World’s Crude Awakening as Oil Hits $60

Most of the experts didn’t see $60 oil coming. Late last year, when prices pushed through $50, it was widely seen as a short-term ’spike’, driven by hedge funds and other speculative investors. Traditional models suggest that when the oil price jumps, global consumers take their foot off the gas. Economic growth slows, demand for oil falls, and eventually the price trickles back down.

Over the past few months, those textbook explanations have had to be ripped up – because they reckoned without the rising power of the east. ‘It was a flawed conceptual model that demand would fall that quickly,’ says Paul Horsnell, head of commodity analysis at Barclays Capital, who has long predicted $60-a-barrel oil. He describes the last few months as a ‘perfect storm’ for the oil price. ‘The analysts had it completely wrong,’ he adds.
The Observer