(Drivebycuriosity) - Oil prices are on a run again. The prices of Brent Crude ( international) and WTI (US version) doubled in the recent 12 months. Should we be scarred that the oil price rally is heating up inflation and even causes the next recession ( "Rapid increases in the price of oil have preceded almost all U.S. recessions" ( marginalrevolution )?
I think the recent rally is just a part of the general recovery. The global economy is recovering from the sharp Covid-19 recession and there is a huge pent-up demand for commodities, produced goods and services. Everything is swinging back, hiking almost all prices (chart below). I believe when everything normalizes the market for oil will get calm again.
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Today Oil costs still much less than in the years 2012-2016. Compared with the year 2008 the recent oil price hike is very moderate (chart below).
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Last weekend a major hurricane shut down US oil production in the Gulf of Mexico but the oil price had just a temporary gain (chart below)
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It is unlikely that the oil price will reach the 2008 peak of $146 anytime soon. The market for oil has changed after the year 2012 ( chart below). Opec lost her monopoly and has to compete with more producers outside the cartel. Around the year 2012 US oil production started a sharp rise because new technologies reduced the costs of fracking and made it profitable. If oil will get more expensive, producers - especially US frackers - will take advantage and pump more.
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Future oil price raises are also curbed by the technological progress which is restraining the demand for oil. Corporations and many private people are concerned with saving energy, using technologies which are more efficient. And we are at the ascent of the electrical car. Stay calm.
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