Here’s a fairly alarming prediction heading into the seasonally strong winter months for oil prices. Amrita Sen, commodities analyst at Barclays was interview on CNBC recently to discuss the outlook for energy prices and to shed some light as to why oil prices have diverged from many other commodities and remained so firm in the face of severe global headwinds. Sen says the likelihood of prices falling much below current levels is close to nil:
“It’s been the supply side. Libya went off the market. Lots of problems in the North Sea. Brazil, I mean, there were problems everywhere. Inventories Are about are about 50 million below the seasonal average heading into the winter. There is no way prices can fall much from where they are now. You just don’t have enough inventories around.”
Not a good sign for the economy. Cost push inflation via rising energy prices is likely to continue to be a major headwind in the future. Real resources continue to hinder economic growth. Like the last few years, this is going to be a major risk heading into 2012.
See the full interview here. It’s quite good:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.