Week in Petroleum: Retractable roofs

In the past, factors such as warmer than normal weather during the peak winter months, and the absence of infrastructure damage due to hurricanes, have helped to keep a lid on oil prices.

Many new sports stadiums, especially those located in less than ideal climates, have retractable roofs that are opened or closed depending on weather conditions.

An analogous mechanism may be at work in oil markets. Since early 2002, oil prices have shown a strong upward trend.
Although one or more factors have put a temporary ceiling on oil prices during some periods, oil prices then continued their upward trend, as if a retractable roof had opened.

In the past, factors such as warmer than normal weather during the peak winter months, and the absence of infrastructure damage due to hurricanes, have helped to keep a lid on oil prices, and even contributed to a decline in prices.

More recently, a major factor keeping the price of West Texas Intermediate crude oil from reaching $80 per barrel and beyond was concern that the U.S. economy was vulnerable to a significant downturn. This concern was centered on the housing sector, particularly regarding sub-prime mortgages and related problems associated with the financial sector.

However, following the Federal Reserve