by Pops » Tue 28 Feb 2012, 08:45:34

This is my new favorite chart:It shows capacity instead of production so it takes out lots of the short term political and price noise. It's like unfocusing you eyes to see a pattern.Capacity grew like the dickens till 1980, was flat till '94 then resumed growing at a shallower but constant rate. Likewise, consumption grew quickly till the first yellow bubble in the '70s then dropped back and resumed growing at a slower but still constant rate. We talk about the drop in OECD demand as if it is a big deal but it is hardly noticeable.From this view it seems inevitable that consumption would intersect with capacity somewhere in the area of the second bubble without increased capacity or decreased demand - the boom in Chinese chachkas moved the date up. As we all know, when spare capacity is that slim the markets get nervous. The other thing that strikes me is just how constant the growth has been over the 3 decades and how little capacity has moved from it's trendline regardless of all the happytalk.We all know the IEA and EIA, not to mention IHS have been using the green line to make their forecasts, not the red one.