by Jerome a Paris
Tue Jun 21st, 2005 at 12:36:06 AM EST
With oil prices again at record (nominal) levels, and more to come, I think it's only fair that I go on the record publicly with a prediction I have made elsewhere, i.e. that oil prices will reach 100$ pretty soon, in fact before the end of the year.
My reasoning is that, quite simply, supply is constrained at a time when demand, pulled by China and by the US, is growing at a record pace. Supply is constrained because:
The outcome of these trends is that the oil market is unbelievably tight (of the above 1.5 mb/d of Saudi "spare" capacity, most is in the form of poor quality heavy crudes that few refineries can work with and which is for most instances and purposes useless for today's needs). In such conditions, any disruption on production, even for the most harmless and frequent reasons like weather, creates a very real - if temporary - unbalance in the market which pushes prices up.
Two days ago, there were worries about disruptions in Nigeria. Yesterday, the story was about a possible strike in Norway, the third largest oil exporter. Tomorrow it will be something else. And meanwhile, demand keeps on rising, despite the five fold increase in oil prices in the last 6 years.
So, anyway, I am on the record. Expect this to be an occasional series...