 Interesting tidbits from a round-table hosted by Stephen Roach:
In my view, the “true” shock probably comes with $50 oil. A sustained increase to that level for 3–6 months would represent a surge of more than 70% above the post-2000 average — on a par with fullblown oil shocks of the past. The recession call probably wouldn’t be too far behind in that instance.
Chinese demand:
Surging demand for oil from China is the primary cause for the high oil price. Chinese demand is currently increasing three times as fast as the trend in 1990s. Global demand was rising by about one million barrels per day every year in the 1990s. Chinese demand is now rising at that speed by itself.
If left to its own devices, an extrapolation of recent trends suggests that China's oil consumption could double over the next decade, from 7 million barrels per day in 2004 to 14 million barrels per day by 2014. The problem with this forecast is that China can’t afford the resulting cost of higher oil. Considering the limited spare capacity in Saudi Arabia, the China factor, alone, could drive up the oil price above $80 over the next ten years.
New Oil:
The average discovery rate for crude oil outside the US since 1995 has been less than 10 billion barrels, and some industry experts think that only one in four barrels consumed is currently being replaced by new discoveries. With worldwide annual depletion from existing fields at 5%, and demand expected to grow by 2% annually, new production will have to rise by 59% to achieve balance. Thus, long-term costs for exploration and extraction are rising, and rising prices will help curb demand. But supplies lie with increasingly hostile producers who want their full share of the rents.
10:48:55 AM 
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