Where is the crude going?

Even with high oil prices the demand growth for gasoline continues to rise. The second largest oil consumer China has seen a much larger demand growth in recent times than the United States. China is consuming a growth of 500,000 barrels a day of crude, while the United States is consuming a growth of 200,000 barrels.

So where is all of this oil going? Chinese consumers have seen a fifty percent raise in automobile sales in the first half of this year. Other developing countries are also demanding more oil. The demand of oil is increasing at a more rapid rate than the supply of oil. Disregard the notion that the supply of oil has decreased. We still have not reached the peak production of oil, and I believe we will not reach this peak until the end of our lifetimes.

Even with the demand of gasoline being high, the inflation rate for gasoline prices is almost right on track. The inflation adjusted rate of 1980 has the price of gasoline to be at $3.18 a gallon. The real national average is close to $3.00. If you ever get bored do a price comparison of gallons of gasoline compares to the beverages in the grocery store. You might find it surprising to see that gasoline is cheaper.