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2/23/11

Why Saudi Arabia can no longer temper oil prices - by Jeff Rubin

With no functional spare capacity left in OPEC, any significant supply disruption in the region could easily see prices spike and test the $147-a-barrel mark set in 2008, just before the crippling global recession.

Once speculators start challenging the mythology of Saudi spare capacity, they will invariably squeeze the market.

But the real danger from the Middle East is not the risk of temporary supply disruptions, or the speculative betting that it will encourage. It is that we lose sight of the levels that oil prices had climbed to even before this latest crisis began, and the basic supply-and-demand forces that pushed them there.

We are now living in a world of triple-digit oil prices. The massive changes this will compel won’t be limited to regime change in the Middle East.

For more: Why Saudi Arabia can no longer temper oil prices - The Globe and Mail

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