Thursday, June 23, 2011

unintended consequences of lower oil price

The IEA released 60 million crude oil and the crude price dropped 5%. It may backfire. The supply in crude is tight and the high price is keeping a lid on demand. When the high price lasts longer, it can change people's behaviour, such as buying electronic car. If the prices turn lower quickly then people will go out buy those SUV again and demand will shut up. The longer the crude price is kept low, the bigger the supply problem will be. I hope the IEA release is one-time only. if not, we will see crude price shut up to 150 in the summer of 2012.

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