Is Another Oil Head-Fake Brewing? – 08.04.17


  • The dramatic declines in the costs of oil production will be boosting supply at the very moment that demand is falling.
  • Over the past decade I’ve addressed what I call Head-Fakes in the cost of oil/fossil fuel: even though we know the cost of extracting and processing oil will rise over time as the easy-to-get oil is depleted, oil occasionally plummets to such low prices that we’re fooled into thinking it will remain cheap for a long time to come.
  •  This drop in price is a head-fake, because over time the depletion of the cheap-to-extract oil will push global prices higher.
  • Why does this matter? Economists have noted for decades that spikes in energy costs tend to trigger recessions for the obvious reason: the more households and businesses spend on energy, the less they have to spend on goods and services.

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