Publications: Notes at the Margin

An Einstein Moment (July 25, 2016)


"Insanity" Albert Einstein purportedly said, is "doing the same thing over and over and expecting different results." By this definition, the oil industry seems certifiably insane. We provide evidence for this assertion by comparing the rise in global inventories to the oil price forecasts being widely circulated. The world is awash in petroleum products. Across the globe, traders are scrambling to find tanks and ships for storing unneeded crude and product. Excess returns to storage point to a widening glut. Yet many oil prices forecasters expect significantly higher prices. Forecasters today are seeing the same cycle of stock increases as observed in the past. However, they somehow expect prices to rise rather than fall, which seems to meet the Einstein criterion for insanity.


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