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Is the Next Peak-Oil Related Stock Market Crash Looming ?

image credit: Oil-Price.net
Tom Therramus's picture
Researcher Self-employed

Tom Therramus writes on instability in the oil markets and its impacts on economics, politics and climate change. He believes:  1. Peak Oil is real; 2. Climate Change is real;  3. And...

  • Member since 2021
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  • Mar 17, 2022
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With a sudden fall in oil price, yet another spike in price volatility careened through the markets last week, with more turmoil apparently building this week. Last week's price crash occurred even though key fundamentals were largely unchanged. Most commentators continue to harp on about the proximal causes of the current instability in oil price - failing to appreciate that the ultimate cause is likely to be the underlying reverberative and long-term effects of the unfolding Peak Oil process. At least these folk are consistent in their misapprehension of the operative cause and effect relationships.

The current bout of volatility is shaping up to be a doozy. As I discussed in my essay of 2018 (https://lnkd.in/gGG-NgnG), the recurring spikes in volatility that have marked oil markets for the last 20 years are associated with collapses in the stock market occurring in a subsequent 3-6 month timeframe. I have further observed, that the extent of these sudden drops in equity price tend to occur in proportion to the upstream level of volatility in the oil markets. Given the fierce, whipsaw behavior currently being exhibited by the global oil markets we can reasonably assume that the coming crash in stock prices is likely to be major - perhaps matching that seen in 2008.

As I reported in my 2018 Oil-Price.net article, I adjusted my modest retirement account to be out of the stock market in association with the last bout in energy market instability - dodging a major correction in the Dow in 2019. As of last weekend, I am again out of the stock market.

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Matt Chester's picture
Matt Chester on Mar 17, 2022

Do you think if enough investors follow your example with their retirement accounts and are looking to divest from the volatile oil markets if that will incentive further decarbonization?

Tom Therramus's picture
Tom Therramus on Mar 17, 2022

Hi Matt, Nice to hear from you again. I have to emphasize that I'm not giving out advice on investment. I'm just reporting what I have recently done with my own modest retirement account i.e., switched from stocks to bonds. It is up to people to make their own choices on specific investments - though I'd also personally be very reluctant about getting anywhere near energy related investments at this time. For me it would not be so much about decarbonization, but sea sickness - way too much chop for my stomach. To reiterate the key piece of information - since 2000 every 3-4 years there has been discrete phases of volatility in oil markets lasting a few months. With the current bout of 2021/22, these phases have now repeated  7 times in a cycling pattern. The last 5 of these phases of instability , have been a followed by significant drops in the stock market. As I discussed at length in my 2018 oil-price.net article linked to today's post, I have shifted my investments from stock to bonds as a precaution when the volatile phases in the oil markets occur. This strategy has worked for me, but please look at the available data and make your our decision. As Jean-Paul Sartre might say - we're free people, our choices are our own.

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