$200 oil going mainstream
It’s enough to set off one’s contrarian radar. I mean, predictions of $200-a-barrel oil have been everywhere over the last week.
CIBC analyst Jeff Rubin, with an eerily accurate track record of previous predictions, kicked it off last week with a forecast of $225 by 2012 (with $7 gasoline to match). “Whether we are already at the peak in world oil production remains
to be seen, but it is increasingly clear that the outlook for oil
supply signals a period of unprecedented scarcity,” he wrote. “Oil supply will hardly
grow at all, with average production between now and 2012 rising by
barely more than a million barrels per day.”
Similar forecasts emerged yesterday, and now OPEC president Chakib Khelil has chimed in with his own $200 call. “Mr Khelil blamed record oil prices on the weak dollar and global political insecurity,” reports the Financial Times. Quoted in El Moudjahid, the government newspaper of Khelil’s home country of Algeria, he said, “I don’t think that
an increase in production would help lower prices, because there is a
balance between supply and demand and the stocks of gasoline in the
United States have recorded a surplus and are at their highest level
for five years. The prices are high due to the
recession in the United States and the economic crisis, which has
touched several countries, a situation that has an effect on the value
of the dollar. Each time the dollar falls 1 per cent, the price of the
barrel rises by $4 and of course vice versa.”
Any comment, Mr. Strong-Dollar Hank Paulson? Hmm, didn’t think so.
Meanwhile, the New York Times, citing Rubin’s forecast among others, points out that non-OPEC oil production is flat-lining and OPEC production likely can’t pick up the slack. Not exactly news to those of us who’ve been paying attention for a while, but it’s worth noting any time awareness spreads.