From the Economist:
http://www.economist.com/node/188181
Oh, wait, this is from 1999!:
“Yet here is a thought: $10 might actually be too optimistic. We may be heading for $5. To see why, consider chart 1. Thanks to new technology and productivity gains, you might expect the price of oil, like that of most other commodities, to fall slowly over the years. Judging by the oil market in the pre-OPEC era, a “normal” market price might now be in the $5-10 range. Factor in the current slow growth of the world economy and the normal price drops to the bottom of that range.”
And this:
“The latest oil-price shock has come at a sensitive time for the Saudi ruling family. Power is passing from the ailing monarch, King Fahd, to his brother, Abdullah. The autocratic family has had problems with dissent in radical Islamist quarters. Low oil prices crippled the Saudi economy in 1998: output shrank by nearly 2%, both the current-account and the budget deficits soared to nearly 10% of GDP and debt approached 100% of GDP. This year will be worse.
The choice is simple. Either the Saudis must cut back their welfare state, by slashing benefits and raising taxes, or they must find a way of increasing oil revenues. But the ruling family’s delicate domestic situation makes the first option difficult. So instead the Saudis may now do what once would have been unthinkable: throw open the taps. That, according to McKinsey, a management consultancy, would certainly herald an era of $5 oil.”
Yup, we’ve seen this story before…
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