Oil Markets in 2012: Calm or Turbulent Waters?

April 16, 2012 | 00:00

Oil Markets in 2012: Calm or Turbulent Waters?

To most analysts, the combination of geopolitical and economic factors constitutes a ‘perfect storm’ that will keep an upward pressure on oil the price for the rest of 2012. The purpose of this short article is to broaden the debate and consider some potential weaknesses in the dominant story.

The article will highlight three main points. First, the premises upon which the story of tightened market fundamentals is built are subject to a wide degree of uncertainty. Second, the channels expected to put an upward pressure on the oil price are not exogenous: they tend to interact with each other and are shaped in part by oil price behaviour. Finally, the feedback from policy circles seems to be different this time from that seen in the previous oil price cycle, and thus should not be ignored. This is not to say that dominant expectations of very tight market fundamentals may not materialize. They may well do, but this is not a foregone conclusion.

To read the full article, click here.


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