(CNSNews.com) - Poor but growing countries pose the greatest risk to the world's oil supply and prices, according to a University of California economics professor, who added Wednesday that the American public should blame those laws of supply and demand, not "greedy oil companies."
"What we've been experiencing worldwide the last couple years is not a reduction in supply," said Prof. James Hamilton in a presentation to the American Enterprise Institute in Washington, D.C. This year's run-up in oil prices is due to developing countries, not low supplies, he said.
"It's been a tremendous surge in demand," he said, adding that contrary to the idea of limited supplies, there's been a "huge surge in production" as well in the last two years.
Hamilton said the higher demand is coming from poor countries that are beginning to open markets and industrialize, especially China. In 2004, China accounted for 8 percent of the global consumption of oil, Hamilton said, while the United States accounted for 25 percent.
But, he said, China now accounts for one-third of the global growth in petroleum consumption. Hamilton said that for the last 15 years China's demand for oil has risen an average of 7.5 percent each year.
The increasing demand for oil is a "standard of industrialization" and common to all developing countries, according to Hamilton. "Poor countries are the ones that have the fastest growth."
If the trend continues, China will consume 30 million barrels of oil a day by 2025, far more than the 20 million barrels that the United States currently consumes per day.
Hamilton said he "can't possibly expect that 7.5 percent growth rate to continue," because as China stabilizes as a developed country, its demand for oil will level off. But as a result of the continued increase in consumption, he said, "sooner or later, we're going to be overwhelmed."
"We're not going to fall off the edge of the cliff," Hamilton said, "but this is a problem we can't ignore." Continuously increasing the demand will produce "tremendous delays on the supply side," keeping prices high "until significant alternatives make economic sense."
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