Lightering our way to abundance

An old Wall Street shibboleth says that nobody rings a bell at the top. To prove the point, even as oil and other commodities were making blistering new highs on a daily basis last year, few people saw the carnage that was to come in those markets as the year progressed.

But the same cannot always be said at the bottom of a market. Quite often, there are many bells ringing. It’s just that by the time a bottom arrives investors are usually too exhausted, too nervous or too broke even to care. And, it’s true that the price of any commodity or stock can trace out a bottom for a very long time, longer than most people have patience, especially if they’ve already been burned in a crash. And so, the bells can go on ringing for years until they just seem like background noise.


Still, I am willing to take a stab at what may turn out to be a fool’s errand and suggest that crude oil prices have bottomed out. My signal? The image of oil supertankers cruising aimlessly for weeks near many of the world’s ports waiting for someone to purchase their cargoes. And, when someone finally does, the supertanker is obliged to lighter oil onto another smaller ship because the buyer only wants a portion of what’s in the hold. When all the supertankers are full, the next step will simply be to spill oil on the ground at the point of extraction. But since this is an unlikely outcome, I suspect that oil producers will scale back production because they have to. The transit system and the storage system are now overflowing.

Of course, demand for oil could drop even further if the world economy continues to shrink. But at some point there will be a bedrock level below which oil consumption cannot fall or the lights will go out on civilization itself.

Energy Bulletin