Viewpoint: 'Slow motion' oil shock (Bloomberg)

[jpak]

http://www.iht.com/articles/2006/07/23/bloomberg/sxpesek.php

The surge in oil prices seems to have the Middle East written all over it. Israel's confrontation with Hezbollah in Lebanon is unnerving markets already jittery over Iraq and Iran. Africa also is thought to have a role. Declining production in Nigeria is helping to keep crude oil above $73 a barrel. All these risks may push oil well above the recent record of $78.40.

The conventional wisdom that bombs and geopolitical risks are boosting oil prices and shaking up stock and bond markets is only half right. The other catalyst is one that won't soon go away: Asia's economic boom.

"While we recognize the risks associated with a supply shock in the oil patch, we believe investors should be just as concerned about the slow-motion demand shock evolving from Asia," said Joseph Quinlan, New York-based chief market strategist at Bank of America.

Asia, after all, is home to about 3 billion people edging toward simultaneous booms in industry, urbanization and demand for automobiles and air travel. And at the moment, Quinlan said, "Asia's energy resources are grossly inadequate." The growing disconnect between Asian supply and demand alone could keep energy prices high in the years ahead.

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[Viva_La_Revolution]

1. So that cheap crap from China will no longer be cheap.

Bring manufacturing back to the US

[megatherium]

2. That would solve a lot of problems, not least of which

is increasing the number of jobs for low-skill labor in the US.

[Strelnikov_]

3. Recent Article On EB Posited That There Is No 'Geopolitical Premium'

A tinfoil theory I have, to counter Palast's 'remove oil from the market' theory, is that the current geopolitical turmoil is being spurred along to cover up the growing supply problems.

Right now, the conventional wisdom seems to be that when the geopolitical problems settle down, prices will drop, so no need to rapidly ramp up development of alternatives.

On the other hand, consider if the current run up in prices was absent of any major geopolitical turmoil in the oil patch, like in the late 90's. I feel there would be serious disscussion of the supply situation.


We don't want the addicts kicking the habit too soon now, do we. There is a lot of money to be made in the years following peak oil. That is, after the problem manifests itself, and before alternatives can be brought up to scale.


Anyone see how much Exxon made this quarter . . .

[Javaman]

4. "when the geopolitical problems settle down, prices will drop"

But that's just it, as long as they can keep the turmoil going, they have their excuse for high prices or to raise prices.

This isn't ending any time soon. To much money is being made.

[NickB79]

5. It's a downward spiral, ie oil and turmoil in the ME

We buy oil from the Middle East, which then funds radical religious groups that wish to destroy any Western influences in their countries. The Western world then funds any groups that will help them maintain the status quo and keep the oil flowing, and in some cases even invade (see Iraq). This causes turmoil, civil war, terrorist attacks, etc. We continue to buy oil from these countries though, and even use up more than before to fuel our war machine. The money keeps going from our pockets to the pockets of our enemies, who buy weapons to use against us and continue the fight. As the oil supplies dwindle and/or world demand increases (see China), the US will fight even harder to maintain their grip on stable oil supplies and the resistance will grow even richer as oil prices spike.