China Syndrome Part III - Oil Bubble
During a liquidity bubble, sensational claims (e.g., “the world is running out of raw materials” or “1.3 billion Chinese soon consume like Americans”) tend to proliferate, juicing up the prices of oil and other natural resources. These have almost always turned out to be false.
Oil prices have averaged twenty-three 2003 dollars per barrel since 1861, when oil was first sold as a commodity, similar to the average price of twenty-six 2003 dollars per barrel over the past 50 years.
Current oil prices are still half as high as their average during the oil shock in the late 1970s, which caused a global downturn. The OECD economies are much less dependent on oil, and current prices are not very high relative to their income. They should be able to cope with current or even higher oil prices. China, however, is a different story, and it is driving oil prices today.
See: Oil Bubble
http://www.morganstanley.com/GEFdata/digests/20050301-tue.html
See: China Syndrome Part II
http://naybob.blogspot.com/2005/02/china-syndrome-ii-no-pricing-power.html
Oil prices have averaged twenty-three 2003 dollars per barrel since 1861, when oil was first sold as a commodity, similar to the average price of twenty-six 2003 dollars per barrel over the past 50 years.
Current oil prices are still half as high as their average during the oil shock in the late 1970s, which caused a global downturn. The OECD economies are much less dependent on oil, and current prices are not very high relative to their income. They should be able to cope with current or even higher oil prices. China, however, is a different story, and it is driving oil prices today.
See: Oil Bubble
http://www.morganstanley.com/GEFdata/digests/20050301-tue.html
See: China Syndrome Part II
http://naybob.blogspot.com/2005/02/china-syndrome-ii-no-pricing-power.html
Comments