Book description
It's a fair bet that most of what you think you know about oil prices
is wrong. Despite the massive price fluctuations of the past decade, the
received wisdom on the subject has remained fundamentally unchanged
since the 1970s. When asked, most people - including politicians,
financial analysts and pundits - will respond with a tired litany of
reasons ranging from increased Chinese and Indian competition for
diminishing resources and tensions in the Middle East, to manipulation
by OPEC and exorbitant petrol taxes in the EU. Yet the facts belie these
explanations. For instance, what really happened in late 2008 when, in
just a few weeks, oil prices plummeted from 4 dollars to dollars a
barrel? Did Chinese and Indian demand suddenly dry up? Did Middle East
conflicts magically resolve themselves? Did OPEC flood the market with
crude? In each case the answer is a definitive no - quite the opposite
in fact.
Industry expert Salvatore Carollo explains that the truth behind
today's increasingly volatile oil market is that over the past two
decades oil prices have come untethered from all classical notions of
supply and demand and have transcended any country's, consortium's,
cartel's, or corporate entity's powers to control them. At play is a
subtler, more complex game than most analysts realise (or are
unwilling to admit to), a very dangerous game involving runaway
financial speculation, self-defeating government policymaking and a
concerted disinvestment in refinery capacity among the oil majors.
In Understanding Oil Prices Carollo identifies the key players
in this dangerous game, exploring their competing interests and
motivations, their moves and countermoves. Beginning with the1976 oil
embargo and moving through the 1986 Chernobyl incident, the
implementation of the US Clean Air Act Amendments of 1990, and the
precipitous expansion of the oil futures market since the turn of the
century, he traces the vast structural changes which have occurred
within the oil industry over the past four decades, identifying their
economic, social and geopolitical drivers, and analysing their fallout
in the global economy. He explores the oil industry's decision to
scale down refining capacity in the face of increasing demand and the
effects of global shortages of petrol, diesel, jet fuel, fuel oil,
chemical feedstocks, lubricants and other essential finished products,
and describes how, beginning in the year 2000, the oil futures market
detached itself almost completely from the crude market, leading to
the assetization of oil, and the crippling impact reckless speculation
in oil futures has had on the global economy. Finally he proposes new,
more sophisticated models that economists and financial analysts can
use to make sense of today's oil market, while offering industry
leaders and government policymakers prescriptions for stabilising the
market to ensure a relatively steady flow of affordable oil.
A concise, authoritative guide to understanding the complex, oft
misunderstood oil markets, Understanding Oil Prices is an
important resource for energy market participants, commodity traders
and investors, as well as business journalists and government
policymakers alike.
SALVATORE CAROLLO graduated in engineering from
the University of Palermo, where he also served as a lecturer and
researcher. In 1975 he began working at eni; both in Italy and abroad
where he was active in various sectors of the petroleum downstream,
refining, market research, supply and trading of crude oil. Since 1995
he has been based first in Amsterdam and then in London as the manager
of the Upstream Marketing Department, where he is responsible for the
commercial relations with several producing countries and eni partners
in various joint ventures. Within this area he provides support to eni
corporate university, through teaching activities at the Mater MEDEA
and organising the annual Oil Market and Commercialization of Crude
Oil seminar. He is often called in as an expert by various
institutions in the oil sector to provide his own analysis on the
dynamics of oil prices.
