January 9, 2018

Are We Headed For Another Oil Shock?

One of my regular readers emailed today to note that the price of oil has been creeping up over the past six months:

Admittedly, oil prices are volatile, but it’s possible to see a pattern in longer-term views. The worldwide supply glut from fracking in the 2014-2016 window (which decreased prices) has been taken up by increasing demand. Now we are at supply-limited pricing again, with fracking included. So if there’s any shock to supply, unless the Saudis open up the spigots (if they can), the price will spike up. I don’t sense wide awareness of this.

That got me curious. Here’s what long-term oil prices look like over the past 40 years:

There’s nothing that looks especially concerning in these numbers, but the basic oil-recession cycle is fairly simple: (a) economic expansion leads to higher demand for oil, (b) demand eventually bumps up against supply constraints, (c) oil prices spike, (d) leading to a recession. However, the Energy Information Administration seems to think supply will continue to keep up with demand over the next couple of years:

For the time being, it doesn’t look like oil will be a constraint on growth in the near future. But ask me again next month and I might change my mind.

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WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We can’t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

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Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

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