Could oil actually hit $300 wd gaster theory


Speculating on the price of oil is a favorite pastime in certain circles, and these include hedge funds. One prominent member of the hedge fund crowd this week said crude could rise to US$300 a barrel if current prices fail to rise further—and soon—to stimulate investments in new production.

Andurand seems to be one of a small group that also includes Saudi Energy Minister Khalid al-Falih, which believes prices can rise further, even to US$100 without affecting demand. Producers, Andurand said in the tweets, are afraid of peak oil demand resulting from the growing adoption of electric vehicles, and this is stopping them from investing in more new production. "So paradoxically these peak demand fears might bring the largest supply shock ever," Andurand said.

The hedge fund manager believes that crude oil should trade at more than US$100 a barrel to stimulate this much needed, in his view, investment, notably outside the United States where it is obvious that E&Ps are faring well with production growth even at current oil prices. Related: Venezuela Offers India 30% Discount On Oil…If It Pays In Cryptocurrency

Most observers of the oil industry seem to be in disagreement with Andurand’s bullish views. After almost three years of cheap oil that spurred more buying from the largest importers in the world, a sharp price rise is likely to have an impact on every economy, especially oil-dependent ones, and this effect is unlikely to be in the form of higher oil demand.

In fact, some believe that the big winners from higher oil prices will be renewable energy and electric cars—especially the latter—as production costs there fall, and this makes them more competitive with ICE cars, even preferable in certain circumstances, possibly even bringing about that peak demand that E&Ps are so afraid of right now.

I don’t see 300 dollar oil happening anytime soon without substantial worldwide carbon taxation (my guess is a tax of 50-100 dollars might be able to do this). Without taxation, if prices go higher, the USA will pump itself silly under the current regime which will probably help take some of the edge off as prices drift higher. Beyond this administration though things could look different. Assuming the next president is a Democrat, it’ll probably mean intense action on Climate Change. Much more so than what would have been if this current administration had never happened. I definitely expect an overreaction. Normally, unilateral actions to force an issue are ill advised since they foster disfunctionality but at this point it might not matter as much, that ship has long sailed, in fact it did so the day this president took the podium. In short, it’s not too outrageous to expect the next democratic president to push for substantial taxes on CO2 emissions and to do this on a worldwide scale. Maybe the GOP and their oil industry sponsors can mitigate actions at home but they will be harder pressed to stop this movement throughout the world, especially since we can expect climate change effects to become more pronounced as well as better understood over the next 4-8 years.