Oil prices. A very hot, very sticky, very crude topic. We’ll look at four versions of reality.
MUDGE‘s reality: $4.259/gallon at his neighborhood Shell.
From the mosaic, we can hope that some kind of truth emerges.
No question that we are living in interesting times.
Oil spill no. 1. How high is up?
$200 a barrel petroleum. If you think your world is changing around you, buckle up.
Will Oil Really Hit $200 a Barrel?
By Desmond Lachman | Friday, May 30, 2008
Rudi Dornbusch, the renowned economist, once said that he did not understand how Mexico’s central bank board members could make the same mistakes time after time. Looking at the ongoing frenzy in the global oil market, one appreciates what Dornbusch meant. Once again, many market participants appear to believe that oil prices can only go up. It seems that the painful lessons of the 2001 dot-com bust have been forgotten, as have the lessons of the much more recent U.S. housing crash.
In their state of forgetfulness, many pension funds and insurance companies have built up very large open positions in the oil futures market. These positions are now estimated to total over $200 billion, roughly the equivalent of a full year of Chinese oil demand. They have contributed to the recent spectacular run-up in oil prices.