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[QUOTE]Originally posted by bond006: [QB] Why Supply Simply Can't Keep Pace. Please don't be fooled by the recent fall in oil prices to under $60. The era of cheap oil is over. If you believe those who say the oil bubble is about to burst, my friend, you're simply going to get blindsided. Here's why: Most Americans don't realize this, but there have been no gasoline refiners built in the United States since 1976--nearly 30 years ago! That's when gasoline was just 60˘ a gallon, gas-guzzling SUVs weren't even on the drawing boards, and the technology revolution hadn't even begun. The thought of China and India growing faster than 6% a year for a decade and draining the world's energy supplies was, well, unthinkable. So it's no wonder why American refineries are working at 99% of capacity… Why oil refinery shutdowns in Louisiana, Texas, California and around the U.S. continue to squeeze gas prices higher and higher. For these reasons, increased demand and limited refining capacity have left U.S. gas inventories 2.5% lower than last year--which is pushing pump prices higher. At current trends, in just four years--as hard to believe as it is--we could easily be looking at $4-a-gallon gas. These conditions can only get worse, as no American city wants an ugly, stinky and potentially toxic refinery in its backyard. And even if a city wanted a refinery, tough environmental standards have made the cost of building new refineries in the U.S. prohibitive. That's just in the U.S. On a global scale, the gas problem is even worse. According to the world's largest oil consulting firm, in order for refining capacity to keep pace with demand, the world needs to build, count 'em, 50 to 70 refineries in the next five years. With only four refineries under construction around the world that I know of, I can tell you that this isn't going to happen. The bottom line is: We stand at the dawn of the greatest gasoline supply/demand squeeze the world has ever seen, as demand for refined gasoline products is exploding...while refining capacity continues to shrink. The result will not only put powerful upward pressure on gas prices at the pump, but also under the stock prices of the world's refineries and drillers. The Second Big Reason Why Global Demand for Oil is Exploding. In addition to a lack of refining capacity, the second powerful factor increasing demand for oil is coming directly from China and India, which are both projected to consume as much oil as the United States in less than 50 years. And they're already on their way. Most Americans don't realize this, but in just 20 years China energy needs will double, requiring 14.2 million barrels a day to keep their economic engine humming...while India's economy is expected to burn through 5 million barrels a day in just 15 years. This is why China tried so desperately to buy Unocal earlier this year. Why both China and India wanted to own PetroKazakhstan. And why they continue to slug it out all over the globe--from Siberia to Sudan--to secure fuel for their exploding economies. While experts disagree on when oil supplies will be exhausted, they do agree on one thing: If demand continues to grow by as little as 2% annually, in five years supplies could fall short by two million barrels a day. That's equivalent to Kuwait's daily production. But Won't Canadian Oil Sands Make Up the Difference? There's no denying that an estimated 1.7 to 2.5 trillion barrels of oil are trapped in a complex mixture of sand, water and clay. That's second only to Saudi Arabia's vast oil reserves. However, turning oil sands into a reliable source of oil is another thing. Most investors don't realize this, but unlike conventional crude oil you just pump from the ground, oil sands must be mined like coal and then the oil must be extracted through an expensive and complicated process. What's more, it takes two tons of oil sands to produce just one barrel of oil. Add to that the fact that only 20% of the Canadian sands lie near the surface, and you can you can see why Canadian oil sands current production capacity of 2.5 million barrels isn't going to explode anytime soon. And why I'm convinced that today's $70+ a barrel oil simply can't last. This is why if you can take an ownership position--even a small one--in any of my top oil plays right now, you'll grasp your share of the even-bigger boom that lies ahead. [/QB][/QUOTE]
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