“OIL” The energy of the next fifty years
One year ago we all were very worried about the impact that the high oil price would have on the world’s economy. Nowadays we are worried about the impact that would have the low price of oil.
Why all this confusion on the investor minds within one year. The real oil demand has changes between 1% to 2%. How efficient is the market in telling us the right price of oil? It seems not as much as we think.
The Commodity and currency markets often react brutally to the most important news. Economists call this phenomenon over-shooting. Financial Times and The Economist gave us three great reasons why the markets reacted this way.
First the major oil consumer in the world China will slow down, second the Russian oil is on doubt if the war in Ukraine deteriorates, and third the Oil coming from the Middle Est is also in doubt because of the ISIS problems.
Another reason that these two great newspapers have forgot to tell us, are the concurrent energies to the Oil.
2014 and 2015 are considered by many analysts the years of the electric cars. Every big car company has debuted with an electric car and Tesla is set for record highs. Also this year the sales of electric cars have touched new records and year 2015 is going to be a great year for electric cars.
The states of Arab Gulf can still make money with oil at fifty dollar per barile. So it’s better continuing to make less money for a longer time that more money for a shorter time. But a price of fifty dollar per barile is a big problem for private western oil companies. If we take a look to these companies’ balances for year 2014, we will be aware about the problem.
What can happen if oil drops even lower? Customers have only to be happy. Russia and Isis will have really big problems with their expansion campaigns. The Gulf States can rest easy that oil will be the energy of the next fifty years and the western oil companies must suspend all their investment plans in off-shore and fracking.