Publications: Notes at the Margin

The Dollar, US Energy Trade Surplus, and Oil Prices (July 1, 2024)

 

Analysts following any market are like photographers using telephoto lenses to focus on a specific person or bird or whatever, ignoring the surroundings. Economists, on the other hand, emulate photographers using wide-angle lenses to take in the entire street or forest. The author is an economist, not an analyst. At one point as a professor, he taught students who became analysts, although all had the common sense not to specialize in oil.

 

Today, oil market analysts and historians such as Daniel Yergin have aimed their telephoto lenses squarely at the actions of a few producers. Some, such as the hedge fund manager Pierre Andurand, seem to be using extraordinarily long lenses. Andurand, at times, has predicted $140 per barrel crude.

 

If one looks at the wider market picture, one sees that the global economy cannot tolerate $140 oil. Such a rise would result in substantial increases in US energy exports and a rise in the dollar’s value that would precipitate depression across much of the world, particularly in emerging market nations.

 

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