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.
In a matter of a few months, the world suddenly recognized that the world is awash in oil. That’s largely because of the extraordinary surge in US oil field production, which soared 3.6mbd over the past two years to a high of 9.4mbd during the week of September 12. Easy money in the US sent lots of investors searching for better returns in the oil patch. They fueled the oil boom. In many ways, it was a bubble that may be starting to burst. Over the past eight weeks through the first week of November, US output has dropped by 0.4mbd to 9.0mbd. As they say in the commodity pits: “The best cure for falling commodity prices is falling commodity prices.”
Today's Morning Briefing: The Great Deflators. (1) The New Abnormal. (2) Nostalgia about normalizing monetary policy. (3) Monetary policy affects both demand and supply. (4) Awash in liquidity and oil. (5) Easy money fueled the oil bubble. (6) Secular stagnation specter haunting Europe. (7) China remains on soft-landing course. (8) Specter of deflation in Asia. (9) Durable goods prices are falling everywhere. (10) How the Great Moderators became the Great Deflators. (11) Central bankers keeping zombies alive. (12) Governments are the biggest zombies of all. (13) Meet the Selfies. (14) “Whiplash” (+ + +). (More for subscribers.)
In a matter of a few months, the world suddenly recognized that the world is awash in oil. That’s largely because of the extraordinary surge in US oil field production, which soared 3.6mbd over the past two years to a high of 9.4mbd during the week of September 12. Easy money in the US sent lots of investors searching for better returns in the oil patch. They fueled the oil boom. In many ways, it was a bubble that may be starting to burst. Over the past eight weeks through the first week of November, US output has dropped by 0.4mbd to 9.0mbd. As they say in the commodity pits: “The best cure for falling commodity prices is falling commodity prices.”
Today's Morning Briefing: The Great Deflators. (1) The New Abnormal. (2) Nostalgia about normalizing monetary policy. (3) Monetary policy affects both demand and supply. (4) Awash in liquidity and oil. (5) Easy money fueled the oil bubble. (6) Secular stagnation specter haunting Europe. (7) China remains on soft-landing course. (8) Specter of deflation in Asia. (9) Durable goods prices are falling everywhere. (10) How the Great Moderators became the Great Deflators. (11) Central bankers keeping zombies alive. (12) Governments are the biggest zombies of all. (13) Meet the Selfies. (14) “Whiplash” (+ + +). (More for subscribers.)
No comments:
Post a Comment