The cheap oil era ...

by Yves Cochet

The daily or weekly fluctuations in the price of a barrel of crude on the New York market are due to a multitude of factors of very different origin and scope.

Commentators usually cite OPEC debits, the state of US commercial stocks, the weather, speculators, terrorism, weak refining capacity, the situation in Iraq, Iran, Nigeria, in Venezuela, in Russia…

But these "explanations" seem valid regardless of the height of the barrel price 30 dollars, 40 dollars, 50 dollars ..., while we lack the main explanation on the height itself, 60 dollars today. Three decisive factors durably push crude oil prices up: the geological scarcity of conventional oil (inexpensive to extract), the entry into a world of terrorism and permanent wars for oil control, the sharp increase in demand due to Asian growth and the maintenance of Western consumption. It is the anticipation of this last factor by traders that is causing prices to soar today.

Read also: Pantone Engine in November Science and Life 2007

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