Jeff Rubin's Contributions

Higher prices are supposed to encourage more world supply. It’s standard textbook economics. But what happens when instead of export-oriented global firms, it’s governments that control supply. They may not respond to price signals the same way as profit maximizing companies. n fact, they may respond in the exact opposite way.

There will be many dress rehearsals in commodity markets before the next global recession. An example is last week’s dramatic and broad-based sell off that took oil prices for over a $10/barrel tumble. And there is no doubt that despite the scarcity of the resource, the price of oil will crash the next time the global economy sewers.

With OPEC tapped out, where will China find the oil to power future economic growth? The obvious answer is it will take a big chunk out of the 19 million barrels the U.S. economy burns every day. And China doesn’t have to build a blue water navy or engage in an arms race to take a big slice of the U.S.’s energy pie. Find out why.

The price of oil isn’t the only hydrocarbon going through the roof. Check out thermal coal prices to see how dependent economic growth has become on burning increasingly amounts of fossil fuels. Prices of Newcastle coal, the Asian coal price benchmark, are poised by rise by as much as 30% this year, approaching the peak levels seen in 2008.

How high must oil prices go before they start killing the very demand that feeds them? Everybody from the International Monetary Fund to the International Energy Agency (IEA) are warning of dire economic consequences if today’s triple digit oil prices persist.

Exactly how high do oil prices have to rise before Saudi Arabia will start using it supposed three million barrels of spare capacity?

Like many in the White House before him, President Barack Obama charted out a plan last week to reduce America’s dependence on foreign oil. And like his predecessors, his road map to cut U.S. oil imports by one-third over the next decade comes against the backdrop of sharply rising oil prices and supply disruptions from an increasingly volatile Middle East.

If the Western military intervention in Libya is really being driven by oil, maybe it’s time to think again. History says regime change is never bullish for oil production in the Middle East and even less so for oil exports.

Was it not just last summer that BP’s engineers were working desperately around the clock to find a way to plug a three month leak from the explosion of the Deepwater Horizon rig that spilled 205 million gallons of crude oil into the Gulf of Mexico? Now, engineers and plant operators are braving potentially lethal radiation to avert a catastrophe in the crippled Fukushima nuclear power station in Japan.

The meltdown of three reactor cores at Tokyo Electric’s Fukushima nuclear power station in the tsunami and earthquake devastated area of northeastern Japan is already reverberating around the world’s nuclear power industry.

As Libya descends into a bloody and protracted civil war, both the White House and International Energy Agency are considering tapping strategic oil reserves.

With very limited excess capacity in Saudi Arabia and the rest of OPEC, further production shutdowns in the convulsing Middle East will soon push oil prices to new record highs. The Brent futures contract, the world’s benchmark price, almost reached $120 per barrel in London last week. With gasoline soon to cost six pounds a gallon (£1.32 pounds/liter), the British government is already considering alternative rationing systems to the brute price mechanism at the pumps.

Why is the Arab world convulsing with social and political unrest when triple digit oil prices should be bringing enormous wealth to the region? The answer may be that the link between energy inputs and food prices suddenly makes soaring oil prices a double-edged sword in the world’s largest food importing region.

The International Energy Agency needn’t bother exhorting OPEC to pump more oil to fuel a global economy that now burns a record 87 million barrels a day. Confidential cables from the U.S. embassy in Saudi Arabia released recently by Wikileaks confirm what others have long suspected: OPEC’s kingpin producer, Saudi Arabia, has little more to give.

It’s more than coincidence the Arab world is convulsing with social unrest just as the United Nations Food and Agriculture Organization’s widely watched price index recently soared past the previous food price peak set in the summer of 2008. After all, didn’t those same prices ignite food riots throughout the world only three summers ago?

Just which price is the world benchmark for oil these days?

There are many ways that oil shocks affect the economy, and none of them is good. As the prices of gasoline, diesel and home heating fuel rise, consumers’ energy bills eat up a growing share of their after-tax income, forcing cutbacks in more discretionary areas of spending. The next thing you know, people are going out to restaurants a lot less, taking fewer vacations and buying fewer clothes.

With oil prices within spitting distance of triple-digit levels (Brent traded over $99 per barrel last week, while West Texas Intermediate was north of $90 per barrel), it may be time to reconsider just how long this recovery will run.

2010 left us all with a mountain of debt. Whether you’re a taxpayer in the UK, Ireland or the US, it must already be pretty clear that you’re on the hook for a lot of IOUs borrowed from your future. You may not have borrowed the money yourself, but your government has already done it on your behalf, running up massive, record-setting deficits. What’s not clear is exactly how your government is going to pay that debt back.

Just as the fiscal crisis sweeping through the major oil-consuming nations of the world is cutting funding for green energy, one of the most expensive yet least efficient of green fuels, corn-based ethanol, has been given another year of generous taxpayer support in the US.