Spike to 100 USD per barrel of crude ?
Yes.
two versions -
1) Real disruption -
Two hurricanes or CAT 5 hurricanes hits Gulf of Mexico
All the Persian Gulf interruption sceanarios
Civil war in Nigeria
Civil war in Mexico
Venezuela cuts exports by >50%
Russia cuts exports by > 20%
2) Oil price ALLOWED to spike - a 'phony' run up, but prices will be real.
Remeber the 'silver corner' of the Hunt brothers ? Silver went to $50...then the commodity exchanges, with US government 'help' (this is a guess on my part) changed the rules, effectively ending the silver corner.
My guess is hedge funds, speculators, etc. could push the price to MAYBE $70 before Exxon, Cononco, Devon, Total and every body else takes the other side of the trade.
Sure I'll sell you a barrell for $68 to be delivered in March 2006, or 2007, or 2008. Cost $22 maximum to lift.
But, there might be a wink and a nod to the major commercial players...so they will let the price soar...WHY ?
Well, 100 USD oil makes it MUCH easier to build nuclear power plants, drill off the coast of Florida, restrict SUVs, wear that sweater we got during the Jimmy Carter years...
Or 'bribe' Saudis and Persian Gulf States for War on Terror
Or support President Putin
Or pressure China to do something about North Korea
Or persuade Japan NOT to go nuclear because of North Korea.
Now, a price run up like this will need some excuse -
Some combination of :
Could be strike in Norway offshore
One good hurricane in Gulf of Mexico
Venezuela cuts 15%
Russia cuts 5%
One or two tankers sunk in Persian Gulf.
Or the 'lite' versions of the first group of events.
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I think one of the worst outcomes would be Japan and South Kore develping nuke weapons because of North Korea.
China doesn't want to deal with 1 million starving refugees, and they may value Kim Jong Ills ability to keep Japan off balance.
China also want to develop and lift another 300 million out of poverty. 100 USD oil threatens that, both by making China's oil use wildly expensive, but also by kicking the #***&* out of the world economy - non-oil world trade might drop 20%. Also, price of copper, steel etc. jumps under cost push - comes down later as demand drops, but that first month is rough.
I don't think China wants a nuclear Japan either...
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Putin's not up for election
The Saudis realize that Osama and friends wants their heads, not just infidels
Japan hasn't gone nuclear yet
and nuclear plants look like they will be built anyway. |
