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Energy / Oil Prices

  • The End Of An Era: Is The US Petrodollar Under Threat?

    Recent trade deals and high-level cooperation between Russia and China have set off alarm bells in the West as policymakers and oil and gas executives watch the balance of power in global energy markets shift to the East. The reasons for the cozier relationship between the two giant powers are, of course, rooted in the Ukraine crisis and subsequent Western sanctions against Russia, combined with China's need to secure long-term energy supplies. However, a consequence of closer economic ties between Russia and China could also mean the beginning of the end of dominance for the U.S. dollar, and that could…

  • Why Oil Prices Are About To Settle

    If you are paying attention, you will be aware that oil prices have been falling dramatically since the end of June, losing over 20 percent from the highs at that time. This is bad news for investors in the energy sector and for the companies that produce the black stuff, but for the global economy as a whole it will provide an unexpected boost to growth. All energy costs are benchmarked against oil, so declining oil prices equate to declining energy costs, and that is a positive for growth. Whether you are benefitting from that or worried about your energy…

  • Oil Price Recovery Will Be Slow, Steady And Painful

    I’ve been trading oil and learning about oil companies for 30 years, and one thing I can tell you is that the common wisdom about the oil market is almost always simplistic, unreliable and wrong.  I was openly bullish on oil as it approached $90, because I know that the strength of the dollar is a spurious trading connection that has never been as strong as right now.  I also don’t believe in the commitment of the Saudis to a price war – today’s report showed that, true to form, the Saudis cut production in September to match their drop…

  • 8 Reasons For Our Oil Price Predicament

    A person might think that oil prices would be fairly stable. Prices would set themselves at a level that would be high enough for the majority of producers, so that in total producers would provide enough–but not too much–oil for the world economy. The prices would be fairly affordable for consumers. And economies around the world would grow robustly with these oil supplies, plus other energy supplies. Unfortunately, it doesn’t seem to work that way recently. Let me explain at least a few of the issues involved.1. Oil prices are set by our networked economy.As I have explained previously, we…

  • Oil Shocks And The Global Economy

    Here I re-tread a well-trodden path, but with recent events in the oil market I thought a brief recap might be timely.I begin with a photographic illustration of a typical US demand response to the tripling of oil prices that occurred during the first “oil shock” in 1974: Demand response after a tripling of oil price, USA, 1974Those long lines of gas-guzzlers were indeed a demand response, but not to the oil price increase. They were a reaction to the nationwide shortage of gasoline caused by the oil embargo that accompanied it. Americans, like George Patton’s tanks during the Normandy breakout,…

  • Oil Market Complexity Means Prices Make The Story

    When the world's business editors sent their reporters canvassing to find out what is behind the recent plunge in the world oil price, they were doing what they do almost every day for every type of market: stocks, bonds, currencies, commodities and real estate.In financial journalism more often it's the price that makes the story rather than the story that makes the price. If a story is about something very surprising which almost no one can know in advance--a real scoop--say, an unexpected outcome in a major court case affecting a company's most profitable patent, then the story will move…

  • Low Oil Prices Hurting U.S. Shale Operations

    Slumping oil prices are putting pressure on U.S. drillers.The number of active rigs drilling for oil and gas fell by their most in two months, according to the latest data from oil services firm Baker Hughes. There were 19 oil rigs that were removed from operation as of Oct. 17, compared to the prior week. There are now 1,590 active oil rigs, the lowest level in six weeks.“Unless there’s a significant reversal in oil prices, we’re going to see continued declines in the rig count, especially those drilling for oil,” James Williams, president of WTRG Economics, told Fuel Fix in…

  • How And When Will Saudi Arabia Respond To Low Oil Prices?

    Oil prices (along with prices of many other commodities) have fallen dramatically since last summer. Some observers are waiting to see if Saudi Arabia responds with significant cutbacks in production. I say, don’t hold your breath. Source: FRED.When oil demand fell in the 1981-82 recession, the Saudis cut production by 6 million barrels a day in an effort to soften the decline in oil prices. They also cut production in response to lower demand in the 2001 recession and the most recent recession. On the other hand, the kingdom boosted production quickly beginning in August 1990 and January 2003 in anticipation…

  • How Oil Prices Affect These Three Major Players

    Russia, Saudi Arabia, and the US will feel the effects of oil prices in radically different ways.It would be logical to think that the emergence of ISIL would have increased oil prices, but Brent crude oil prices have plummeted since July. Having now traded as low as $80 per barrel, oil is at its lowest price since 2012. The steep decline can be attributed to three trends: surging supply led by US fracking production, stagnating European demand, and a strengthening dollar.Declining prices could have a negative impact on oil-producing economies around the world, but some have significantly more risk than…

  • How Cool Heads Can Prevail In This Panic

    The oil market’s in freefall, the stock market is in freefall.  You’re taking losses, big losses, in stocks that you bought – not at the top of the market where valuations were high – but at areas you thought were terrific long-term propositions.  What do you do now?I am precisely where you are right now, because I am an oil trader, first and foremost.  And I can’t tell you what is going to be right for you, I can only tell you what is right for me.  And for right now, I’m standing pat and even committing a little more…