Sunday, April 24, 2005

IXIS-CIB: Oil going over $300...

Al-Jaz has got hold of a confidential forecast by some French investment bankers that suggests the oil price may reach $380 a barrel by 2015. Now, there seems to be something of a competition among bankers at the moment to see who can do the most terrifying Oil Price Deathwatch, what with the Goldman Sachs boys predicting a "super-spike" above $100. But perhaps it's good news that the cash people are suddenly aware of The Issues. (By the way, that price does include 2.5% inflation annually, so it's not quite as scary as it looks.)

A brief point: you hear a lot of people on the net who say that everything is going to be all right because "the market will adjust". Indeed it will. But all the things flobbering lefties advise (public transport, local production, taxes on aviation fuel, smaller cars) are going to happen too - because they are the market adjustment to $100+ oil prices. If something gets too expensive you use less of it (except for a couple of bizarre lab flowers known as Giffen goods).

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