Painful though it is, this oil shock will eventually spur huge change. Beware the hunt for scapegoats
Cover art courtesy of The Economist, May 29th 2008 issue
For those of us who believe in such things as contrary indicators, this suggests a short term top in Oil to me. I would bet we don’t see new highs in Oil for the next 6 months, and perhaps even 12 months.
Thirty-five years on, oil prices have quadrupled again, briefly soaring to a peak of just over $135 a barrel. But, so far, this has been a slow-motion oil shock. If the Arab oil-weapon felt like a hammer-blow, this time stagnant oil output and growing emerging-market demand have squeezed the oil market like a vice. For almost five years a growing world shrugged it off. Only now is it recoiling in pain.
Before engaging in a knee jerk dismissal of the magazine cover indicator, please read page 9, #4 of this report: Contrary Indicators 2000 – 2003 Bear.
UPDATE: June 4, 2008 10:26am
My friend Paul Kedrosky references the Senate debate as the crude oil top tick . . .
The Economist, May 29th 2008