Friday, 6 June 2008

$139 a barrel

The biggest two-day rise in the price of oil in history.

13 comments:

Anonymous said...

Inflation, inflation everywhere and not an interest rate hike in sight.

vodka drinkier said...

$200 oil by September?

Anonymous said...

$10 dollars in just two days. Incredible!

Anonymous said...

Parabolic rises = bubble

Nick

Anonymous said...

Biggest?

In absolute or relative (%) terms?

Probably both, but it would be nice to know. 8-)

markbaldy said...

New Labour is not responsible for the price of crude oil... but they are reponsible for the massive tax hikes on diesel (in particular) and doing sweet nothing about the UK's energy needs over the last 11 years.
Gordon Brown and his chums just sat back and watched everyone become wealthy as their house prices tripled and then claimed the glory for his miracle economy.

Boat52 said...

Price it per ounce and it is still cheaper than Perrier or a Starbuck's coffee. Oil will stop rising in price when the price truly reflects its economic worth. The Shah of Iran many years ago was quoted in an interview saying that oil was too valuable to use as a fuel. He was correct and still is. In the U.S., every state could build a new large nuclear power plant and autos for short commuting distances be powered by battery. This will occur when oil reaches a price that forces this to occur.

Vado said...

boat52 - absolutely right. When the price reflects the scarcity of oil, the world will start to reduce carbon emissions.

Anonymous said...

Nick: "Parabolic rises = bubble"

Or:

Rationing = Price increasing because supply is constricted or declining.

Ghawar has been in decline for a while.
North Sea past its peak of production about six years ago.

Perhaps it is not a bubble, but a genuine price signal?

Anonymous said...

If this was a true supply shock the price would've gone up earlier and more in line with actual supply.

Peak oil is a part of the rise but for the most part it is a combination of:

1. inflation (i.e. more dollars)
2. index investors flooding the marker
3. hedge funds losing leverage from brokers so piling into the fundamentally leveraged futures
4. bubble investing

It was only a month ago everybody was saying the same things about peak wheat and peak rice. Look how that turned out.

Nick

Anonymous said...

Got to agree with the last comment (Nick). I'm in the farming business and everyone was getting excited with wheat at £180/tonne. Now its back down to £130 and everyone's wondering how to make a profit given diesel's up, fertiliser's up, pesticide's up etc etc.

This is a classic speculative bubble.

aSteve said...

I'm reading a book published in 1995 - it suggests that, then, the UK was a net exporter of oil. This got me to thinking about the FTSE...

BP, Shell, Cairn, Eurasian Natural Resources Corporation, Permier Oil, Hardy Oil & Gas, Tullow Oil (and probably some others) are all buoying the UK stock market.

On freeview I watched a (probably not especially new) documentary about the Russian steppes - and they noted that one of the largest oil reserves in the world is located there - owned by BP... subject to potential political problems with Putin wanting to gain control over Russian natural resources.

I have a sneeking suspicion that it is only the price of oil that is shielding the public from realising a spectacular stock market slump. Of course, if the price of oil is false - primarily bid up by speculators as opposed to consumer demand (as I suspect) then when the price of oil corrects, we should also expect a major deterioration in UK (if not also world) stock market indices.

I don't believe that the price of oil is down to supply and demand of oil... Maybe it is about American inflation expectations... maybe it is ploy by investment banks to avoid a stock market collapse. There is definitely something odd about it - even if you're cynical and suspect trouble in Iran... the graph of prices defies common sense explanations couched only in terms of supply and demand for the commodity.

powerman said...

I think Nick has hit the nail on the head.

The smart money is probably going to just cash up soon and wait to buy distressed assets at fire-sale prices.

Be nice to have the kind of cash reserves necessary to buy residential property without needing to borrow once rental yields and house price/income ratios return to (or slightly overshoot at the the bottom) their historic norms.