It?s a fair bet that most of what you think you know about
oil prices is wrong. Despite the massive price fluctuations of the
past decade, the received wisdom on the subject has remained
fundamentally unchanged since the 1970s. When asked, most people
? including politicians, financial analysts and pundits
? will respond with a tired litany of reasons ranging from
increased Chinese and Indian competition for diminishing resources
and tensions in the Middle East, to manipulation by OPEC and
exorbitant petrol taxes in the EU. Yet the facts belie these
explanations. For instance, what really happened in late 2008 when,
in just a few weeks, oil prices plummeted from $144 dollars to $37
dollars a barrel? Did Chinese and Indian demand suddenly dry up?
Did Middle East conflicts magically resolve themselves? Did OPEC
flood the market with crude? In each case the answer is a
definitive no ? quite the opposite in fact.
Industry expert Salvatore Carollo explains that the truth behind
today?s increasingly volatile oil market is that over the
past two decades oil prices have come untethered from all classical
notions of supply and demand and have transcended any
country?s, consortium?s, cartel?s, or corporate
entity?s powers to control them. At play is a subtler, more
complex game than most analysts realise (or are unwilling to admit
to), a very dangerous game involving runaway financial speculation,
self-defeating government policymaking and a concerted
disinvestment in refinery capacity among the oil majors.
In Understanding Oil Prices Carollo identifies the key
players in this dangerous game, exploring their competing interests
and motivations, their moves and countermoves. Beginning with
the1976 oil embargo and moving through the 1986 Chernobyl incident,
the implementation of the US Clean Air Act Amendments of 1990, and
the precipitous expansion of the oil futures market since the turn
of the century, he traces the vast structural changes which have
occurred within the oil industry over the past four decades,
identifying their economic, social and geopolitical drivers, and
analysing their fallout in the global economy. He explores the oil
industry?s decision to scale down refining capacity in the
face of increasing demand and the effects of global shortages of
petrol, diesel, jet fuel, fuel oil, chemical feedstocks, lubricants
and other essential finished products, and describes how, beginning
in the year 2000, the oil futures market detached itself almost
completely from the crude market, leading to the assetization of
oil, and the crippling impact reckless speculation in oil futures
has had on the global economy. Finally he proposes new, more
sophisticated models that economists and financial analysts can use
to make sense of today?s oil market, while offering industry
leaders and government policymakers prescriptions for stabilising
the market to ensure a relatively steady flow of affordable
oil.
A concise, authoritative guide to understanding the complex, oft
misunderstood oil markets, Understanding Oil Prices is an
important resource for energy market participants, commodity
traders and investors, as well as business journalists and
government policymakers alike.
oil prices is wrong. Despite the massive price fluctuations of the
past decade, the received wisdom on the subject has remained
fundamentally unchanged since the 1970s. When asked, most people
? including politicians, financial analysts and pundits
? will respond with a tired litany of reasons ranging from
increased Chinese and Indian competition for diminishing resources
and tensions in the Middle East, to manipulation by OPEC and
exorbitant petrol taxes in the EU. Yet the facts belie these
explanations. For instance, what really happened in late 2008 when,
in just a few weeks, oil prices plummeted from $144 dollars to $37
dollars a barrel? Did Chinese and Indian demand suddenly dry up?
Did Middle East conflicts magically resolve themselves? Did OPEC
flood the market with crude? In each case the answer is a
definitive no ? quite the opposite in fact.
Industry expert Salvatore Carollo explains that the truth behind
today?s increasingly volatile oil market is that over the
past two decades oil prices have come untethered from all classical
notions of supply and demand and have transcended any
country?s, consortium?s, cartel?s, or corporate
entity?s powers to control them. At play is a subtler, more
complex game than most analysts realise (or are unwilling to admit
to), a very dangerous game involving runaway financial speculation,
self-defeating government policymaking and a concerted
disinvestment in refinery capacity among the oil majors.
In Understanding Oil Prices Carollo identifies the key
players in this dangerous game, exploring their competing interests
and motivations, their moves and countermoves. Beginning with
the1976 oil embargo and moving through the 1986 Chernobyl incident,
the implementation of the US Clean Air Act Amendments of 1990, and
the precipitous expansion of the oil futures market since the turn
of the century, he traces the vast structural changes which have
occurred within the oil industry over the past four decades,
identifying their economic, social and geopolitical drivers, and
analysing their fallout in the global economy. He explores the oil
industry?s decision to scale down refining capacity in the
face of increasing demand and the effects of global shortages of
petrol, diesel, jet fuel, fuel oil, chemical feedstocks, lubricants
and other essential finished products, and describes how, beginning
in the year 2000, the oil futures market detached itself almost
completely from the crude market, leading to the assetization of
oil, and the crippling impact reckless speculation in oil futures
has had on the global economy. Finally he proposes new, more
sophisticated models that economists and financial analysts can use
to make sense of today?s oil market, while offering industry
leaders and government policymakers prescriptions for stabilising
the market to ensure a relatively steady flow of affordable
oil.
A concise, authoritative guide to understanding the complex, oft
misunderstood oil markets, Understanding Oil Prices is an
important resource for energy market participants, commodity
traders and investors, as well as business journalists and
government policymakers alike.
