A “permanently high plateau” in oil prices?
Oil prices, which were $10 a barrel not that many years ago, are now going to remain in the stratosphere forever, according to the markets, OPEC experts, and some wise men. The FT has the story:
Crude oil futures prices for delivery until 2016 have surged above $100 a barrel as investors bet that oil costs will remain high in the long term even if they weaken in the short because the impact of the US economic slowdown. Every futures contract until December 2016 finished last week above $100 a barrel for the first time after a strong rally in long-dated futures prices. The Nymex December 2016 future settled on Friday at $103.59 a barrel.
The surge in long-dated prices comes as the International Energy Agency, the western countries’ oil watchdog, meets financial, trading, producing, refining and economic experts on Monday to discuss the roots of the current price rise. The meeting signals policymakers’ growing concerns about the rise in the oil price from about $50 a barrel in early 2007 to a record high of $111 last week.
Everybody appears to be on the same side of this trade. That in itself is a worrisome sign. When we see such things, we are always reminded of Yale economics professor Irving Fisher, who famously predicted, a few days before the Stock Market Crash of 1929, “Stock prices have reached what looks like a permanently high plateau.”