Globe and Mail:
Oil's immediate future looks so gloomy, at least from an investor's standpoint, that raging bull T. Boone Pickens is packing in his energy hedge fund. That's probably a wise decision, considering that the fund has racked up $2-billion in losses and is down 60 per cent so far this year.Thanks for the link goes to Carpe Diem.
Some analysts, ever eager to get in front of a trend, even started talking up $200 oil.
Too bad they weren't paying attention to a veteran energy economist named Philip Verleger Jr., who insists oil never should have gone much above $70 a barrel; that it did so only because of "a perfect storm" of U.S. policy mistakes, European economic developments and currency shifts; and that it could well end up back in the low $20s before the global economy gets back on its feet.
"I think it will go a good deal lower, particularly next spring [when oil markets are traditionally weakest]," Mr. Verleger said in an interview. "If this thing follows a natural cycle, I think we'll see something as low as $20 to $25."
Mr. Verleger was at Yale when energy expert Daniel Yergin declared that the second oil shock of 1979 had triggered a permanent change in the characteristics of the market and prices would be heading higher. In 1981, oil was at $35; five years later, it was down to $10.
Labels: oil prices