I forecast in April this year - in the face of hysteria about $200/barrell oil prices - that the price of oil would approach $75US/barrell within 18 months and would settle around there. After I made my prediction it increased to a peak of $145-29US. Today- about 5 months later - it touched $91-23US. Indeed we seem to be moving back into what looks increasingly like an OPEC-determined oil price driven by supply rather than oil prices driven by surging developing country demands. I'll stick to my earlier medium term forecast - there is plenty of exploitable oil in the world at $75US/barrell. The OPEC cartel-type supply restrictions have a long history of repeated failure.
Of course, the current oil price fall is partly due to expectations of lower economic activity associated with the current capital market crisis. This capital market crisis has however dented speculative activity in oil markets that will make things easier for motorists and more difficult for OPEC and the Russians.
Wednesday, September 17, 2008
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4 comments:
Well my own feeling is that at least in the short term oil prices are influenced by expectations of political turmoil around the Strait of Hormuz in the Persian Gulf.
Once it became apparent that the US and Israel weren't going to bomb Iran oil prices went down.
The oil price bubble, that's what it was, was driven by the entirely unlikely prospect of a war with Iran around the Strait of Hormuz. In fact I think that Iran made a quick buck with a couple of well placed histrionic announcements.
PS. My own personal preference-prejudice-is for an oil price below ten dollars and water prices above a hundred per barrel, that'll sort out a few issues I have with the Saudi regime.
harry -have you got a link to that graph that shows oil prices from around 1970?
If you google 'real oil prices' and then click on image you get various graphs. Here is one to 2005.
http://www.theoildrum.com/uploads/12/oil_price_1945_2005.png
A bit misleading as real incomes have risen strongly too - suggests current prices are not unprecedented.
Thanks harry - I was hoping you'd have one adjusted for real incomes or tracked against a Big Mac
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