If The Price Of Oil Were Based On Fundamental Data It Would Be Much Lower

The current price of a barrel oil has nothing to do with the amount of oil that will be used in the global economy. It’s currently being used as an investment vehicle to hedge against the weakening dollar, and rising inflation, The New York Times writes.

If it were based on fundamental data, the price of oil would be lower than the $49 it’s trading at now. 

NYT: Serious questions loom over the global economy that would suggest lower, not higher, prices. Unemployment is rising sharply in the United States, the Chinese economy is sputtering and its exports are falling, Europe is stagnant and Japan is contracting. The World Bank forecasts that the global economy will shrink by 1.3 per cent this year, the first decline in global output since World War II.

“At some point, you’d think that reality has to set in,” said Tom Bentz, a senior energy analyst at BNP Paribas in New York. “All the news is pretty negative, and certainly demand continues to take a hit. And yet prices are still hanging on.”

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