Friday, May 16, 2008
The price of oil rose to a new all time high of more than $127 per barrel per day. The reason was apparently the Chinese earthquake. Many people would perhaps have expected the earthquake to, if anything, lower the oil price as it will temporarily lower Chinese economic growth and so cut demad for oil there. But as much of the negative supply shock will occur through problems in coal distribution, which in turn means that the need rises for a substitute in the form of oil.