Bad-news bear: Russia warns oil could again hit $150 a barrel
As oil prices dropped under $67 a barrel today on the foreign markets, some analysts insist they're not surprised. After all, says one, "the major economies are still weak and we are still losing demand."
So there's plenty of oil, right? And you can still enjoy relatively low prices at the pump, right? Maybe not. Goldman Sachs analysts say the price of crude, which has wildly gyrated in the past couple of years, could hit $85 by the end of the year. And now Russia is predicting that oil could rise again to $150, as it did last year.
Well, it is true, as the Wall Street Journal points out, that this year's rise in crude has been steeper than even last year's. It was only on February 12, after all, that oil closed just under $34. That's a 50 percent rise from then to now. In a comparable period last year, the rise was "only" 33 percent.
Ah, but the real story may be taking place in the mysterious Far East, where analysts are trying to figure out just how big China's demand for oil is.
While China's censors are cracking down on the internet — trying to force PC companies (including our own Hewlett-Packard) to install filters to block "harmful content" from unwelcome web sites — oil analysts are sorta turning the tables by using the web to suss out China's oil demand. If that demand is growing more rapidly than now thought, we could be wind up over a barrel again. As the WSJ notes:
China is estimated to account for 9.3% of the world's oil use, yet it releases no actual consumption data. That has led analysts to turn to Google Earth to track the movements of oil tankers and to travel across China meeting with low-level oil industry officials. To predict agricultural production, firms are studying ways to use satellite, weather and soil data throughout China.
These analysts were early in spotting a rise in demand in China this spring and believe demand will stay strong, justifying the current oil price and possibly pushing it higher.
Complicating the picture by injecting a new dose of foreign policy implications: Iran's national oil company has invaded China, setting up its first office there and hoping to start selling oil to the Chinese market.
If Iran does establish a beachhead in China, the Chinese would be even more unlikely to support harsher sanctions on a country that is supplying oil to its growing middle class.
And that would make it all the more unlikely that the U.S. will try to do to Iran what it did to Iraq — unless Dick Cheney raises a private army to storm Tehran.
