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Posted by Daniel Workman Aug 10, 2008 |
Developing countries led by China and India have 2% driving automobiles, while 14% of Brazilians drive. That compares with 80% in more developed economies like the United States and Canada.
Therefore, demand for fossil fuels is expected to increase substantially as the number of drivers in developing nations accelerates. No one expects alternative energy sources like ethynol, solar, electricity or wind to replace oil and gas to fuel vehicles - at least not any time soon.
Petrobras de Brasilia has budgeted US$250 million to develop oil properties, many of which are offshore.
The problem is that the world economy will need millions of barrels of oil to keep up with accelerating demand. The marginal cost to extract millions of barrels of oil is estimated to be at least $100 per barrel, principally because reserves are located so far below the surface and therefore difficult to pump out.
Yes, oil prices are down because as the slowing U.S. economy is pulling down demand for oil and gas in the short-term. But we shouldn't fixate on short-term fluctations in demand.
The geophysical fact is total oil reserves around the world are limited. Particularly in emerging industrial powerhouses like China and India, long-term demand for oil will be back in a big way. Oil prices will go back up.
The same analysts pointing to the temporary pullback in petroleum demand will lead the chorus screaming for alternative energy including uranium.