by Jerome a Paris
Wed May 21st, 2008 at 05:50:38 AM EST
Shortage fears push oil futures near $140
Fears of a shortage within five years propelled long-term oil futures prices to almost $140 a barrel on Tuesday, further stoking inflationary pressures in the global economy.
Investors rushed to buy oil futures contracts as far forward as December 2016, pushing their prices as high as $139.50 a barrel, up more than $9.50 on the day. The spot price hit a record $129.60 a barrel.
Veteran traders said they had never seen such a jump and said investors were increasingly betting that oil production would soon peak because of geopolitical and geological constraints.
Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.”
It's about time "peak oil" made it to the frontpage of our business papers. Yesterday, the FT still had a positive spin on things, in an article saying that the US decline in foreign oil dependency is already becoming more visible, with imports making up 57.9 per cent in the first three months of this year, down from 58.2 last year. In other words, market forces are doing their job, nothing to worry about, move on.
Today's tone is quite different - maybe it's the $9 per barrel jump in one day, and the fact that it's long dated prices that are icnreasing more than short-dated ones, ie worries are now about future supplies, not current supplies, a change whose significance is hard to understate.
For politicians, the only heat they are getting is from fishermen and truckers who are being squeezed by higher costs (you'd expect that with such an across the board price increase, competition would not be impaired, and higer costs would be passed on to consumers, but the market power of big retailers still seems to limit that to some extent for now, so the problem remains localised within the fuel-intensive sectors rather than with the end-user consumers in the form of inflation.
Not to worry, prices will increase until prices are actually passed on and cause new consumption patterns; the fact is that the current "boiling frog" price increases are unlikely, it would seem, to lead to shortages or rationing in the short term, because that's not where the problem is.
Of course, the good news of sorts is that, if the problem is access to oil or energy a few years out, then we have time to actually do something about it. Not much, but some. Awareness is key to that, but it has to go through a thick fog of denial.