Wednesday, February 28, 2007


In recent years, Information Technology has revolutionized our lives. Dark era of nineties, when 2% of the world population was having the right to use and rest was languishing in poverty and destitution, is over with awakening of children of lesser God. And control over natural resources slipped out of the hands of few. In the last few years we saw commodity prices flying high on unabated demand. Energy at the base of it all, saw oil prices multiplying to the count of 4 in just a matter of few years enough to trigger the second Oil rush.

Soon Oil started free flowing once again, superceding the demand. Result, we saw a sharp dip in the oil prices and OPEC, now used to big money, had to quickly turn the valves clockwise in order to control the over supplied market. Speculators waiting such opportunity jumped in and we saw a quick correction to 60.

From here where to?

As markets do not look and think beyond short period, We base our assumptions on following facts which should hold good over the next five years :

- Demand will remain robust as there is no looking back for growing need and greed of mankind.
- OPEC has ample capacity in reserve to meet escalating demand over a period of few years from now.
- Global warming is a fact but still far from raising a alarm shortly.
- Petro dollar is being pumped back into the markets making them liquid and thus keeping world economy on its toes.
- USA is still the main consumer/importer of crude.
- Inflationary pressures are high, but more than economic, there is political will to curb rising prices. (shooting prices do not find favours with masses and thus populist govt.) - US Elections in 2008.
- Strong and rich Russia makes America vulnerable.
- China is getting too hot to handle.

We can say, politically, America would like to keep the prices down and fair weather is on their side for a while. Also on supply side we see no immediate threat. However, suppliers are on a high due to exploding libido of neo consumer markets.

For short to medium term, Oil, in all probability, is manageable and can be brought to naughty forty. Any premium till 60 on account of speculators and any premium thereafter on account of religious and political nuisance.


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