Tom Whipple points out in his article titled: The Peak Oil Crisis: The Perfect Storm, that we shouldn’t feel confident with this month’s low oil prices… in the Philippines alone, the price of gasoline has gone down a full peso within the span of just a week…
In the article he first explains that the main drivers of Oil prices can be broken down into 3 causes:
1. Supply and Demand
2. Normal Commodity Speculation
3. The fear factor speculation <- negative speculation causing overvaluing/undervaluing of a commodity...
He pointed out that the 3rd cause was what forced the prices to jump to an all time high, evidenced by some worldwide events:
1. Fears of a Long Hurricane Season
2. Iranians and their nuclear program
3. Israel vs Hezbollah/Lebanon
4. Kidnapping of Foreign Oil Workers in Nigeria
5. Venezuela and their oil
6. Start of the US driving season
As these world wide events slowly quieted down (some of them temporarily) and were overtaken by good news : good weather, US stockpiles building, new oil finds in the Gulf and Mexico. As did the price of Oil cool down.
He warns that we shouldn't be lulled into this false sense of security that Peak Oil is not a reality because:
1. We are still consuming Oil at 85 Million barrels a day.
2. The new oil finds are in ultra-deep locations, making it more costly to extract.
3. OPEC has signalled that it's members wouldn't go below $60/barrel and will control production to maintain that price.
4. The high price of oil is an evidence of low supply.
The only time I'll feel confident that Peak Oil is not a reality is when I see the price per barrel hitting the $20 range... how did I come up with this figure? based on WRTG Economics history of oil prices… if we adjust all previous years oil prices to 2006 inflation rate the world average should be $21.57… that is so way off from the $60/barrel price that we have right now.
Original Article here
