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This May, the Organization of Petroleum Exporting
Countries (OPEC) again reduced its estimate for world oil demand
this year, from its original forecast. That means demand for oil is
weaker than earlier thought.
Growth in global oil demand will
be 1.2 million barrels per day, a slight downward revision from
OPEC’s forecast in April. That is 40,000 barrels a day less than
the previous forecast. The last cut, of 70,000 barrels a day, was in February.
China, the Middle East, India and
Latin America will account for all the demand growth. Demand in
North America will be flat while oil demand in other OECD regions
will decline due to weakening transport fuel demand in the second
quarter.
Yet, speculation persists crude
oil will climb to $200 per barrel. Goldman Sachs has said so. The
president of OPEC, Chakib Kheli, has said so. A Deutsche Bank energy
analyst has said oil could even reach $250 a barrel. And no one has
said they are crazy to make such predictions.
OPEC insists factors other than
supply and demand are driving up oil prices to record highs. The
weakness of the dollar, speculative trading and political tension
are lifting prices, not a shortage of oil.
OPEC is the source for two of
every five barrels of oil worldwide. It is not the only industry
group to trim its projection for world oil demand.
World oil price has reached more
than $126.98 per barrel. If crude breaches $200 per barrel,
Filipinos will have to drastically change their lifestyle. A $200
per barrel oil translates into gasoline at P100 per liter at the
pump. At least half of vehicle owners won’t be able to afford it.
That means reduced traffic, and more woes for the common man.
Workers would demand higher wages on top of the P20 per day promised
by President Arroyo. Minimum wages would have to rise by P50 per day
easily. Overall, costs of almost everything will escalate.
Around the world, there will be
so much turbulence. Imagine Russia (which already has the world’s
largest pool of billionaires), Venezuela (whose Hugo Chavez hates
America), and Iran (another America hater) having double the oil
revenues they already have today. These petropowers will transform
themselves into global political powers.
Dubai already has the world’s
only seven-star hotel. It is the world’s boom town, with oil at
$100 a barrel. It will become an even more spectacular global hub.
Its Emirates airline will dominate international aviation.
If rice at $1,000 per ton will
add 100 million to the ranks of the very poor, how many people will
be impoverished by a $200 oil? Rice will probably climb to $2,000
per ton too because there seems to be a direct correlation now
between the price of oil and the price of the cereal which is
consumed by half of the world’s population. To speculators, rice
and oil are one and the same thing—a commodity to be traded,
hoarded, bartered and damn the consumers.
Newsweek thinks oil at $200 will
make the world less “flat. ” Globalization will stumble. The
magazine cites Jeff Rubin, chief economist of Canada’s CIBC, who
says oil at $100 has added enough cost to the cost of shipping to
wipe out 45 years of tariff reductions that have lowered borders to
trade and allowed India, China and other countries to boom.
Rubin says oil at $200 could
start displacing labor costs as the chief factor for companies to
determine where to locate their offshore production. With oil at
$200, it would cost $10,000 more to send a 40-foot container to the
Eastern United States from China, rather than from Mexico. China
thus will look for customers in Japan, not in the US. Western Europe
could turn to Eastern Europe and regionalization would be the new
globalization.
For the Philippines,
regionalization could be good. Asia has two of the world’s largest
consumers and the fastest-growing—China and India. We probably
have to stop conducting those hearings on the ZTE broadband
overpricing scandal. And Filipino tourists should start appreciating
the Taj Mahal rather than posing before the White House. India is
only half the distance between Manila and Washington, DC.
OPEC on May 15 cut its forecast
for global growth in oil demand in 2008 for the second time this
year, a sign that record crude prices were slowing consumption in
the industrialized world.
“Oil demand growth is expected
to experience the typical seasonal low consumption in the second
quarter,” OPEC said. “This year’s summer driving season is not
likely to show its normal annual growth due to the anticipated
weaker gasoline demand in the US.”
Gasoline use usually rises in the
summer as vacationing American motorists hit the road, but the
slowing economy and record prices are expected to weigh on demand.
The rise in oil prices has
prompted the industrialized countries to pressure OPEC to increase
oil production.
OPEC’s May report blames
another factor it has frequently cited for oil’s rally: limited
capacity at refineries and its impact on the crude market. The
rising premium of higher-quality crude grades to lower-quality
grades reflects a shortage of refineries able to make light oil
products, like gasoline, from lower-quality crude. 
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