Global struggle for oil can become a nightmare for the markets

Wednesday, May 11, 2005

Michael T. Klare, author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Oil has written an excellent update on the current status quo of the major nations' efforts to secure their oil demands. Follow this link.
It strengthens my view that the sole biggest concern in today's world is about future oil supply. Read also my earlier posts Oil bulls are on the loose - or on the losing side?, Has Saudi oil output peaked?, Markets cheer 15 % decline of oil prices - after a rise of 434 %, Saber-rattling from Saudi Arabia and Venezuela probes oil co's for tax evasion to comprehend that all other problems the share markets are plagued with pale in comparison to the oil issue, as the world has not yet developed a viable source of an alternative energy that can fill the coming gap between supply and demand.
The reason for fear is clear. Economic theory says - and practice proves - that all productivity of human mankind is based on its exploration of the earth's energy resources. Whatever we do commercially is based on this free lunch from our globe and we have not yet developed viable alternatives to the black gold.
Today's EIA Petroleum Status Report will make no difference to the grave short, medium and long term problems that are unavoidable if no serious efforts for better energy preservation are undertaken.
Yesterday's fall of US share markets was a direct result of a change of investor's minds that oil prices above 50 dollars a barrel are here to stay and projections of a super spike into three-digit price levels could become a reality sooner than anyone wishes for. Higheroil prices will eat into the profit outlook of more or less every company as consumers will have to set aside ever bigger parts of their income for gasoline and products made from oil. This demand is quite inelastic given the fact that commuting to and from work cannot be reduced on a meaningful level. A return to measures of the 1970's, when governments put limitations on private car use, will only be a drop in the barrel considered to commercial transportation needs that cannot be curbed as easily if one does not want to risk the uninterrupted supply of goods to the consumer.

1 comment

Howard said...

I think we have a problem right now. Did you see the insider selling is 60-1?

15 May, 2005 22:33

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