Publications: Notes at the Margin

Oil Market Analysis: Stuck in the Dark Ages (February 13, 2017)


Markets can be cruel to those who fail to keep up. Unisys is a case in point. In 1988, Unisys ranked thirty-sixth on Fortune's list of the five hundred largest corporations in America. Last year, Unisys slipped to seven hundred twenty-fifth. Unisys lost because it was sluggish and did not keep up. It could not contend in the highly competitive, commoditized world of personal computers. Most economists and analysts at organizations that follow the world oil market today suffer from the Unisys malaise. Futures markets have completely altered oil market behavior, indeed all energy market behavior. Those tracking these markets do not understand this fact or its implications. They have contracted the Unisys disease, fallen behind, and so now are stranded in the oil market equivalent of the Dark Ages. Companies and oil-exporting countries that fail to recognize the change are also condemned. The message here is as it has always been: technological change is driving prices down. Efforts to hold prices up may succeed for a short period. Over time, though, they will fail. Those living in the Dark Ages have yet to recognize this fact.


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