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The Latest from the Energy Analyst
May 7, 2008 - After the briefest of corrections, oil prices and stocks have moved onto new highs...
After the briefest of corrections, oil prices and stocks have moved onto new highs. The surge in oil past $120 per barrel dominated the market today, in part driven by a new report from Goldman Sachs that discussed the possibility of $150 - $200 per barrel prices. The most interesting aspect of the report was that it contained no NEW reasons for the higher price objectives. Rather the “drivers” remain the same, which are, in my opinion: 1) still growing world oil demand; 2) lack of non-OPEC supply growth; 3) tight spare OPEC capacity; 4) increasing resource “nationalism”; and, 5) geopolitical instability (read Iraq, Nigeria etc.). insert.a.chart.APA What is different now, is that the global oil market has awakened to the fact that the demand feedback mechanism is broken and that it could take even higher oil price levels to cause a significant drop in consumption. I discussed this concept in a post on April 23. Specifically, the problem is that the bulk of the world’s energy consumers are shielded from the impact of higher oil prices by national subsidies. This is particularly true in China, India, the Middle East, Russia, Asia and Africa. In effect, every country except in the so-called OECD, or developed world. Discuss this article in the forum. ...thanks
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