Chinese use 4 billion barrels of oil per year. That’s 11 million barrels per day. And that’s only three barrels of oil per person per year . But here’s the kicker... China is in the middle of its second industrial revolution. Poverty is decreasing, and the middle class is growing. The standard of living is rising dramatically. They are driving cars and scooters, not riding bicycles. They watch TV, they use a lot of electricity, and they are making a lot of stuff. So is India. It will add another 241 million “people of working age” between 2010 and 2030. Most of them will be driving cars, watching TV, and making stuff. India will soon surpass China and have the most people of any country in the world. And remember, India only uses 1.1 barrels of oil per person per year.
See where this is going?
There are 2.7 billion people in India and China combined. What happens when 2.7 billion people begin to use oil at the rate of America and Japan?
BOOM!
The U.S. and Japan use an average of 19 barrels of oil per person per year. But let’s say that China and India consume just five barrels of oil per person every year by 2030. That’s just 13.5 billion barrels per year (2.7 billion people times 5 barrels of oil). That would increase world demand by 9.5 billion barrels per year... or about 26 million barrels per day. And don’t think I’m the first to identify this trend. Former EOG CEO Mark Papa described this phenomenon to me in 2007. It was one of the driving factors behind that company’s shift from gas production to oil.
But the big question now is where will an additional 26 million barrels of oil per day come from?
Our bet is the good ol’ USA.
And what part of the U.S. will be the center of the universe for oil production? The Permian Basin, the king of the U.S. oil basins.
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