Insight: Oil prices have peaked

Ed Morse
Financial Times
Thursday, Aug 14, 2008

Thanks in no small degree to a drop in global demand, oil prices, after breaching $147 per barrel, have tumbled more than 23 per cent to below $113. Barring a big hurricane in the Gulf of Mexico or a disruptive geopolitical event, oil prices appear to have peaked.

World oil consumption is now growing at a significantly lower pace than had been imagined a year ago. Last October, the International Energy Agency was forecasting global demand growth for 2008 of 2.1m barrels a day, with 750kb/d from the OECD and 1.33mb/d from emerging markets. In their latest monthly report, the IEA has slashed this by more than 60 per cent to 800kb/d, with OECD demand actually forecast to decline by over 600kb/d and emerging markets demand to grow by 1.4mb/d.

In our judgment, the IEA’s forecasts for emerging markets will turn out to have been far too optimistic by year’s end and OPEC countries will again complain about the inability of oil importers to guarantee sufficient demand growth to warrant investments in expanded production capacity.

(Article continues below)

Pointing fingers about who is responsible for the uncertainty of global demand may be futile. Clearly, higher prices and lower economic growth are taking a toll on US and other OECD country petroleum product demand. But now two other articles of faith are being challenged. First, the consensus thinking that emerging market oil demand has decoupled from industrial countries will be severely tested over the next half year. Second, the growing consensus that lower prices and higher economic growth will result in a rebound in global demand growth is wishful thinking.

Let’s look at both of these arguments in more detail. There is growing evidence that the economic malaise affecting many of the OECD economies is spreading into emerging markets, especially those whose growth is reliant upon the strength of their export markets.

For China, which has been responsible for more than half of global base metal demand growth and as much as one-third of global petroleum demand growth, challenging times are ahead for exporters and the metal and energy-intensive producers of steel, aluminium, cement, and other primary products.

Full article here

• 
• Social bookmarks
• 
• Email this article
• 
• Print this page

Comment Terms Of Use

8 Responses to “Insight: Oil prices have peaked”

1. kevin Says:
   August 14th, 2008 at 12:13 pm

   The only way that this articles claim of “Peak Oil Prices” (barring war) can be true is if the supply/demand ratio increasingly favors supply over demand. If world oil production reached its maximum level in 2006 then supplies will continue to drop forever. How can demand continue to drop even more than supplies do? There would have to be global economic decline, not just the current slowing down of growth that we have recently been experiencing (globally, the US is in negative when you account for inflation).
   I predict that oil prices will go back over $150 per barrel by the end of the year. Oil is just to important of a resource for people to voluntarily cut back on their use. They have to be forced out of the market by high prices.

2. Vern Says:
   August 14th, 2008 at 5:06 pm

   Good points Kevin. The word “manipulation” comes to mind.

3. The Great Owl Says:
   August 14th, 2008 at 7:10 pm

   My sources say that oil and commodities will soften against a STRONG dollar for the next year or so running up to a financial collapse (most probably following USA backing an Israeli attack on Iran and China dumping our bonds). The price of almost all commodities and major currencies is completely manipulated the boom-bust cycles are engineered so that elites can consolidate wealth and major social changes can be effected quickly.

4. HenryDavidThoreau Says:
   August 14th, 2008 at 11:14 pm

   Manipulation.

   How come Dow is only at 11615.90?

   How did the dollar rebound so quickly WITHOUT RATE HIKES may I add…

   Wow, FUCK ME.

5. HenryDavidThoreau Says:
   August 14th, 2008 at 11:20 pm

   I guess its time to buy some metals. Back up the dumptruck and load that mother up!!!

6. HenryDavidThorea Says:
   August 14th, 2008 at 11:21 pm

   I guess its time to buy some precious metals. Back up the dump truck and load ‘er up!!!

7. kevin Says:
   August 15th, 2008 at 6:46 am

   TGO: I am a bit puzzled by the very sudden shift of the market to favor dollars over real assets like oil/gold. All the same factors that pushed oil/gold so high in the first place haven’t changed. The risk of war with Iran or in other oil areas seems to have increased, there was even a war in Georgia (oil and gas pipeline)! It seems very likely to me that some sort of government action was taken to affect these changes. Such as selling off a large quantity of their gold stock possibly.
   It may be that another, and possibly last, inflationary effort is going to be made to prop up the dollar followed by a sudden and catastrophic collapse to precipitate the crisis that they need for whatever insane scheme they have planned for the next round.

8. GARKO FACTOR Says:
   August 15th, 2008 at 9:20 am

   tired of being manipulated?
   http://mywater4gasengine.com is the answer