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Is Volatility in Oil Price on the Way, Again ?
Is Volatility in Oil Price on the Way, Again ?
Experts say that you shouldn’t look at your pension investments too often as you might make unwise decisions. I don’t follow this advice. The reason that I’m drawn to tending my pension spreadsheet weekly, if not daily, is two-fold. First, I’m told by professionals who read the tea leaves on this sort of thing that I have Asperger’s syndrome. It turns out that pawing over columns of numbers in Excel is nirvana to certain of us oddball hues on the autism spectrum. Second, for ten years I have had a fascination, bordering on dread, for the incremental drama of two charts in my spreadsheet, both of which are shown below.
Paradoxically, neither chart directly relates to my investments. However, they have guided the timing of when I move money around in my accounts – shifting between riskier stock indexes to safer bond funds. So far, my strategy has worked. For example, my pension fund suffered little during the 2008 financial crisis, and from lesser bouts of turbulence in 2011 and 2015.
So how does my investment approach work? It’s quite simple. The top graph in red shows a rolling 3-day standard deviation (SD) of daily oil price – specifically calculated from the Brent crude oil index. The chart below it in blue is a rolling 3-day SD calculated from the Dow Jones Industrial Average. Whenever, the red chart (i.e., that of oil) develops a cluster of large spikes that is sustained for a few months or more, I’ve noticed that a similar cluster turns up a few months later in the stock market. More importantly, I’ve learned that you don’t want your money in stocks when this is happening, so when the warning signs occur in oil, I march my money off to the relative safety of the bond market.
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This Week In Energy: Geopolitical Triggers Could Spur More Price Volatility
This Week In Energy: Geopolitical Triggers Could Spur More Price Volatility
Tensions heated up in the Persian Gulf this week after Iran fired upon and seized a cargo ship near the Straits of Hormuz. Considered to be the most strategic and vital chokepoint for global oil trade, the narrow stretch of water is regularly patrolled by the U.S. Navy. Oil prices briefly surged before it was known who was on board the ship. Once it became known that the ship was carrying a Marshall Islands flag and had no Americans on board, tensions calmed a bit. Still, the U.S. Navy sent a destroyer to the Straits in order to try to force the Iranians to back down. “At first appearance, this does seem to be provocative behavior, but we don’t have all the facts yet,” Col. Steve Warren, a Pentagon spokesman, said amid all the confusion. Iran insists the incident was a commercial dispute over unpaid debt, but there are fears that Iran thought it was targeting a U.S. ship. In any case, the incident will surely not be welcomed by U.S. President Barack Obama, who is seeking to reach a historic agreement with Iran over its nuclear program.
In another maritime dispute, the war of words between China and its neighbors over sovereignty in the South China Sea heated up this week as well. First came a statement from the Association of Southeast Asian Nations (ASEAN), which said that China’s reclamation work in the South China Sea “eroded trust and confidence and may undermine peace, security and stability in the South China Sea.” China’s Foreign Ministry followed up with a terse response, saying it was “extremely concerned” over ASEAN’s statement because the conflict was not one between China and ASEAN, but rather a dispute that should be resolved between China and individual nations.
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Energy market madness is the death spasm of the oil age – renewables now!
Energy market madness is the death spasm of the oil age – renewables now!
Current oil price volatility is a symptom of the end of cheap oil, writes Nafeez Ahmed, and it’s destablising the entire global economy. The answer is a major shift to renewables – but the the International Energy Agency, which should be leading the transition, is in the grip of nuclear and fossil fuel interests. Instead the leadership must come from us, the people!
There is, of course, a way out, and it lies in recognizing the growing efficacy and efficiency of renewable energy sources, especially solar, wind and geothermal.
The market price of oil has dipped below $50 a barrel – an event that few anticipated. So low is this price collapse, that it is endangering the profitability of the entire oil industry.
The immediate cause of the price collapse is the US-Saudistrategy of interfering in the oil market. The duo is using oil prices to wage economic warfare by sustaining unusually high levels of production.
With the global economy still limping along in the context of weak demand and slow growth, the supply glut has tumbled the market price of oil with the precise aim of undercutting the state revenues of US-Saudi mutual geopolitical rivals, especially Russia, Iran, Syria, and Venezuela.
Despite the apparent low price of oil on international markets, costs of production remain high. Since the peak of cheap, conventional oil around 2005, production has fluctuated on a plateau as the industry has turned increasingly to more expensive, dirtier and difficult-to-extract forms of unconventional oil and gas, especially shale.
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