Oil Prices Continue To Swing

Not to beat a dead horse, but oil price volatility will continue to exist for the forseeable future. Today’s markets in London experienced opened 2.2 percent higher today, after the American Petroleum Institute announced a 9 milliion barrel drawdown in inventories last week. That’s a big inventory decline, so it’s no surprise that prices are rising today.

This article in today’s New York Times (registration required) provides a nice summary of the current state of oil markets, as well as a discussion of the decision facing the administration regarding whether or not to release oil from the strategic petroleum reserve. It also points out how attempts to raise prices have changed in 25 years:

But most analysts agree that whatever disruptions might occur, they will probably not come in the form of oil embargoes like those of the early 1970’s, which still haunt many people in the West.

“People have to stop thinking that oil markets will be affected by embargoes, because embargoes are a thing of the past,” said Moisés Naím, a former Venezuelan minister of trade and industry and now editor of the journal Foreign Policy.

“The problem is failed states,” Mr. Naím said. “It’s a harbinger of things to come: when internal political turmoil limits oil to world markets.”

A primary reason why embargoes are a thing of the past is the growth of non-OPEC supplies in countries like Russia, Mexico, Norway, and in the Caspian and West Africa countries.