The future for oil

on Mar 31 in Oil Market tagged by Trevor Hicks

Many experts are predicting that today’s dearth of investment in oil exploration will lead to a return to oil prices like we saw in mid-2008. The report quotes Charles Maxwell, who I’ve seen speak a couple of times and he’s quite persuasive: 

We are thus, in my view, setting the stage for a sharp upswing in oil prices by 2012, and beyond.

In my recent job search I had discussions with a wide range of people in the business, nobody seems to dispute this scenario. This is old hat to my old corporate blog readers, but to those of you who may not work in the oil industry I want you to know that this is the common sentiment.

My intuition is that the price increases of 2006 and 2007 caused the recession that started at the end of 2008 and the massive spike in prices in early 2008 are what has led to the recession being so deep and long. I think the banks were not the cause, rather they had brittle portfolios that couldn’t withstand a serious recession and in that sense are a “victim.”

So when prices spike again in a few years, unfortunately, I will expect a repeat of 2008 and our recovering economies will be pushed off a cliff again. If the era of cheap energy is indeed truly over, then our economies will sputter along like this until we adjust to the new reality.