Betting On The ‘Other’ Oil Black Swan

With oil prices plunging to 5-year lows, perhaps it is time to consider the cheapness of betting on the other oil black swan…
Via BofA’s Jake Greenberg,
In my base case, I remain structurally bearish oil. The world is making huge productivity and efficiency gains (lighter vehicles, new technology, etc.), and we are starting to see real substitution (e.g. to LNG and CNG). On the supply side, oil is not resource constrained (i.e. at the right price, you get more shale coming to market Libya KRG North Sea’s Buzzard Arctic, etc) and OPEC is a dysfunctional oligopoly. Francisco Blanch thinks we could see Brent drop below $60/bbl in the next six months.
Interestingly, lower oil prices may not incentive increased demand as both China and India are taking advantage of the drop to raise taxes on fuel consumption.

This post was published at Zero Hedge on 12/08/2014.