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The price for West Texas Intermediate crude oil continues to sink toward $30 per barrel. Now the analysts at the financial services firm Morgan Stanley are saying that it could go as low as $20 per barrel later this year. Not just because rising global supply is colliding with weakening demand, but also because the U.S. dollar is likely to rise in value. As OilPrice.com notes, a Morgan Stanley research report …
…attributes the sharp slump in crude prices to the strength of America's currency. Morgan Stanley says that if the U.S. dollar appreciates a mere 5 percent, it could force crude oil prices down by another 10 to 25 percent… Not only that, but a steeper drop could be just around the corner, again because of the strengthening greenback. "Given the continued U.S. dollar appreciation, $20-$25 oil price scenarios are possible simply due to currency," wrote Morgan Stanley's analysts in their latest report. "The U.S. dollar and non-fundamental factors continue to drive oil prices."
Last fall, Goldman Sachs even suggested that the current oil price slump mirrors what happened when oil prices collapsed in the 1980s and remained low throughout the 1990s. In other words, humanity may enjoy low oil prices for perhaps another 15 years.
In my book, The End of Doom: Environmental Renewal in the Twenty-first Century, I reported various depletionist predictions:
"The world is at, nearing, or past the points of peak production of a number of critical nonrenewable resources—including oil, natural gas, and coal, as well as many economically important minerals ranging from antimony to zinc," warned prominent environmentalist Richard Heinberg in his 2010 article "Beyond the Limits to Growth." Heinberg had earlier made plain his collapsist beliefs in his 2007 book Peak Everything: Waking Up to a Century of Declines. In 2012, Michael Klare, Hampshire College political scientist and defense correspondent for The Nation, piled on in his book The Race for What's Left: The Global Scramble for the World's Last Resources. "Government and corporate officials recognize that existing reserves are being depleted at a terrifying pace and will be largely exhausted in the not-too-distant future," declared Klare.
Wrong again.
As recently as July, I was part of a Cato Unbound debate with economist Dambisa Moyo who was still unaccountably arguing that brilliant Chinese central planners were locking up all the world's fast-depleting resources for their country.
In fact, it is very likely that the world is now experiencing the downward sloping side of latest commodity super-cycle. Generally speaking, as each succeeding super-cycle unfolds resource prices eventually reach levels even lower than the nadir of the previous cycle. In any case, depletionist innovation-deniers need to be publicly shamed.
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