Archive for the ‘commodities’ tag
Oil Prices: Near Vertical Supply Curve?
Not everybody believes that the spectre of high oil prices has been banished. We are operating on the close-to-vertical side of the supply curve, the argument goes. The plunge in oil prices does reflect falling demand, but the magnitude of the price fall exaggerates the actual volume change in oil demand. Unless we see a strong shift towards alternative energy, or a significant expansion in oil production, the stage will be set for another oil rally when global demand picks up again.
We should all be watching these price indicators very closely, but the magnitude of the dips can be somewhat difficult to interpret. Being hyper-sensitive to changes in demand or sentiment, sudden spikes driven by isolated or industry-specific events may not make them the most reliable economic indicators. But if there is indeed a real turnaround in growth, you’ll probably catch wind of it there.
