I recently posted a graph on supply versus demand balances. This has drawn significant interest, as it stands in stark contrast to the forecasts of all the agencies, OPEC, and the major forecasting firms. In this post, I will discuss the underpinnings. Demand World Oil Demand (All Petroleum Liquids) Source: Respective monthly reports of the agencies The major agencies, the US Energy Information Administration (EIA) and the European International Energy Agency (IEA), as well as OPEC, expect demand to increase moderately in 2015, up 1.0 to 1.6 mbpd (million barrels per day), with an average gain of 1.2 mbpd. This represents a middling year, better than 2014, but certainly unexceptional in recent times. Given that oil prices have fallen by more than half, the agencies must consider price elasticity of demand to be something close to zero. According to these views, cheap oil does not make people buy more of it. This was […]