Famed energy analyst Jeff Rubin conceded this week that his famous prediction of $200 oil by 2012 won’t come true.
His mistake was underestimating how much high oil prices would kill demand and set of financial crises, he writes at The Globe & Mail:
By the time oil reached $147 a barrel, the economic drag was more than sufficient to trigger a chain reaction of events—including spurring higher interest rates which pricked the U.S. sub-prime mortgage bubble—that ushered in the deepest global recession of the post-war era. Instead of marching towards $200 a barrel, oil prices abruptly reversed course and plunged all the way to $40 a barrel.
Looking ahead Rubin sees a repeat of this cycle:
[T]hat same movie is about to play out again. Recessions are already rolling across Europe. Economic growth in North America is lackluster, at best. Meanwhile, the spectre of sovereign debt defaults in the euro zone continues to hang over global financial markets. Added up, it spells another sharp drop for oil prices not because fuel is abundant, but because once again the world can’t afford to stay out of a recession.
Unfortunately low oil prices will make the supply crunch even worse, as alternative oil sources like the Alberta tar sands became uneconomical.