To you and me it will soon be summertime, but for oil analysts it’s got another name: the driving season.
It is that time of the year when Americans jump into their massive road wagons, fill up the tank with petrol and hit the road, drinking up gas as hundreds of miles of tarmac disappear behind them. At least that is how it used to be.
As a result, this is a time of the year when oil often goes up in price. Oil is like that, it follows the seasons. There’s the driving season, and then the hurricane season, then things tend to go quiet, providing that there isn’t a war against terror season, until the following year.
But of late, oil has been no respecter of these conventions. One day it seems to go up in price for no better reason than it’s Monday, and then the following day it rises because, well, because it was Tuesday.
Yesterday it was one of those Tuesday-driven oil hikes but it was enough: enough to push oil all the way up to $129 a barrel, yet another all-time high. But here is the real worry: today is Wednesday, will those mid-week blues send oil over the $130 mark for the first time ever?
Well, actually, additional reasons were given for the latest hike. The latest news came from OPEC, when it said it was not planning any supplementary meeting to discuss rising oil output, so that means the next meeting won’t be until September.
But then the other day, Saudi Arabia said it was upping output by 300,000 barrels a day but even then the price went up.
It seems that if the news is good oil goes up in price, if it is bad it goes up too.
The Chinese earthquake has also been cited as a reason for oil going up, as damage to local hydro-electricity energy plants will lead to a shortage of home-grown energy.
Yesterday also saw the revelation of the news that the US was now importing less oil than before. According to the US Department of Energy, US oil imports as a percentage of total consumption are expected to fall from 60 to 50 per cent by 2015, before then rising to 54 per cent in 2030.
So the US is trying its hardest to break its addiction to oil, and as it emerges that it is having some success, oil shoots up in price. Does that remind you of anything?
Of course, a raft of reports have been published predicting oil will rise. One moment headlines are made with a prediction of oil at $146, then it’s $150, and now the latest is saying $200 a barrel.
No doubt these stories are right, and oil has got much further to rise in the SHORT-RUN.
The oil bandwagon is getting busy too. Yesterday, Norman Baker, the Liberal Democrats’ shadow transport secretary slammed government transport policy because it was based on the assumption oil will be trading at half the current price at the end of the next decade. “It is absurd to assume that the price of oil will be $70 a barrel in 2020. Nobody outside the government thinks that will be the case,” he said.
Clearly, then, the Lib Dems are experts on commodities it will be interesting to get their view on the FTSE 100 in 2020.
Right now, oil is far too expensive. People just can’t afford it. Alternatives will be found, fuel-efficient cars will become ever more popular, true renewable energy (not that bio-fuel nonsense) solar, wind, wave and tide will become more efficient.
If oil is anything like $200 in 2020 in current prices that is, then we will have messed up energy policy big time.
© Investment & Business News 2013