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Page added on February 24, 2012

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Could Oil Be Facing a Repeat of 2008?


While US WTI oil prices have remained at a sharp discount to the more globally reflective Brent crude price, both have risen this year, with Brent at a nine-month high of $122.72 per barrel this week after rising 13 percent in dollar terms since January.

Although this is far from the peak of $150 set in July 2008, it is at an all-time high in sterling of £77.71 per barrel and is flirting with a euro high at €92.70 per barrel, just off the 2008 peak of €93.50 and a crippling high price for a region on the edge of recession. Indeed, oil consumption has already begun to react to the combination of rising prices and stagnant growth, according to the FT.

Official data show deep drops in year-on-year consumption in European countries, such as Italy, in January. The International Energy Agency forecasts that Europe’s richest countries will witness the largest drop in oil consumption of any region, contracting by 340,000 barrels a day, following a drop of 290,000 barrels per day last year in what was then considered to be a period of economic recovery.

The oil price is being pushed and pulled by two main drivers. The first and so far the most influential has been the growing fear of supply disruption to crude exiting the Persian Gulf via the straights of Hormuz — let’s say, The Iranian Factor.

As progressively more bellicose language has come out of Tehran, oil traders have taken the easy option and forward-covered their requirements, driving up the price of seaborne oil as evidenced by the Brent crude price. Additional impetus has been added by the loss of some 300,000 barrels a day from South Sudan, following that region’s war of (mostly) words with North Sudan over transit fees.

Bulls also point to Libya’s production recovery flattening; the failure of Iraq to reach previously projected production rates; and Syria’s rapidly deteriorating situation, as reasons why the oil price is destined to go higher. Indeed, the bulls were much in evidence at the International Petroleum Week in London where traders and executives talked about $120 per barrel as the floor for the market and some ventured forecasts of oil hitting $150 a barrel or higher if the Iran situation goes wrong.

Metal Miner

8 Comments on "Could Oil Be Facing a Repeat of 2008?"

  1. Alan Cecil on Fri, 24th Feb 2012 4:48 pm 

    Too bad the “other” factor isn’t mentioned, that the mighty Dollar is starting its own Hubbert Curve down the merry path of devaluation. Certainly a contributing factor.

  2. Kenz300 on Fri, 24th Feb 2012 6:45 pm 

    Every time oil prices spike we get a recession.

  3. Anvil on Fri, 24th Feb 2012 8:59 pm 

    The bulls are hitting the barrels again.

  4. jaime on Fri, 24th Feb 2012 10:34 pm 

    well guess what its Time for THE OBAMA-NATION TO BE IN PLACE you know the one that makes it desolate.

  5. BillT on Sat, 25th Feb 2012 1:45 am 

    This is the future…price spikes followed by recession, followed by oil prices not as low as before, followed by price spikes, followed by recessions, followed by oil prices not as low as before, followed by price spikes, etc…until the last spike ends the use altogether and we go into an eternal depression.

    Then again, the whole system could collapse somewhere along the way and end it with billions of recoverable barrels still in the ground but no financial means to get it out. Oil requires investment, loans, a trade base, secure payments, etc to exist as a usable commodity. If the global financial system collapses, (and it appears to be on the way) international trade will stop. Those tankers will not come to the US if there is no means to guarantee payment for the oil they carry. Payment with a value that the seller recognizes. (Gold?) How many shiploads of Charmin would it take to pay for a tanker of oil? The dollar is fast approaching the value of Charmin.

  6. MrEnergyCzar on Sat, 25th Feb 2012 4:12 am 

    Is there actual gold in Fort Knox?


  7. Isaiah on Sat, 25th Feb 2012 6:28 am 

    Hey BillT, I’m tired of you belittling and insulting toilet paper. Toilet paper (especially the sweet soft high-quality Charmin type)is an integral component of the modern economy. Without it, I don’t see how the global economy and society would function. Moreover, something that’s hardly ever talked about in the liberal media is Peak Toilet Paper, which is much more urgent and imperative than so-called Peak Oil.

    The Peak Oil crisis will pale in comparison to the Peak Toilet Paper crisis, in my humble opinion. In short, I think people can manage to live in a world with less energy and complexity, but without toilet paper, the sh*t will hit the fan…literally.

  8. BillT on Sat, 25th Feb 2012 12:52 pm 

    Isaiah…believe it or not, you CAN exist without toilet paper of any kind. All you have to do is ask your grand parents what they used when they were small. The joke about the Sears catalog is not a joke. Nor is the corncob or even leaves. Most of the world gets along just fine without such a luxury. You will also if you live long enough. Actually a roll of Charmin is worth more than a US dollar today, but…that is another story.

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