Peak Oil Passnotes: Normalising $70 Oil

In the past week or so, we have once again seen the price of Brent crude touch $70. But now it appears that even a plateau of $70 oil is not worrying politicians and bankers unduly. There is no great hurry on the parts of central banks to raise interest rates. How did we get to this point? And when Brent breaks out of its range, which way is it going to go? Up or down?

Let us have a look at the way down. It does not seem too likely right now, but the case for the bears does have some legs. Firstly economic activity is patchy and that is what normally drives the crude price. In many parts, if not all, the United States we have a marked fall in housing prices.


One that has been going on close to a year and is yet to stop. That feeds into other sectors like construction, transportation and so on. Which in turn creates patchy consumption of goods and services.

The marked fall in housing has also happened in Spain. There over supply has been the main factor. Back in the U.S. crude consumption may not have been quite as high in the first quarter of the year as we thought. Figures from the U.S. Department of Energy show that consumption of crude rose by 1.4% in the first quarter, set against the same period last year. That is a lot of oil, but it is not spectacularly more.

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