Nine out of ten stories that I have been reading in the media recently strongly support the notion that gas prices at the pump will only skyrocket up for ever... such as Oil; The Final Warning in New Scientist this week. They confidently predict that: "It is hardly conceivable that the world could function without oil"
Here's one shock scenario from New Scientist:
"According to one analyst who took part in a simulation of just such a crisis, the situation most experts fear is what they call a "psychological avalanche".
Here's what happens. A small, distant country one day finds it can no longer import enough oil because of a spike in prices or problems with local supply. The news media whip this up into a story suggesting an oil shock is on the way, and the resulting panic buying by the public degenerates into a global grab for oil.
Most industrialised countries keep an emergency reserve as a first line of defence, but in the face of worldwide panic buying this may not be enough. Countries in which the oil runs out face transport meltdown, wreaking havoc with international trade and domestic necessities such as food distribution, emergency services and daily commerce. Without oil everything stops."
Another doomsday oil scenario plays out like this:
"Another pinch point occurs in the Strait of Malacca, which narrows to just 2.7 kilometres between Sumatra and Singapore. Tankers from the Persian Gulf and west Africa transport some 15 million barrels a day through the strait en route to Japan, China and other Pacific destinations. A report [...] claims that some tankers have been hijacked here by would-be terrorists whose initial aim has been simply to learn how to operate them. In 2003 a small chemical tanker called Dewi Madrim was taken over by 10 armed men, who sailed it through the strait before leaving with equipment and technical documents.
One scenario being suggested is that hijackers might commandeer a liquid natural gas tanker plying one of these shipping routes, load it with explosives and use it to ram an oil tanker. If this floating bomb produced a burning oil slick, it could render the passage impassable for months, tipping the global economy into crisis as alternative routes would fail to make up the lost supplies.
But here's the silver lining in a dark cloud:
"Most industry experts, including geoscientists and economists, who were polled in 2007 said that peak production will occur by 2010. This contrasted with a similar survey conducted two years earlier, in which respondents were split, with many of the economists opting for a later date. "Now, a real consensus is emerging,"
"This tells us that we will have to start making serious attempts to wean ourselves off oil, and fast. It will be no easy task." says Didier Houssin, director of oil markets and emergency preparedness at the IEA.
Other downward pressures are building see Fresh Signals of Falling Demand Push Crude-Oil Futures Lower
Sure feels like a bubble to me. Mike Hollingshead from Alberta echoes my sentiments:
Mike comments:
"Interesting. When everybody including cab drivers and secretaries believes that something is going up for ever, it is about to reverse.
This feels just like 1981.
Yesterday on an investment list I belong to, someone was asking how to short oil and he received a bunch of answers real quick, so it was obvious people were already thinking about it."
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