After the Brexit vote, spot-market oil prices dropped like a rock on Friday morning (curiously, though, only after spiking much higher at NYSE's open) along with the equities market. Prices continued to decline at a milder level Monday although they started to rise Monday afternoon.
A two day blip is all the Brexit wrought. Here is the reason that oil prices will trend consistently higher.
On the Asian side, demand growth has been steady and consistent for decades, tracking the rising development of the Asian tigers and the slow lumbering rise of China. While China is still not a first world nation, it’s not as poor as it was. At this stage, China is really a second world nation – between the first and third world; an appropriate moniker given it is the last major bastion of communism (which is what the term first/second world referred to).
There is still significant opportunity in Asian nations for additional development. India is extremely undeveloped, while smaller though still significant nations like Malaysia and Indonesia still have opportunities as well. All of this is merely to point out that despite the advancing technology in the West, the Asian nations are still extremely underdeveloped and have huge needs, creating massive upside potential for oil demand. After all, it’s a lot easier to build a gasoline vehicle that doesn’t rely on electricity, than it is to build an electric car without a reliable electric grid or universal indoor lighting.
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