Juz like Goldilock’s porridge.
Since August last year, oil prices have stabilised in the US$70 to US$83 range and according to this NYT article, Economists and government officials say that if prices remain in that band, it could benefit the world economy, the future security of energy supplies and even the environment. The price is high enough to drive investment in future oil production and in supplies of alternative energy, they note, but low enough that consumers can bear it.
“It’s a sweet spot,” said Kenneth S. Rogoff, a Harvard professor of international finance. “It’s not too low that it’s crushing demand for renewable energy sources or causing debt and fiscal crises in oil-exporting countries. And it’s not so high that it’s driving African countries deeper into poverty and threatening the recovery in the U.S. and Europe.”
So for us value investors, the issue is avoiding being complacent because, For all the good that stable prices can do, however, no one is willing to predict they will last forever.
“Demand will change; supply will change,” said Christof Rühl, chief economist of BP, the oil company. “The world changes all the time.”
BTW looks like Temasek goofed in selling Orchard Energy
But the buyer, RH Petrogas, is having difficulties completing the deal because the Indonesian authorities are insisting a transfer of an oil interest needs their approval.