Sunday , 19 May 2024

Crude Oil: Which Countries Consume It Most Efficiently? (+2K Views)

So says Tom Guttenberger in edited excerpts from his original article* as posted on Seeking Alpha.

Lorimer Wilson, editor of (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Guttenberger goes on to say, in part:

Shown below is a linear regression of PPP-adjusted GDP against the number of barrels of oil consumed daily. For the regression I used countries that ranked in the top 20 for both statistics.

As illustrated by the ~.93 R-squared figure, the amount of oil consumed by a country is an excellent way to predict their economic productivity….

(click to enlarge)

An examination of the residuals [in the graph below shows that] the United States underperformed the prediction by the largest nominal figure and China outperformed by the greatest.

Before going any further, I would like to add [the following] caveat to the above results:

  • The PPP adjustment of GDP would tend to favor developing countries in this type of analysis. (By adjusting for PPP, goods purchased domestically in these developing countries are normalized to their worth globally, therefore increasing their impact to GDP.)
  • What a PPP adjustment can overlook are the import/export dynamics that will be affected if the currency were revalued to the PPP-adjusted price. (For example, if workers in China were to require an adjusted wage to purchase the same basket of goods, producer prices would rise and the incentive to manufacture goods there would be diminished.) This is not to say that these countries have not been executing on their oil consumption well – they have – but the residuals for India and China are large enough to merit an explanation.

(click to enlarge)

Most interestingly, the residuals of Germany, France, Italy, and even Spain are all positive. Germany has the largest residual of all developed countries and is a good sign of things to come for the country’s economy going forward. These positive residuals for EU nations highlight the superior infrastructure in these countries compared to the United States. Rather than a sprawling system of highways, the public transportation and higher relative population density of Europe helps position them to execute more efficiently on their resources….

*  (To access the above article please copy the URL and paste it into your browser.)

Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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