Amidst the anxiety over lower oil prices, there are three discrete investment issues

John Robertson


Amidst the anxiety over lower oil prices, there are three discrete investment issues. The first is whether oil market balances warrant lower prices. The second is whether lower oil prices necessarily imply worsening demand in other raw material markets. The third is whether lower oil prices should engender fears of contagion (possibly due to their impact on debt markets, lower than expected capital spending on exploration and development and emerging economy growth rates). Lower prices are justified because of the need to cut capacity by enough to match demand. Prices need to inflict enough pain for this to happen but the required rebalancing could still happen as early as later in 2015 on currently anticipated usage rates. Secondly, lower prices do not necessarily have adverse implications for other raw material markets because halting the price fall requires an industry specific supply side adjustment. Lastly, the contagion risks are probably overstated because they do not take adequate account of the beneficial effects of lower oil prices on economic activity.

1 topic

John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...


No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.