The Oil Drum article - Countdown to $200 oil: $140 oil and speculation
Countdown to $200 oil: $140 oil and speculation
Excerpts:
There are A LOT of good reasons why oil prices are going up. Let me show you just a few.
...
Chinese growth
China is enjoying staggering growth rates for car ownership.
...
volumes available for export, and thus volumes available on the global oil market, are shrinking
...
Production declines
Beyond Russia, it is striking to note how many regions we have been relying on are experiencing absolute production declines. All mature fields have a natural decline rate, and whole provinces are seeing absolute declines in their production.
...
In normal times, when demand varies, market equilibrium is reached by adjusting production to such demand, which is a relatively easy and cheap process. But when supply is constrained, as it is now, any brutal change in the market (whether on the demand side, for instance through a cold spell in winter requiring more heating, or a hot spell in summer requiring more AC, or on the supply side, for instance guerilla attacks in Nigeria, a refinery strike in Scotland, or a pipeline accident anywhere) will require market equilibrium to be reached by demand destruction, which is a lot harder and triggers much more substantial price movements: prices need to move high enough for some users of oil to renounce such use and "take their demand out of the market", whether by not doing what they wanted to, or by finding a substitute. In the US, people travelling less for vacations, or carpooling, have barely managed a couple percent demand destruction.
...
Altogether, it appears that they are a number of factors explain oil price increases perfectly well, with no need to go into conspiracy theories or market manipulations.
Excerpts:
There are A LOT of good reasons why oil prices are going up. Let me show you just a few.
...
Chinese growth
China is enjoying staggering growth rates for car ownership.
...
volumes available for export, and thus volumes available on the global oil market, are shrinking
...
Production declines
Beyond Russia, it is striking to note how many regions we have been relying on are experiencing absolute production declines. All mature fields have a natural decline rate, and whole provinces are seeing absolute declines in their production.
...
In normal times, when demand varies, market equilibrium is reached by adjusting production to such demand, which is a relatively easy and cheap process. But when supply is constrained, as it is now, any brutal change in the market (whether on the demand side, for instance through a cold spell in winter requiring more heating, or a hot spell in summer requiring more AC, or on the supply side, for instance guerilla attacks in Nigeria, a refinery strike in Scotland, or a pipeline accident anywhere) will require market equilibrium to be reached by demand destruction, which is a lot harder and triggers much more substantial price movements: prices need to move high enough for some users of oil to renounce such use and "take their demand out of the market", whether by not doing what they wanted to, or by finding a substitute. In the US, people travelling less for vacations, or carpooling, have barely managed a couple percent demand destruction.
...
Altogether, it appears that they are a number of factors explain oil price increases perfectly well, with no need to go into conspiracy theories or market manipulations.