Article Written by Ian Kilbride and Published in BizNews.
Bastille Day, 14th July, a day of celebration and joy in France and the cry of Libertè, Égalitè, Fraternitè is heard throughout the streets on Montmartre and a general sense of bon homme prevails across the country. Can you imagine, however, just how well 14th July 2008 was celebrated in Riyadh, Dallas and Aberdeen, not because any of them particularly love the French and their sense of freedom, no simply because on that day oil went to $145 a barrel, its highest price in the last ten years.
Yet like all parties the music and gluttony had to come to an end and by Christmas Eve, only five months later, the price was at its lowest price in the last ten years, ooh la la $35 per barrel!
The current oil price of around $50 per barrel therefore helps us to see a few home truths about the oil myth, be it oils true value, cost, availability and immediate impact on world economies. Please don’t get me wrong I am no economist, my son in Grade 11 has forgotten more on this topic than I will ever know, but I do understand common sense and I have been around, witnessed and at times been the victim of enough manipulation to know it when I see it.
A great deal of commodity prices today are not based simply on good old supply and demand, no the hedge fund and other speculators have ensured that they are great drivers of the values, that they seek to make fortunes on at the average man’s expense.
When the perception is that the economy is fine they, the producers and speculators can drive up the oil price, the governments are also happy as their tax revenues are linked to this price. We are all sold stories of supply issues, under capacity and over demand, clearly it’s all a lie.
ISIS are rampage in Syria and Iraqi, the remainder of Iraqi is in Civil War and maybe now we are finally told turmoil in oil producing nations really means nothing. Their use to justify oil over $100 is a fallacy, the Saudi’s can pump the stuff down to $10 or less a barrel and still make money and do we really care if it runs out and accelerates the research for other more attractive clean fuels, well no!
The interesting thing will be to watch petrol prices and the low oil price impact. I personally say let’s keep oil at $50 or less and stop trying to “spin” that it is bad for the economy, it’s bad for Halliburton and their franking, it’s bad for “Valid the Inhaler” (the rather asthmatic Mr Putin) but low oil prices are as about bad for our economy as cream on a scone. Nett consumers of oil, like SA, can only benefit from this low price whatever its cause and although it may be partly aimed at killing off research into more expensive alternatives, or simply killing off the Putin regime, it will give our economy a much needed fill up as we also suffer the result of appalling governmental planning for our electricity requirements. So everybody, enjoy the low oil price and cheaper fuel and light another candle!