The reality of $100 per barrel WTI returning
Some may recall back in the early months of this year or late the previous I wrote a thread discussing the likely increase of WTI to $75 a barrel or above by the latter part of this year. This followed previous contentions that the price of our crude would rise as the country ushered in more credible economic leadership, bringing real growth more in line with historical averages.
It was my contention that the new President would enact policy to help the economy grow at or above 3% in spite of most leftist politicians and media meatheads saying it was now impossible to see that number again. If they, and obama, as smart as they all are and as much as they care about the average flyover American couldn't get growth above 2% even with the Fed holding interest rates at 0% while the government doubled the debt over the 8 years of the guy with no presidential qualifications it just simply couldn't be done. In their opinion.
Well, times have changed and reality as well as their idiotic contentions have snapped back at them. With growth above 3% in spite of trade turmoil it stands to reason that when these trade difficulties are overcome, as the recently redone nafta deal, not only will we see an additional economic boost but many parts of the world where growth lags ours will as well.
Economic growth fuels consumption and consumption pushes up demand and demand increases pricing. Investors will be more encouraged to fund a more disciplined industry and we will be on our way to $100 a barrel oil, maybe not until the midpoint of next year, but it is coming none the less.
The danger for us all is what it was in the run up to the 2008 recession, energy prices greatly increasing the cost of every necessity choking off the American consumer, although continued growth is a great hedge against that risk.
Some are talking $200 a barrel oil on the horizon, which may be great for those of us receiving royalties but would be catastrophic for the world as a whole.
Hold onto those royalties folks. It isn't polite to cheer higher oil prices because few benefit and many suffer, but reality is what it is and we should know what to expect going forward, which is higher checks and increased activity but probably not a return to the insanity we saw initially when the shale revolution was out of its mind crazy.
https://www.cnbc.com/2018/10/01/oil-prices-opec-powerless-to-preven...
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Replies to This Discussion
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Permalink Reply by Dan on
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The next recession is a given. The question is how long will we have growth until it happens and are we building our countries foundation stronger so it doesn’t crumble as much when the next one hits. When markets crash and folks say the money disappeared from the economy it didn’t disappear, it went into someone’s pocket. Hopefully the next downturn doesn’t swing as low.
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Permalink Reply by David Allen Lilly on
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I believe it will be a longer expansion cycle due to the anemic "recovery" we saw during the obama years. Economic cycles are a reality of life but politics and politicians can and do get in the way.
I am writing more about the oil market than economics although you cannot separate the two. The oil market caved in upon itself due to rampant, undisciplined over production causing an over supply and crashing prices. OPEC, and especially the Saudis very stupidly believed they could crush the American shale companies with artificially low prices and lost "big league".
What they succeeded in doing was leaning out American shale and losing much of their leverage as the worlds swing producer. The article I linked talks about the Saudis now being unable to pump enough extra oil to keep prices from rising to the $100 per barrel range, especially with new Iranian oil sanctions hitting tight supply.
I believe this was more detrimental to oil pricing than the actual economics, it seems that manufactured dynamics injected into a market or an economy generally worsen conditions more so than the natural cycles of these things.
My opinions are not cut and paste, there were many "experts" who said cheap oil was here to stay. I didn't believe it and still see it rising. Oil has never gone down in price without recovering, all that I believed was necessary was an economic catalyst to drive prices upward. The obama "recovery", such as it was, was a weak, shallow and over blown recovery that took place minus real, historical growth in GDP. I felt certain that President Trump would get us moving in a more historical recovery with 3% growth driving an economy that would consume much more energy which would drive pricing and I still see that upside.
You might be able to glean that I am not an obama fan, and you would be correct. The guy was a joke and the Trump economy is showing that obama only looks good when compared to the final two pathetic years of the sad, weak boosh administration. It is hard to argue that the Trump economy isn't much stronger. I don't see the next recession as being right around the corner, when the trade issues with China are solved (as they surely will be) there will surely be another uptick that will add some duration to the current cycle.
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