Evening Must-Read: James Hamilton: The Changing Face of World Oil Markets

James Hamilton: The Changing Face of World Oil Markets: “1. World oil demand is now driven by the emerging economies…

…2. Growth in production since 2005 has come from lower-quality hydrocarbons…. 3. Stagnating world production of crude oil meant significantly higher prices…. 4. Geopolitical disturbances held back growth in oil production…. 5. Geological limitations are another reason that world oil production stagnated…. More recently, the decline in U.S. production has turned around dramatically with the exploitation of tight oil formations…. Many analysts are optimistic that the trend of growing production from this resource will continue…. But even if this forecast proves accurate, it is abundantly clear that it would not return real oil prices to their values of a decade ago…. Rather than a force pushing oil prices back to historical lows, it seems more accurate to view the emerging tight-oil plays as a factor that can mitigate for a while what would otherwise be a tendency for prices to continue to rise in the face of growing demand from emerging economies and stagnant supplies from conventional sources…