Open Thread November
It Was An Oil Bubble [Not]
ED YARDENI, DR. ED’S BLOG
When the price of a barrel of Brent crude oil peaked at a record $145.40 on July 3, 2008, there was lots of talk about “peak oil.” Industry experts were speculating about whether the price might continue to rise to $200 or even higher. Global oil demand was growing faster than global oil supply. It was widely believed that global oil reserves were likely to dwindle because all the cheap stuff had been found. The remaining reserves would require higher prices to develop. Now that the price has plunged from this year’s high of $115.15 on June 19 to Thursday’s $76.13, the focus is on how low can it go, what I called “trough oil” in late October.
JR: It’s a fundamental positive for anybody who uses oil, who uses energy. It’s not a positive for places like Canada, Russia, or Australia. It seems to me that this is a bit of an artificial move. The Saudis, from what I can gather, are dumping oil because the US has told them to in order to put pressure on Russia and Iran. And it’s probably not a real move. I read about shale oil like you do. But at the same time, North Sea production is declining. Russian production will start declining next year. All the major oil fields that we know about — all the production is static or declining. So it doesn’t quite add up on any kind of medium-term basis I can see.