 Petromania
By
Daniel O'Sullivan
A
book review by Emanuil Manos Halicioglu of the
AIM
& PLUS Newsletter
Petromania by Daniel
O'Sullivan can be purchased for GBP 20 by
clicking here.
Petromania
by Daniel O'Sullivan is an engaging account of
how the financialisation of oil
trading drove the speculative bubble of 2008.
Crude hit $100 per barrel for the first time
ever on the very first day of 2008. Just seven
months later, black gold was fetching almost
$150 per barrel - only to collapse back to
around $30 by the end of the year. These were
the most extreme price movements ever seen in
the world's most important commodity, and
punctuated a chain of events that wreaked havoc
on economies, companies and the lives of
individual citizens across the globe. And with
the commodity currently trading at around $73 a
barrel O'Sullivan
warns that the forces that blew the bubble are
once again at work.
A wealth of fundamental factors - supply and
demand balances, inventory levels, geopolitical
tensions and the costs of hunting down and
exploiting resources in ever more remotes or
technically challenging environments -
influence the price of oil. Petromania
documents them all, but more importantly it
finds that in the final analysis, the pressure
which drove the oil price into triple-
digits-figures through 2008 originated far from
the deserts, frozen steppes or churning seas in
which our most crucial energy source is
produced.
The oil price blow-out was instead a tale
shouted hoarse across City trading desks and
buried in the small print of pension fund
returns - the results of the financialisation
if the oil markets and a speculative fever led
by financial investors which overtook all other
factors. Against an entrenched establishment
view, Petromania proves that the $100-plus oil
prices of 2008 were indeed a speculative asset
price bubble in the most classic sense, with
striking and obvious similarities to other
well-documented market bubbles. This diagnosis
also forewarns us that the structural
determinants of the market continue to
encourage irrational oil price appreciation,
and further outbreaks of Petromania.
This is an excellent primer for anyone who has
more than a passing interest in how the price
of oil has become detached from the real world
factors of supply and demand. This impressive
book is, however, not easy-going. O'Sullivan's
energy and enthusiasm permeate every page in
the form of some of the longest, unpunctuated,
sentences to be found. Still, it's worth
hanging in there despite, arguably, a touch of
tedium as O'Sullivan builds his case through
all six sides of the cube. A must read for
anyone interested in the finance and politics
of oil in the 21st Century. I highly recommend
it.
Petromania by Daniel
O'Sullivan can be purchased for GBP 20 by
clicking here.
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