The Next Oil Shock
The Bear on Jun 03 2009 at 8:15 am | Filed under: Energy Policy
Energy Policy: A top expert tells Congress that oil will be around for a long time and high inventories and low prices are no excuse not to find more. Oil shock? How about a no-oil shock?
Be careful what you wish for, goes the old proverb. Well, as we all had hoped, energy prices have fallen — but only as part of the global decline in economic activity. This has been used as an excuse to further discourage exploration for and development of domestic oil resources. But if the economy does recover, that policy could provoke another recession.
Daniel Yergin, chairman of HIS-CERA, testified before the Joint Economic Committee of Congress last week that we have already experienced a “demand shock” with very high prices driven by rising global demand led by the economies of China and India.
We’ve also experienced what he calls a “recession shock” with flat or falling demand and low prices. But there might be another “long aftershock” in our future with high demand returning with a vengeance along with a global economic recovery, leaving those who buried their heads in the oil sands in the economic lurch.
The current recession has wiped out demand growth for the last four years.
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