Oil Price Bubble?
Supply is up, demand is down, yet the price is soaring. Here’s why.
Oil prices climbed to their highest level ever, reaching over $108 per barrel this week. And Americans are feeling this price spike at the pump, with gasoline averaging $3.22 per gallon. An analysis released by the investment firm Goldman Sachs suggested that oil prices might soar to $200 per barrel. Does this make sense?
Not really. Although U.S. crude oil inventories have fallen, gasoline inventories are at their highest since March, 1993
….{snip}….
world production is projected to be 3.3 percent higher in the second quarter and 4.1 percent higher in the third quarter than the same periods a year ago.
….{snip}….
the U.S. consumed 4 percent less petroleum in January 2008 than it did the year before.
….{snip}….
Exxon Mobil CEO Rex Tillerson blamed a third of the recent run up in oil prices on the weak dollar, another third on geopolitical uncertainty, and the rest on market speculation.
….{snip}….
The dollar has fallen in value by more than 30 percent against a Federal Reserve index of major currencies since 2002. This means that the price of imports, including oil, have gone up.
….{snip}….
”I think that this is the riskiest time to be long in crude oil since 1980.”
Ronald Bailey is reason’s science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.
