There is an attention-grabbing headline if there was ever one. The logical reaction, even by a market novice, would be ''no way.'' Sure, California is the largest U.S. state by population and the largest economy in the country, but there is no way that the state consumes more oil than the second-biggest economy in the world. Is there? Even with something in the order of three cars for every person in California, it does not seem plausible that Golden State's oil consumption would dwarf that of China.
Yet, that is exactly what a now infamous analyst report issued by HSBC recently would lead us to believe. CNBC even quoted the report on November 17, but criticism of the notion that a single U.S. state with a flailing economy somehow gobbles up more crude than a country with more than a billion people really ramped up last week.
Oddly enough, the HSBC report is hard to come by these days. Several reputable trading blogs have noted the report, but have admitted that they cannot find the actual text. How convenient. It sure would be nice to see how HSBC arrived at its conclusion because the statistics really are not there to support such at an outlandish claim.
Sure, California is the eighth-largest economy in the world and had a 2008 GDP of $1.85 trillion, according to the Commerce Department. On the other hand, China's 2009 GDP checked in at $4.9 trillion and it is reasonable to assume California's GDP was lower last year. As I mentioned last week, oil consumption does not always grow linearly with GDP, but come on. Who would actually believe an economy with a GDP of less than $2 trillion needs more oil than an economy worth almost $5 trillion?
Of course, the best thing to do is just head straight for the consumption data. The U.S. Energy Information Administration says that in 2008 the U.S. consumed an average of 18.7 million barrels per day, tops in the world. California accounted for 1.9 million barrels per day of that total. Again, it is reasonable to assume that California's consumption levels have dwindled under the pressure of the Great Recession.
In the same year, the EIA says China consumed 8.12 million barrels a day, a number that has more than likely increased a fair bit over the past two years. So the math simply does not add up. Some sources have accused HSBC of market manipulation by issuing the California/China report. I do not want to speculate on that or make hasty accusations, but the report does remind investors to not believe everything they see on television.