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The oil genie – how it will kill the oil companies in the next ten years
The oil genie was created to boost the profits of the oil companies. The lower dollar, outsourcing to India and China, the Iraq war, and hard-line approach to Venezuela and Iran are all part of the ‘oil genie equations.’
The lower dollar helped push the oil prices higher. It forced the Saudis and others to look for higher oil prices. The suppliers did not do much to increase the supply. The lower dollar also promoted outsourcing fro0m India, China and other countries. The increased money supply in Chinese and Indian economies through outsourcing and foreign direct investments created enormous artificial buying power. Indians and Chinese common people started dreaming ‘America’ and millions of cars were sold on credit. The Asian economies started growing close to 10% per year. It resulted in unprecedented demand in crude oil. The oil went up from $30 a barrel to $146 a barrel.
The Exchange Traded Funds, Private Equity Funds and Hedge Funds provided the infrastructure for speculation in oil futures. Bush refused to punish the speculators by releasing the strategic oil reserves. His oil friends from Texas must be thanking him.
But the oil honeymoon may be short-lived for the oil tycoons and the oil companies all around the world. Te oil genie that is out there will haunt these oil enterprises for decades till they disappear from the corporate and financial radars of the world.
Oil companies are running for cover. They know they face socialist driven oil nationalization in US. It may seem impossible now. So did it seem in 2001 that Bear Sterns would be rescued from a run by Federal Reserve and Bush Administration. Who ever thought that Bush will be forced to sign a bill to help the home borrowers pay their mortgage. Who ever could think a conservative American President will create the biggest welfare by distributing stimulus checks, one after the other.
The oil genie has now irreversible. The higher oil price has sparked a new debate on replacing hydrocarbons with Hydrogen, solar and other non-hydrocarbon energy sources. Oil companies BP are hiring environmental engineers in hundreds to look into environmentally responsible energy sources.
Higher prices create bear markets. When people find that there are cheaper and better alternatives, the bear markets become decade long. In many cases the world economy completely changes to kill a dominant trend like hydrocarbon fuel systems.
We may have seen the peak in hydrocarbon use in the world. Clean alternative fuels will dominate the world in future.
The history will record that the oil genie of early twenty-first century eventually killed the hydrocarbon economies and moved human civilization forward into the world of solar, hydrogen, and gravitational energy.
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