Fear and Loathing in the Oil Markets

摘要

Oil is primal. like food, it's necessary to our survival, and when we fear that our ability to heat our homes and fuel our cars might somehow be in danger, we panic. That's a key reason petroleum prices have jumped so wildly off the back of the turmoil in the Middle East in recent weeks. The current price of oil-$116 per barrel as of March 1-is at least $20 per barrel higher than what experts say it should be, based on the simple logic of supply and demand. The same was roughly true during any number of past oil spikes, from the Iranian revolution to the Gulf War in 1991; in those two cases, prices were 30% higher than they should have been, based on the facts on the ground. As it was then, it is often fear rather than reality that drives oil prices.