in 2014 (demand) of the 34 OECD advanced economy nations despite larger total populations and trillions in stimulus and new debt.

 

4-OECD-consumptionOil consumption of OECD advanced economies (source, EIA) – click to enlarge.

 

But advanced economy declining demand is nothing new and some (i.e., Italy, Japan, France) have been showing declining consumption since at least 1980!

 

5-consumption comparison2013 oil consumption vs. previous selected years – click to enlarge.

 

So, global production is up and advanced economies demand is in long term decline. The below chart highlights the fact that BRICS oil consumption is still growing – but the rate of BRICS oil consumption growth is in line with periods of global recession?

 

6-BRICs consumptionBRICS oil consumption (2014 estimated).

 

A quick snapshot of global production increases (y/y) vs. BRICS (y/y) consumption increases below. BRICS demand has been the driver for greater global production – until now?

 

7-production and consumption increaseGlobal production growth vs. BRICS consumption growth (source EIA).

 

The next chart shows the same global production change (y/y) as above but highlights China’s oil consumption change (y/y).  China’s $21 trillion quadrupling of its credit bubble from ’07 til now has been driven by real estate, but in the last year, China’s real estate prices have fallen and mortgage driven credit is slowing with the leaking bubble.  Could China’s economy be looking at an outright contraction in oil consumption in ’15?

 

8-global change vs. China consumptionGlobal production (y/y) vs. China’s consumption (y/y) (source, EIA).

 

The above charts clearly disagree with the narrative that equity and real estate markets have any linkage with the economy’s present or future health.  The above charts clearly indicate global advanced economy plus developing economy demand is waning at a pace typically seen in recessionary periods.

 

Monuments to Easy Money

The chart below is a reminder real estate but particularly equity markets are currently off in their own world and not supported by growing employment, wages, or savings…employment and slow growing wages seem to agree with oil.  Stocks and real estate are simply monuments to perpetually “cheaper” money.

 

9-US bubblesUS: asset bubbles grow, wages keep stagnating (employment data source: US Bureau of Labor Statistics; salary/wages source: US BEA; real estate data source: Federal Reserve System, Z.1 Financial Accounts; equities data source: Wilshire Associates) – click to enlarge.

 

Equities are supported by cheap money encouraging massive corporate buybacks and very favorable corporate taxation, as previously discussed here.

In direct opposition to equity markets are decelerating US population and jobs growth, declining full time jobs (replaced with part time jobs), ramping debt and unfunded liabilities growing far faster than both economic activity and tax revenues to pay for all of it.

 

10-US economic dataAssorted US economic data (total debt source: 2013 OASDI and Medicare Trustees’ Reports [p. 183]; population source: OECD; employment data source: US Bureau of Labor Statistics; HHNW source: Federal Reserve System, Z.1 Financial Accounts; wages, GDP, & taxes source: US BEA) – click to enlarge.

 

But who should you believe … record stock market valuations and consensus spouting, highly paid economists who tell you all as is well, or oil prices, negative economic indicators, and your own eyes that this is just one more artificial boom desperately trying to run from the inevitable bust?

 

Charts by Chris Hamilton

 

 

 

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