Wikinvest Wire

The Economist weighs in on the price of oil

Sunday, June 01, 2008

This week's cover isn't nearly as good as what appeared last week, but, just in case you haven't gotten enough already, there's one more story about oil prices in the current issue of The Economist.

The image you see to the right (that goes along with the cover story) may have some "Magazine Cover Indicator" prognosticators sitting up to take notice, but it is the curious comments in the lead story that are of more import.

In a well-reasoned look at oil markets over the last few decades and the last few months, they note the following:

Stuck for answers, politicians have been looking for scapegoats. Top of the list are the speculators profiting from other people's hardship. Some $260 billion is invested in commodity funds, 20 times the level of 2003. Surely all that hot money has supercharged the demand for oil? But that is plain wrong. Such speculators do not own real oil. Every barrel they buy in the futures markets they sell back again before the contract ends. That may raise the price of “paper barrels”, but not of the black stuff refiners turn into petrol. It is true that high futures prices could lead someone to hoard oil today in the hope of a higher price tomorrow. But inventories are not especially full just now and there are few signs of hoarding.
Then they go on to dismiss the entire notion of "peak oil":
Others fear that oil is pricey because it is running out. But there is little evidence to support the doctrine of “peak oil” in its extreme form. The Middle East still seems to contain a sea of the stuff. Even if new finds elsewhere have been rarer and less accessible than in the past, vast quantities of oil could now be profitably stripped from tar sands and shale.
Maybe they would be accepting of "peak-oil lite"?


This week's cartoon:
AddThis Social Bookmark Button


Anonymous said...


A must read:

Cassidy: How Silicon Valley families are downsizing their lives

And even those well beyond middle class, like computer scientists Radha Chandika and Ravi Duvvuri, are discovering they've got it good, but not nearly as good as they once had it. Chandika and her husband, Duvvuri, moved to Silicon Valley in 1994 and joined the successful tech crowd.

By early 2007, they had two kids and a house in Cupertino. Duvvuri was a software architect at Blue Coat Systems, and Chandika was a software engineer at Google. Their household income was about $300,000.

Duvvuri left his job to start an Indian social-networking company with a friend and former business partner, reducing the family income by about half. He says he would have done it no matter the economic conditions, but with rising prices the family has cut spending more than they anticipated.

Duvvuri, who draws no salary, says he's concluded the Bay Area is no place to live as a family on one income. At the end of the year, he and Chandika plan to move their family back to India, where their lives and prospects will be better.

"I have more reasons to go back," he says, "than to stay."

But more than all that, the Big Squeeze has Chandika and Duvvuri thinking about how lucky they are and how difficult tough times must be for those who have much less.


little larry sellers said...

The Economist article is weak, but the comments are encouraging. The feedback that generated by far the most recommendations were ones critical of the article, asking how it downplays the rapid decline of the US dollar and dismisses the entire concept of peak oil without explanation.

Looks like more people are starting to "get it" and even more will when it becomes obvious that the stimulus checks did not have their desired effect.

One side note- did everyone see that the government says after-tax incomes were flat in April despite bogus CPI numbers and stimulus checks being counted as income?

Expat said...

Agree that the Economist article was inept and shallow. It waffled and tossed around jargon. Whoever wrote it obviously did his research in a cozy bar in Washington instead of a raucous pub in London. If the author had bothered to visit the pub he would have spoken to real traders.

Basically, it was slapdash and designed to cash in on the topic du jour.

Disclosure: I am an oil trader.

The Economist is starting to get sloppy, drifting toward People and Time magazine type of journalism.

Eldridge Cleever said...

I agree with all of the above (see it's easy to follow the crowd and write with no imagination or creativity). However, I want to make the point that in the USA we need to stop listening to the whining cultlike ministrations of organized environmentalism. Sure, we all want a clean planet and no pollution and to save the polar bear but the reality is there is no real crisis there. The crisis is with the US debt, sinking dollar and worldwide high demand for oil. So I say to you all... Drill for oil in the USA...

  © Blogger template Newspaper by 2008

Back to TOP