Publications: Notes at the Margin

 

Much has been written on oil over the last few weeks. Almost without exception, the authors have exaggerated. In this report, we to remove the hyperbole surrounding several key stories. First, the Persian Gulf situation, especially the Strait of Hormuz, is not nearly as dire as many describe. Second, refinery closures will change the world oil market’s behavior, reducing the market power of producers such as Nigeria. Third, the credit crunch and falling demand is affecting global stocks. The normal inventory level will be lower. Fourth, the price risk is decidedly to the downside. Fifth, President Obama’s rejection of the Keystone XL Pipeline is essentially irrelevant.

 

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