Is peak oil finally upon us? Should we panic? Perhaps not, as thanks to an excellent article by Thoughts from the Frontline's John Mauldin we can get an idea of why oil prices have spiked as of late and it has less to do with peak oil and more to do with questionable political moves and the potential rise of a new bubble.
In his recent piece "Whither the Price of Oil?" John discusses how institutional investment houses (pension funds, etc) have been dumping tons of money into commodity based exchange traded funds (ETFs) as a means of taking their money out of the Sub Prime havocked markets and placing them into something that will hedge against rising inflation. The problem however, is that ETFs largely rely on future's markets to cover new investments and as such have pushed futures prices up drastically. 
Now, because many ETFs hold oil futures, this has purportedly caused a run up of the price in oil alongside other commodities .
Adding to this are political concerns with regards to interesting movements made by Iran. John mentions how Iran has been leasing out all of the oil tankers they can get their hands on and are storing their oil in them. Indeed, the Calgary Herald confirms this by suggesting that the number of tankers Iran has leased has gone from 10 on May 2nd to 20 by May 22nd. It also confirms John's suggestion that Iran may be in a bad spot as the bulk of Iran's oil is of low quality and can only be processed by specialized refiners, namely in India, China and the US.
As the Times Online notes, the problem may not be so much that the price of oil has risen as the price of futures, the paper guarantees of oil for a month or more from now have risen out of control.
"consider the situation today in oil markets: the Gulf, according to Mr Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell. That physical oil is in excess supply at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground. All it suggests is that there are few buyers for physical oil cargoes at today's prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year. This situation is exactly analogous to the bubble in credit markets a year ago, where nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for “financial derivatives” that allowed investors to bet on the future value of these bonds. "
However, on the flip side of the coin, could the political motive exist for Iran to attempt to disrupt oil prices? What is interesting to note is that back in December Iran stopped accepting U.S. dollars in exchange for oil, which we can recall was a move made by Iraq back in the year 2000 that wasn't very well received. Could this be a partial cause for why Iranian oil is less in demand today? Of further interest is that in February Iran inaugurated the Iranian Oil Bourse, an exchange dedicated to encouraging trade of Oil in non-US currencies. Both moves being very anti-American suggesting an potential interest to stir the pot.
The large question that arises from this is that why would Iran lease so many oil freighters? Is it simply for storage of oil they are no longer able to easily sell or is it something more politically malicious such as trying to cause a disruption? Certainly by leasing so many tankers and leaving them sitting the availability of tankers to ship oil decreases, forcing leasing costs to rise and can also cause a restriction in supply. One could certainly wonder, what is Iran's plan in this regard?
Questions that arise with regards to oil prices are where will they go next? If Iran continues to hoard tankers will that cause oil prices on the futures markets to continue to rise and if so, to what extent will it continue and what action will the U.S. take as a result? If Iran dumps all their oil on the markets and frees up the tankers, could we be in for a crash in the price of oil? On top of that we have the issue of the money thrown into ETFs by institutions and what eventual impact this will have on things to come and then there is the question of what impact the suggestion that Asian countries may cut oil subsidies will have on overall demand. While there are a great many unknowns, one thing seems pretty clear, peak oil isn't here... yet.
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