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Page added on January 30, 2007

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Price of oil on the slippery slope

ONLY five months ago crude oil prices nudged $US80 a barrel amid predictions by informed observers – not apocalyptic ravers – that the commodity would reach the $US100 level.
Since then, oil has tumbled 30 per cent and the contango on futures pricing has disappeared, which means investors aren’t punting on a quick recovery.


What has shifted sentiment in such a short time? After all, the global economy still ticks over nicely and the Middle East remains a time bomb – literally and figuratively – ready to explode.


“It’s a hard slog convincing investors about the the oil recovery story,” Bell Potter research head Peter Quinton says. “Anecdotally, people are waiting on the sidelines for the oil price to bottom, but the trouble is, by then it’s too late.”


It’s useful to remember the long-term context. According to Commonwealth Bank of Australia commodities analyst Tobin Gorey, the oil price has tumbled more than 20 per cent five times since late 2004, but the price of oil has still risen 25 per cent over this period.

The Australian



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