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Don’t Let Higher Oil Prices Fool You

Tuesday, June 02, 2015

U.S. crude was up from $49.21 a barrel in April to $61.01 due in great part to a weaker dollar. In conjunction with the weaker dollar, the Saudis disclosed they have an oil surplus. This is a strong indication the higher prices are driven mostly from speculators.

A weaker dollar makes commodities denominated in the greenback, typically boosting demand for such raw materials. Meanwhile, fighting in Yemen raised concerns about the security of oil shipments from the Middle East with analysts weary of potential proxy way on the Arabian Peninsula. This is of course home to the world’s biggest oil fields.

Oil, being a commodity, has seen lulls in supply and lulls in demand since it was commercially bought and sold. But perhaps with a fast-growing industry offering energy alternatives, this- if not the next- bust could possibly be the last. There has been much greater investment in solar, hydro and even something called ‘compact fusion’ options. So if the oil prices do spike to stable rates, it is likely they will struggle to maintain value- especially over the coming years.

Just as oil made kerosene and coal oil obsolete, investors are speculating alternative resources will have the same effect on oil in as soon as five years, by some projections. And with oil possibly losing all utility, it is sure to be a worthless commodity not long thereafter.

With so many alternatives in the works and the electric car becoming increasingly apparent, the focus is clear: to make oil a thing of the past.



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