A Secret About Oil You Won’t Find Anywhere Else

In early 1983 – the first week of February, to be precise – the inventory of crude oil in the U. S. reached an all-time economic high. I say ‘economic high’ because nominal supply of crude oil has since far surpassed its 1983 number. In fact, current U. S. crude-oil inventory (504 million barrels) is the actual all-time high. Supply today is about 150 million barrels more than total supply in 1983.
Obviously, we have a lot more oil in storage than we’ve ever had before – about 40% more. But nominal supply numbers aren’t as important as you might think. Demand for crude oil in our economy has grown a lot since 1983.
To make a bona fide ‘apples-to-apples’ comparison to today’s supply glut, we should measure the amount of oil supply relative to consumption. In 1983, the number of days’ worth of consumption in the U. S. hit a peak of 33.4. That’s the largest amount of crude oil we’ve ever held in private storage, relative to demand. That’s the all-time highest amount of ‘economic supply’ – supply in relation to actual demand.

This post was published at Wolf Street by Porter Stansberry ‘ March 2, 2016.