It seems like the invisible hand has decided to hand us everyday people another round of crude for May and it is most certainly neither light to our pockets nor sweet to our ears. That oil is at an historic high is matter which seem to amaze analysts who speculate about when it might come down from its mighty $100+ chair. Based solely on my intuition, I'd say never.
I question the willingness of oil producing countries to reduce the price of oil significantly and really what incentives do they have to do so? The West is reeling from these prices and yet there is no sizable political will to aggressively switch from fossil fuels to renewable sources of energy. The message it sends to OPEC countries is that they can continue reaping pretty much unhinged the benefits of high oil prices. After all, many such countries hold a not so kind view of U.S. policy so if the invisible hand decides to reward them and punish the West, I think they'd be happy to oblige. At the very least I don't see how prices will come down since the demands of emerging industrial giants like China are ever rising.
Of course new oil fields will appear and production might increase as much as to affect a relief in gas prices at the pump but will be anything more than temporary before the barrel rises again.
In all events, I think that once the world has proven that these levels of cost can be more sustained, I think that good old greed may very well force the not-so-invisible hand to keep the price of light sweet crude -hence profits- high.
To summarize, don't be fooled $3+ gas is here to stay. Cheers!
Oil gains push up energy shares and U.S. stocks - International Herald Tribune
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