Paris, March 19 (EIRNS) – When the prices of oil and gas explode, “economists” insist that governments and public actors should abstain from any intervention. Let the market (supply and demand) regulate the prices, they explain.
To make their point, they present the coordinated release of 60 million barrels of oil from strategic reserves by International Energy Agency member countries which failed to calm spiking prices.
Respecting the price of a barrel of oil, JP Morgan claims that to bring down prices, they first should reach a level of $180 a barrel, others say $200 a barrel. This very high price will then provoke what bankers and traders elegantly call the “destruction of demand,” in reality prices will be so high that truckers will stop driving, fishermen stop fishing and citizens stop heating their homes. The physical reality of production and people simply is inexistent.
“Oil prices have become so disconnected from the marginal cost of supply—given the extreme shortage of oil—that they are marching to the level where demand destruction becomes prevalent,” said Mitsubishi UFG’s head of emerging markets research, Ehsan Khoman.
ConocoPhillips Chief Executive Officer Ryan Lance told Bloomberg something very similar: “Oil prices are so high that demand for crude-derived products such as gasoline soon may start to shrink. Prices are encroaching upon the area of demand destruction.”
Paul Sankey of Sankey Research: “I’m concerned that we don’t have enough oil at all here, and we need to go to $120 to $150 [per barrel], and then we get into economic destruction.” Despite the extreme oil price moves, Sankey suggests that it may have been the right call for OPEC and its allies to stick to their small production increases as planned. “The scale of the emergency here is so severe that you probably don’t want to be doing what the Western governments are doing, which is releasing emergency stocks,” he said.