The Guardian: We have been here before: the price of oil will fall
“One piece of conventional wisdom which is hardening into a truism is that oil prices will continue to rise. Recent headlines include: “Shell predicts two decades of rising oil prices” and “Oil will hit $100 by winter”.
Monday August 8, 2005
Vincent Cable
One piece of conventional wisdom which is hardening into a truism is that oil prices will continue to rise. Recent headlines include: “Shell predicts two decades of rising oil prices” and “Oil will hit $100 by winter”.
The futures markets are expecting prices to continue to rise from just over $60 a barrel to $64-$65 in six months. The mainstream forecasters anticipate continued high prices in the short and even long term.
We have been here before. At the peak of the 1979/80 oil shock, when prices reached $80 a barrel in today’s terms, a poll of forecasters showed a consensus expecting prices to rise indefinitely. The forecasts were underpinned by the belief that supplies were becoming exhausted or that the Opec cartel had limitless capacity to adjust supply to maximise revenue. Little account was taken of the supply and demand response which led to the collapse of prices within five years. The old adage of all commodity markets that high prices lead to low prices was forgotten. It is being forgotten again. read more
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