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.