Does it even matter if we’re actually near peak oil? Sanford Bernstein’s Neil McMahon told the Financial Times yesterday that the fear of it might be enough:
Fears of a shortage within five years propelled long-term oil futures prices to almost $140 a barrel, further stoking inflationary pressures in the global economy.
The spot price of Nymex West Texas Intermediate hit a record $130.30 a barrel on Wednesday. On Tuesday investors had rushed to buy oil futures contracts as far forward as December 2016, pushing their prices as high as $139.50 a barrel, up more than $9.50 on the day.
Veteran traders said they had never seen such a jump and said investors were increasingly betting that oil production would soon peak because of geopolitical and geological constraints.
Neil McMahon, of Sanford Bernstein, said: “Peak oil views – regardless of whether right or wrong – are seeping into the market and supporting high prices.”
Anne-Louise Hittle, of Wood Mackenzie, added that investors were shifting their focus from the short-term to the medium-term, where supply fears played a bigger role. Since January, long-term futures oil contracts, such as those for delivery in 2016, have jumped almost 60 per cent, while near-term prices have gone up 35 per cent.
That trend was exacerbated by T. Boone Pickens, the influential investor who believes world oil production is about to peak as aging fields run dry. He warned that oil prices would hit $150 a barrel by the end of the year.
“Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m,” Mr. Pickens told CNBC. “It’s just that simple.”
Mr. Pickens’s view is still in the minority in the oil industry. But concerns over future oil supplies are fast moving into the mainstream and influencing investors.
Meanwhile, on the flex-fuel front, Thomas Friedman quotes Gal Luft in his New York Times column today.