Skip to main content

Yes, but oil WILL recover

Japan Restarts Old Oil-Fired Power Stations | Financial Tribune

A recent article in SLATE bore the questioning headline, "What happens if oil doesn't recover?".

The question is a timely one. Oil prices have taken a beating of late. I have a precis of the reasons why in a recent post here about Berkshire Hathaway and Occidental Petroleum, and won't recap that.

The brief dip of near-month futures into negative prices -- companies were paying good money to cancel deliveries of the stuff -- drew a lot of attention. But let's look at the big picture to fix the size of the drop. Through December 2019 the price of West Texas Intermediate rose slowly and, it seemed, steadily. It went from $55.86 per barrel when the month began to $61.40 at year's end. In January, before most of the western hemisphere even knew the word "Wuhan," the price began a decline. WTI ended January at $51.56.  The decline became much more dramatic in February, down to $44.76. In March, it fell off a cliff, ending that month at $20.48, only about one-third of the year-end value. In April, let us simply say: no rebound.

The SLATE piece, by Fred Kaplan, engages in speculation about the geopolitical shifts that will take place if there is still no rebound through the coming (northern hemisphere) summer. Of course summer is usually a time when a lot of people are doing a lot of driving. Gasoline demand means crude oil demand. Also, summer is a time when people at home use a lot of air conditioning, which keeps those oil-fired power plants busy.

Kaplan suggests that if oil doesn't recover, and it appears as of September that this is a long-term demand depression rather than something oil producers can easily wait out, then the world could see the fall of the House of Saud in Arabia, with all the region-wide instability one might infer from that.

Personally, I am unworried, for the reason I succinctly stated in the headline of this post. The possibility of a power struggle in North Korea worries me. Increased Chinese claims to regional sway to their south and west also worries me. Lots of things in the world today worry me. An imbecilic sociopath in command of the nuclear arsenal of the US happens to be on the list.

But that there will be no rebound in oil demand? Put that one aside. There will be. Trees don't climb to the sky and drills never reach the opposite side of the globe. There is always a reversal.
Labels:

Comments

Post a Comment

Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.   We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a maj...
9 comments
Read more

Searle: The Chinese Room

John Searle has become the object of accusations of improper conduct. These accusations even have some people in the world of academic philosophy saying that instructors in that world should try to avoid teaching Searle's views. That is an odd contention, and has given rise to heated exchanges in certain corners of the blogosphere.  At Leiter Reports, I encountered a comment from someone describing himself as "grad student drop out." GSDO said: " This is a side question (and not at all an attempt to answer the question BL posed): How important is John Searle's work? Are people still working on speech act theory or is that just another dead end in the history of 20th century philosophy? My impression is that his reputation is somewhat inflated from all of his speaking engagements and NYRoB reviews. The Chinese room argument is a classic, but is there much more to his work than that?" I took it upon myself to answer that on LR. But here I'll tak...
17 comments
Read more

Recent Controversies Involving Nassim Taleb, Part I

I've written about Nassim Taleb on earlier occasions in this blog. I'll let you do the search yourself, dear reader, for the full background. The short answer to the question "who is Taleb?" is this: he is a 57 year old man born in Lebanon, educated in France, who has been both a hedge fund manager and a derivatives trader. He retired from active participation from the financial world sometime between 2004 and 2006, and has been a full-time writer and provocateur ever since. Taleb's writings for the general public began where one might expect -- in the field where he had made his money -- and he explained certain financial issues to a broad audiences in a very dramatic non-technical way. Since then, he has widened has fields of study, writing about just about everything, applying the intellectual tools he honed in that earlier work. As you might have gather from the above, I respect Taleb, though I have sometimes been critical of him when my own writing ab...
4 comments
Read more