Gluskin Sheff’s David Rosenberg has joined the “peak oil is dead” caravan.
In a note this morning, Rosenberg echoes what others have been saying this year: that demand for crude oil is slowly but surely being destroyed by the rise of natural gas, improving efficiency standards and increased environmental awareness in emerging markets.
As a result, the cost of producing goods — and the price paid to transport them and pick them up a store — is going to fall, he says:
A substantially lower energy price environment is singularly the most bullish underpinning to the global cost curve and real purchasing power (the U.S. in particular), which is very constructive for capital goods industries that are highly energy intensive, not to mention the positive impact on disposable incomes (and cyclical consumer spending as a result)
There is evidence that this effect is not as big as Rosenberg makes it out to be, at least for now. Goldman’s Jan Hatzius and Deutsche Bank’s Peter Hooper both have said the net benefit of reduced energy costs in energy-intensive industries, and thus the knock-on effect for the broader economy, may be limited.
But it’s hard to argue we’re not heading in the right direction.
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