Remember when a rebel firing a bullet in Nigeria caused the price of oil to jump $10 a barrel. Now, there's an all out way in Georgia and oil prices continue to drop. Something has changed.
It's namely the fact that everyone realizes the runup to $140 a barrel oil was total speculation unsupported by the fundamentals. In those days any little piece of news was used to justified massive increases in oil prices. Well, that game seems to be over.
The country of Georgia borders Russia and one of the largest oil pipelines in the world passes through it. If anything should spike oil, this is it. But the news of demand destruction is just too great. Consider:
- China reported Monday that crude oil imports had fallen 7% to 13.79 million tons in July, down from 14.83 million tons 12 months earlier.
- American auto usage has plunged as prices have risen.
Demand is dropping like a rock.
When will the drop stop? As I've been saying, somewhere below $100 a barrel. If you need anything to convince you, the war between Georgia and Russia is it.
Comments
Anonymous
August 12, 2008
It is quite remarkable. This is a real August surprise and should be driving commodities higher and messing everything up. There clearly has been a fundamental shift in the trend now.
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Steve
August 12, 2008
Yes, you are correct. This war is dangerous and should be causing ga tremendous spike. Instead, the bubble is popping. Very clear that it is going much lower.
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JRodgers
August 14, 2008
Oil is going back up today as it appears that the French-brokered cease fire is not going to hold. I am not sure that you are correct.
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