Rising crude oil price has taken the global economy on ride. In India the inflation rate has crossed 12.01% last week, this is based on whole sale price index in India, but the real rate of inflation considering consumer price index is anything between 60-70% and so with other developing economy in the world. Now the oil price is cooling down and revolving around $125 per barrel from its all time high $153 per barrel, is still failing to make any visible impact on the rising inflation rate. Let us see what the crude facts about global crude demand are and supply position.
The demand of oil has increased considerably in the developing nations, no doubt since last ten years. In China for the demand of oil has been registered as compounded annual growth rate of 6.5% for the last ten years (1997-2007). Last year India has taken the 4th largest oil consuming country in the world overtaking Germany and Russia. At the same time India`s position as a oil producer in 23rd in the world. This is the picture how the demand of oil is rising in the developing nations at such a faster pace. But contrary to the rising demand; the supply of oil by OPEC nations has been reduced by 2.7% comparing to last year`s supply. This is the position of only 10 oil producing countries under the umbrella of OPEC. Whereas the world`s 3rd largest oil resourceful country Iraq is currently handicapped with its oil production. Iraq is producing at present 1.87 million barrels per day for the past 5 years, whereas it used to produce 2.4million barrels per day earlier! The 6th largest oil producing country Mexico`s oil reserve is fast depleting, at best it will last till 2014. US alone import it`s 14 per cent oil from this country. The economic condition of Mexico is in doldrums, the production is reducing with escalation of expenditures. As a result their exports earning is plunging. Over all as per B P Statistical Review 2008, it is observed that this is the first time ever global oil consumption is exceeding the production. In 2007 the global production of crude stood 3905.9 million tons and the consumption were 3952.8 million tons. The difference of 47 million tons were met by production of bio-fuel from sugar cane, maize etc. this caused the food shortage!
The emerging scenario in global oil demand supply position being alarming, a further crisis has been added by commodity traders, speculators. Who are out to make a stake on every crisis. Now the global consumption of oil is around 8.5 million barrels per day and this is escalating every day. The cooling down of the oil price by 20% from its zenith is not backed by real betterment of supply position or reduction of consumption. The investors, speculators or hedge funds are moving away from oil to elsewhere.