GOLD AT $800, OIL AT $64
The mini-boom is on
Two years ago we saw the first faltering of the oil price, as Brent crude dipped below US$80 per barrel. Gold was also weak, at about US$1100 per ounce. This despite the ongoing crises in the Middle East and Ukraine.
What was happening? Some put it down to weak demand and plentiful supply. Although the global economy had stabilized, there was no great appetite for oil at these prices. The United States was also producing more of its own oil and gas, becoming less dependent on the Gulf for crude.
Stimulus policies were being eased, and industry was making a comeback, requiring less government subsidies. The super-cycle was over. Nervousness from the Financial Crisis had dissipated.
What many observers failed to see was the start of a new era of cheap energy. The market intuitively started pricing in advances in solar power, cheap natural gas, and the move to efficiency. From LED lighting to hybrid cars, people were starting to reduce their energy budget. Smart micro-grids went viral.
Cheap energy leads to cheaper production and more consumer spending. Everything from housing to smartphones becomes more affordable. The boom is on, as oil oligarchs fight for market share by cutting prices.
Will it last? The cycle might turn at any moment, and it will probably catch us all by surprise, again. But cheaper, more sustainable energy is now embedded in the global economy. There’s no going back from here.
Links to related stories
- Oil Extends Drop on Libyan Field Restart, OPEC Outlook - Bloomberg, 6 November 2014
- Gold Drops for 7th Day in Longest Decline Since 2013 - Bloomberg, 6 November 2014
- Oil Prices Are Dropping. So What? - Politico, 5 November 2014
- MindBullet: AMERICA THE OIL EXPORTER (Dateline: 4 July 2025, Published: 05 July 2012)
- MindBullet: STOP THE WORLD, WE'RE HAVING A MIDLIFE CRISIS (Dateline: 1 May 2040, Published: 18 April 2013)
Warning: Hazardous thinking at work
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