The crude oil pessimists are back and talking up a story not heard since 2008 and the days of “peak oil”--$150 a barrel crude oil and a resulting crash in the consumer economy.
Over the past week and a half many in North America have been surprised to find the Sunni militia ISIS has come to control an area of Syria and Iraq as large France. The militants are making money off the oilfields they have captured, this is pushing up the price of a barrel of oil. U.S. Secretary of State John Kerry has said the United States is considering air strikes to help the Iraqi government as ISIS threatens Baghdad.
Also working to keep the price of a barrel of oil high is the relatively under-reported story that China is filling of a new national petroleum reserve modeled on the American strategic reserve. China is buying an extra 600,000 barrels a day from the global market, demand that is helping to push the price of oil up.
No wonder the pessimists are back and squawking on the cable news
shows as they were in 2008. “If Iraq's oil supply goes offline crude prices could hit $150-$200 a barrel," famed Texas energy mogul T. Boone Pickens said on CNBC on Friday.
The corresponding spikes in retail gasoline prices is directing money that would otherwise be spent in the consumer economy into the sovereign wealth funds of foreign oil producers, creating a drag on the economies of net oil consuming regions like Ontario and the United States. It is this dynamic of modern economy, at a time daily production of oil is plateaued and no longer rising, that is creating the persistent deflation central bankers are attempting to combat. It seems interest rates cannot overcome physical, geological, geo-political reality.
"Volatility around the world is finding a place right here in Toronto with prices now hitting levels we've never seen," ‘Gas Guru’ Dan McTeague told CTV Toronto. He suggests prices could climb to over $1.43 a litre.