Re: Kemp & Edwards agree - time to get tuff with Russia
On Jul 14, 2006, at 1:49 PM, Steven L. Robinson wrote:
True, energy prices have historically fluctuated - boom and bust -
as in 1986. But at that time Saudi Arabia had the excess capacity
to flood the market with crude and drive the price down. If it
still has that capacity now, it hasn’t used it.. Either the Saudi
monarchy is, for unexplained reasons, resisting the entreaties of
its patron the United State to increase production, or it can’t.
Oil prices are high in part because of supply/demand fundamentals,
but there’s a large speculative component too. I couldn’t put a
number on it, but it’s probably at least $25. A US recession would
reduce demand enough to change the S/D balance slightly - but it
could be enough to prompt a collapse in prices. It doesn’t require
Saudi Arabia’s intervention.
Doug