The Running Commentary

Oil Price fueling Global economic downturn

question markMany discussions currently are dominated by the price of oil and how this is negatively impacting on the Global economy, but many people are scratching their heads trying to understand what has lead to the change in demand, which is driving the increase.

I have, with many of my colleagues debated whether the demand has increased to such and extent or whether the speculators on the market are driving the price. The consensus amongst us was that it was probably significant increases in demand, coupled with a finite resource level and a punt by some really powerful speculators.

None of us talked to the supply concerns as a result of the Iranian tensions around their nuclear development programme. This may be common knowledge to the people in the know, but to the man on the street this is something that has not factored into the equation.

I came across and article by Jorge Castaneda in the latest Newsweek, which talks to just this point. Logically it makes some interesting reading indicating the effect on the world that an “attack” by America and Israel on Iran would do to the supply of oil. Effectively Tehran would stop exports of oil, certainly into America and anybody that should side with the Red White and Blue and it appears that speculators are betting that this attack could happen before GWB leaves office.

The effect that is estimated with such an attack would be that several million barrels of oil would be removed from the supply (given the allies of Iran which include Caracas)

This certainly seems one of the more plausible reasons, given the slow down in the global economy and one therefore assumes slow down in the demand for oil, for the consistent increase in the price of oil.

Lets hope that they are able to find some peaceful means to get rid of this threat, both nuclear in the form of Iran as well as the aspect of war being declared by the war machine of the USA.

Back to basics though and I have covered this many times before, we need to be thinking with more urgency toward replacing our hunger for our finite resources.

fossil fueliranoilpeaceUSAwar

Mike • July 10, 2008

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