Lynne Kiesling
Just a quick little note that despite high crude inventories in the US, the dominant driver right now in world oil markets is the chance that Turkey will invade Iraq to attack Kurdish militants there.
These roilings have added about $7/bbl to oil prices, currently hovering around $87/bbl.
First off, I’m skeptical that Turkey’s threats have really added $7 to the price of a barrel of oil. I see these kinds of claims (e.g. Nigerian insurgents or Mexican insurgents knocking out oil facilities) causing x dollars of increase in oil prices and I wonder how these traders can possibly know.
Second, whatever pushed the price of oil up to $80 in the first place seems like the dominant driver of the market. My guess is that rising Asian demand combined with higher extraction costs for the remaining oil are responsible for the high oil prices.
And while I’m at it: I wish economics could tell us something useful about how declining oil production will impact economic growth. But I suspect that economists can’t predict the rate of technological innovation and therefore can’t predict how big the impact will be of declining oil production.