Helping America Navigate a New Energy Reality

The One Chart That Shows Why Oil Prices Have To Keep Rising

By on 28 Jun 2016 in analysis, notable posts

Oil Rig

(oilprice.com) There has been a lot of pessimism among oil investors in recent months, and indeed the bear market over the last couple of years in black gold has destroyed many nest eggs. With that said, oil investors who have run for the hills could find themselves regretting that decision in the months and years to come.

Oil prices are almost certain to continue rising and the chart below spells out why. The recent bear market in oil is largely a by-product of a technology shock and a set of ideal production conditions that will be hard for the world to replicate in the medium-term. (Click to enlarge)

As the chart shows, the next century really will be the Asian Century – at least when it comes to oil demand. Western Hemisphere demand has been flat since roughly the year 2000, and even before that, growth was fairly uneven. Unlike the oil shock of the 1980’s, which caused an unsustainable rise in Western demand for oil to plummet, there has been no comparable extreme run up in oil prices today, nor has there been a resulting collapse in demand.

Related: Iran’s Oil Production Is Slowing Fast

On the Asian side, demand growth has been steady and consistent for decades, tracking the rising development of the Asian tigers and the slow lumbering rise of China. While China is still not a first world nation, it’s not as poor as it was. At this stage, China is really a second world nation – between the first and third world; an appropriate moniker given it is the last major bastion of communism (which is what the term first/second world referred to).

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