Publications: Notes at the Margin

Energy Markets: Lost at Sea without a Compass (January 3, 2017)


Happy New Year. 2017 promises to be very interesting, perhaps the first of four interesting years. Today, the market sails blindly on a proverbial ocean, lacking even the most minimal of navigation guides. Oil-producing countries, the industry, writers, commentators, consultants, and other market followers have no GPS. Their radar has failed. Overcast skies prevent them from getting a fix from the stars. They are plowing ahead at full speed relying on dead-reckoning, cruising, they hope, to higher prices.


The experts, though, do not know the market’s position at the end of year. The uncertainty relates to the growth rate of consumption and global inventory levels. The experts also have no idea what storms lie ahead before they “reach port” in twelve months. Yet the “captains” keep driving the ship ahead as the passengers on the SS OPEC (the reporters, consultants, economists, and others) all cheerfully agree that oil producers have nothing but calm seas before them. This view seems contrary to the facts.


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