The irony of crude prices breaking well above $85 can’t have been lost on the energy ministers who met in Cancun last week to discuss new measures for tackling oil price volatility. The big question is whether prices will remain at that level, and push even higher – something that could dampen nascent economic growth in much of the world.
As most reports have noted, the latest rise followed reports of improved global manufacturing data, particularly in China. Some analysts caution this is not sustainable, given that relatively substantial amounts of crude oil remain in storage, which should continue to dampen physical demand for oil.
But is there a fundamentals angle to this rise; and what would it mean if so? One long-time oil watcher says it could mean the high crude prices are not only sustainable, but will keep rising.
Expect to hear a lot more about the US coal industry in the coming months, and only in part because of the tragic explosion in West Virginia. The accident at the Upper Big Branch mine in Montcoal, owned by Massey Energy, left at least 25 miners dead, with four still missing.
Massey itself is seeing its share price punished and one analyst said it was too early to tell what the overall effect would be on the company. Although rival companies have seen share prices rise, the fallout for the wider industry could be substantial. Congress will look into it and the industry is predicting tougher regulations.
Opec producers fret about the destruction of demand for crude oil setting in if prices rise too high. Judging from the EIA’s latest short-term forecasts, their concerns about further declines in developed world demand might be borne out by this year’s US driving season.
The EIA says any boost from economic recovery for gasoline demand will be wiped out by higher prices, which the agency expects will be about 50c/gallon higher this summer than last year’s driving season – $2.92 compared to $2.44, to be exact, and prices will likely exceed $3 at times. The EIA, which has raised its 2010 WTI forecast slightly to $80.74, also says every dollar of sustained price increase above its forecasts will result in about a 2.4c per gallon increase for gasoline and diesel.
Lagos | It was an obvious choice. Urbane, respected in the industry yet steely enough to push tough reforms, Odein Ajumogobia had been tipped for months to step up from deputy to minister and take the helm of Nigeria’s oil industry. His task would be to steer into law the Petroleum Industry Bill, the most ambitious overhaul of sub-Saharan Africa’s biggest energy sector in its 50-year history.
Except that it won’t be. Instead, following acting president Goodluck Jonathan’s unveiling of his cabinet on Tuesday, Mr Ajumogobia will be in charge of burnishing Nigeria’s pummelled image abroad as foreign minister.
For the first time, a woman will be in charge of the most macho of industries in the most macho of countries.
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