Paradoxical End Of The Oil Age

The credit crunch assault intensifies, pummeling deeper into the world economies. The best example to examine it to date is the eroding oil price. No doubt, much anticipation is loaded up for the coming Year of the OX. Even the Westerners believe in Chinese animal zodiacs. The year of the ox significantly represents sheer hard work and persistence will grant rewards at the end of the darkened tunnel. In economic terms, it represents the coming of the bullish market, which has long absent from the financial world. The desperadoes need it to kick start the growing stage of 2009. So-called the healing period. Many countries had fallen to the ultimate recession. Ireland had been declared bankrupt last year and currently seeking assistance from the International Monetary Fund Organisation (IMF). Undeniably, America had fallen into deep recession long time ago, they are just denying it! Detroit Automakers are still scrambling for funds from the USD 700 billion stimulus package announced by President Bush last year.



Now back to the oil context. The price of oil had suffered a sharp decline once more (now future trading for the month of February is at USD 35.40 per barrel on the NEw York Merchantile Exchange) despite the heroic efforts by the OPEC to slash production by 4.2 millions of barrels per day. The problem with oil demand lies at the disposable income structure of consumers. America provides the largest demand for most of the global output, whether they are from China or internally manufactured. That is why China is yet to be qualified to take over America as the economical powerhouse of the world, the spending factor of Chinese is still lower compare to Americans thus not being able to generate the huge demand required. In normal terms, the chinese are still not willing to spend as much as the Americans. Which one way is good and bad the other way. Because of Americans usual lavish spending, they tend to spend more then what they can afford. They even took up loans to finance their buying lust. This lust finally turn into the sub-prime mortgage crisis (i.e. low-doc crisis) which now drags the whole world into economic meltdown. OPEC has no longer control of the oil price (they can't control when it was skyrocketing, neither now can they control when it's free falling). The USD 147 per barrel had shaked the very foundation that builds the demand structure for oil and gas globally. Consumers are now reducing their dependency on oil, but slowly they will switch to other energy alternatives, so long as economical growth is projected into the well being of the consumers. We need to grow, so if oil can't sustain our growth then other viable source of energy might provide the necessities to jump-start the growth back. Oil is cheaper than water in the early era of the oil age. The cost of pumping out one (1) barrel of oil from the ground of Iraq cost only USD 1. The additional cost are all production cost (e.g. distilling).
All it takes is one major crisis that would cause a domino effect to break the dependency attitude towards oil. And the crisis has occurred, causing people to switch to other substitutes (e.g. hydroelectric, bio fuels) . To simplify my justification, consumers are afraid to spent unwisely with commodities that are exposed to uncontrollable fluctuations. To say the least, the oil age is coming to an end!