US / Canada vs. the RoW:
The chart below shows all global producers of crude oil broken down by: a) US/Canada vs. b) global RoW ("rest of the world", all producers except the US/Canada)...plus the changes in pricing along the way. Looking at the two distinct groups of crude oil producers generates a curious outcome...the two groups have moved in distinctly opposite directions since at least 1980.
- The US & Canada's older and cheaper production sources were retiring and new sources were not globally price-competitive until recently when prices reached $50+ per barrel?
- The structure of Nixon's Petro-Dollar agreement with Saudi Arabia, made in '73 and subsequently finalized with all of OPEC, may have discouraged domestic production. Whether the US/Canada agreed to discourage or deny domestic crude production via means of environmental, financing, or "other means" until '08 is unclear? What is clear is the US/Canada reacted entirely differently to pricing changes than the rest of the world. The reason I call out '08 is that global production (x-US/Canada) peaked in '05 yet it wasn't until '08 and beyond that US production began to ramp up to bridge the gap.
The chart below shows global crude oil production and the price per barrel of crude oil from '05 to '13. A 100% price increase over nearly a decade only drew a 3% global production increase?!?
Given China's housing driven credit binge is breaking down...it's hard to guess how low Chinese oil consumption will fall. And if China is a harbinger for the BRICS and "developing economies" in general, then slowing oil consumption among the "developing nations" eventually akin to that already seen in "advanced economies" may explain why peaking global oil production is being trumped by slowing global credit. For without the credit aided demand, organic demand for crude oil (and nearly everything else) may be significantly lower...but trying to determine if oil prices have much further to fall is increasingly dependent on central bank actions and government credit creation...an impossible $ figure to guess.
These are just a part of the complex economics of the depression we are entering. Evidence of slowing global credit leading to a spreading global depression can be found in my previous report here... http://econimica.blogspot.com/2015/03/are-seeds-of-depression-sprouting.html
And of course swelling 55+ and 65+ year old populations and shrinking 25-54 year old core populations in the US and among all "advanced economy" nations are at the core of this depression... detailed here http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-4.html
and here... http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-1-advanced.html