January 9, 2018

Are We Headed For Another Oil Shock?

One of my regular readers emailed today to note that the price of oil has been creeping up over the past six months:

Admittedly, oil prices are volatile, but it’s possible to see a pattern in longer-term views. The worldwide supply glut from fracking in the 2014-2016 window (which decreased prices) has been taken up by increasing demand. Now we are at supply-limited pricing again, with fracking included. So if there’s any shock to supply, unless the Saudis open up the spigots (if they can), the price will spike up. I don’t sense wide awareness of this.

That got me curious. Here’s what long-term oil prices look like over the past 40 years:

There’s nothing that looks especially concerning in these numbers, but the basic oil-recession cycle is fairly simple: (a) economic expansion leads to higher demand for oil, (b) demand eventually bumps up against supply constraints, (c) oil prices spike, (d) leading to a recession. However, the Energy Information Administration seems to think supply will continue to keep up with demand over the next couple of years:

For the time being, it doesn’t look like oil will be a constraint on growth in the near future. But ask me again next month and I might change my mind.

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We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

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