oil inflation

Economist James Hamilton on the Real Causes of High Oil Prices

Originally published by Oilprice.com  WTI

Nowadays the energy picture is confusing at best as the more information we are shown the more blurred our vision seems to become. Mixed messages, poor reporting and a media hungry to sensationalize anything it thinks can grab a headline have led to many wondering what the true energy situation is. We hear numerous reports on how the shale revolution will transform the energy sector, why alternatives are just around the corner, why advances in oilfield extraction techniques and new finds will help to lower oil prices. Yet no sooner have we read these rosy reports than we are bombarded with negative news on the Middle East, on why alternatives will never compete, on peak oil and declining oil production.

So where do we really stand? Is our energy future one of falling prices and plentiful supply or should we prepare for declining supply and sky high prices?

Countdown to $100 Oil?!? (3): Oil under $120

"Countdown to $100 Oil?!?" is my contrarian series on the direction of Oil prices. The premise of this series is that, even if we have arrived at the plateau of "Peak Oil", there will still be wild swings in its price (in fact, there already have been) and that demand destruction is taking place sufficiently such that oil will recross the $100 boundary before it ever reaches $200.
In the first installment, I argued that unsustainable heavy subsidies to the consumption of Oil in Asian economies, together with some evidence of hoarding of supply, and already apparent demand destruction in the US, meant that Oil was ready to decline below $100 sometime soon. Just a few days later, a number of Asian countries cut their subsidies, giving rise to my second installment.
Then Oil went on a sudden tear to $147+, before breaking down and by yesterday trading at $119.50, and at $118 this morning.

Countdown to $100 Oil ?!? (2): Asian subsidies crumbling

In a diary over the weekend entitled, Countdown to $100 Oil ?!? Subsidies, hoarding, and bailing out billionaires, I took the contrarian position that oil is more likely to re-cross to the downside the $100 a barrel price, before it hits $200 a barrel. I cited evidence of hoarding on tankers, the Fed's realization that destroying the dollar might be a bad thing, and most of all, intense pressure being applied to Asian governments' subsidies of consumer oil prices in support of that position.
Today, with the price of a barrel of oil at the moment at $123.75, comes fresh evidence that those oil subsidies are collapsing. It turns out the laws of supply and demand work on the other side of the globe too.

Countdown to $100 Oil?!? Subsidies, Hoarding, and Bailing out Billionaires

I was in the midst of writing a diary about how there aren't "2 Americas", a la John Edwards, but 3, when it became clear that so much information has become available this week concerning the forces affecting Americans' demand for oil, that it demanded its own diary. Even if the world has reached the plateau of "Peak Oil" and supplies will gradually be rationed at higher and higher prices, there are going to be booms and busts along the way. I'm here to tell you that the evidence suggests that there has been a speculative boom in the last 6-9 months and we may shortly see a bust, echoing the sudden decline of oil from $80 to $55 a barrel just before the 2006 elections.