WTIa Apr11.pngThe blog spent much of 2007/8 warning of the likely impact of high oil prices on chemical demand. It was then renamed ‘The Crystal Blog’ in November 2008, as the full extent of the problems finally became clear.

Today we are back in the danger-zone. The chart above shows annual oil prices since 1970 – in $s of the day (blue dotted line), and $s adjusted for inflation (red line) – with extra points for H2 1990 and Q1 2011. The red shaded areas mark periods of recession in global chemical demand.

Every sustained period of oil prices above $50/bbl in real terms has been followed by a sharp slowdown in chemical demand:

• As oil prices rise, so consumers cut back on discretionary spending
• This reduces demand for those products which drive chemical demand
• Yet chemical buyers have to start buying forward, to protect supplies
• The eventual oil price peak is thus followed by destocking
Operating rates then collapse down the value chain.

The blog saw this process at first-hand in 1979-80, as a young sales rep. Then, as in 2007/8 and today, it was assumed that the combination of tight markets with rising oil prices, meant demand was still robust. But the evidence of history makes this assumption very doubtful.

Every speculative mania, such as today’s, has its own illusion. As the blog pointed out in the Financial Times in September 2007, the myth behind the sub-prime disaster was that US house prices would never fall. Now they are down 30%, and still falling.

The myth behind the crude oil rally has been that the liquidity provided by central banks is the same as capital. It isn’t.

PREVIOUS POST

China's Dalian trading suggests trouble lies ahead

11/04/2011

The blog spent much of 2007/8 warning of the likely impact of high oil prices on...

Learn more
NEXT POST

Japan's Fukushima disaster equal to Chernobyl

12/04/2011

The blog spent much of 2007/8 warning of the likely impact of high oil prices on...

Learn more
More posts
Smartphone market decline begins to impact global stock markets
19/05/2019

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And Pre...

Read
US-China trade war confirms political risk is now a key factor for companies and the economy
12/05/2019

There are few real surprises in life, and President Trump’s decision to launch a full-scale tr...

Read
There’s a great future for the European plastics industry in recycled plastic
05/05/2019

Europe’s plastics industry is under major threat from the growing legislative and consumer bac...

Read
Uber’s $91bn IPO marks the top for today’s debt-fuelled stock markets
28/04/2019

Uber’s IPO next month is set to effectively “ring the bell” at the top of the post...

Read
The End of “Business as Usual”
21/04/2019

In my interview for Real Vision earlier this month, (where the world’s most successful invest...

Read
Most businesses were nowhere near Ready for Brexit last Friday – we mustn’t make the same mistake again
14/04/2019

Thank goodness for backbench MPs and the European Union. Without their efforts, the UK would by now ...

Read
Don’t get carried away by Beijing’s stimulus
07/04/2019

Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the econ...

Read
Businesses thrilled by Brexit uncertainty: “It’s exhilarating” says small business owner
01/04/2019

With the European Commission saying that a No Deal is now “likely“, small businesses acr...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more