Pay Attention
The oil mess may be about to get a whole lot worse.
Personally, I'm a believer in peak oil, although I don't have any way to know if we're there right now. This may just be traders pushing the theory for their own gain, but it makes me nervous.
Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.”....
That trend was exacerbated by T. Boone Pickens, the influential investor who believes world oil production is about to peak as aging fields run dry. He warned that oil prices would hit $150 a barrel by the end of the year.
Personally, I'm a believer in peak oil, although I don't have any way to know if we're there right now. This may just be traders pushing the theory for their own gain, but it makes me nervous.
posted by mikevotes at
1:20 PM
2 Comments:
Peak Oil timing isn't as relevant as Peak Oil perception, but the biggest risk in oil extraction is and always has been political. Recent production and consumption data suggest that supply is not an issue, neither worldwide nor in the US; world production was up by 2.5% in 2007, world consumption up by 2.0%. US January 2008 petroleum consumption was down by 4% year-on-year.
An economist would say that the market must be pricing risk into oil, since demand destruction is not having its expected influence on prices. I suspect there's a larger, less examined factor at play--the rise of non-dollar oil purchases and a new lack of faith amongst holders of dollar reserves. The implications aren't pretty.
By
MarcLord, at 5:47 PM
Good points.
I do think weak dollar plays a role, not only as you point out, but also in a speculative manner as some investors seek a commodity hedge against the weakening dollar.
As for risk being factored in, yes, but I would also say a more subtle price influence that would come under the risk mantle is the growing independence of the Saudis and some other countries as they begin to reach for a middle position between the US and China/India.
The US seems to have less influence on the oil producers at this point, and I think that creates some of the uncertainty/risk price increase. (beyond the more standard Iran/Sadui destabilization risk.)
I have to say, this is out of my area of expertise, so if I'm way off, forgive me.
By
mikevotes, at 6:03 PM
Post a Comment
<< Home