Why Oil Prices Will Remain High

I don't know about you, but in the absence of any dramatic news about Iran in the papers, and especially set against the general background of a weakening global economy, the relentless rise in gas prices each time I pull up at the pump has come as a bit of a shock.

And before anyone leaves a comment about being a bit tight-fisted, let me tell you, here in the UK it costs me about $200 to fill up my tank - no small outlay.

So if anyone else is wondering what's going on, an Economist article makes depressing reading, because rather than report this as just another temporary Ayatollah-induced spike, the learned news mag reports that in spite of oil market indicators being bearish, oil prices are likely to stay above $100 per barrel for the rest of the year.

Source: The Economist

Unfortunately, while the Economist gives credit to suggestions that on-going tension between Iran and the West are spooking the oil markets, it bizarrely spends much more time focusing on poor growth prospects in many developed economies, particularly Europe and China.

The oil market is obviously delving deeply to find this speculation about a possible Israeli strike on Iran's nuclear facilities, and retaliatory threats by Iran to block the Strait of Hormuz, because while the headlines were rife with just such possibilities nine months ago, there has been precious little of late.

Still, be that as it may, and even though the world's storage tanks are awash with oil, the little bit of news and the fear (not backed up by hard evidence from what I can see) that the loss of about 1 million barrels per day of embargoed exports from Iran cannot be made up by Saudi Arabia and Russia is enough to get oil investors running for the hills.

Better dig out that bicycle then.

By. Stuart Burns