Stratfor: Oil Prices Will Plummet When Asia Cracks

Stratfor: Oil Prices Will Plummet When Asia Cracks

I read an interesting counterpoint to the “oil is never going lower” argument this morning in my morning Stratfor brief (subscription required).

Here’s a quick summary:

  • In the ’97 – ’98 Asian financial crisis, crude fell as low as $8/barrel
  • High oil prices today depends upon continued growth of Asian economies
  • The questionable characteristics of Asian financing — subsidized loans and the tendency to prioritize full employment and expansion of market share above rates of return, efficiency and profitability — have not disappeared since 1998
  • China escaped the carnage in 1998, but they have a very “Asian” economy today
  • China – and Asia – could crack again, which would send oil prices plummeting

Whether you agree or disagree, it’s important to at least recognize the possibility of a major pullback.