High oil prices: war premium or physical fundamentals?

Bob WilliamsAs oil prices hover above $35/bbl and inch towards $40/bbl, the question persists: Is the oil price spike a war premium or a market fundamentals premium?The answer is important because it points to the longer-term health of oil markets. If the higher price is solely the result of war fears, then it likely will evaporate once the outcome of hostilities in Iraq becomes quickly apparent. That was the case in 1991.Even if there are much larger long-term considerations for a post-Saddam Iraq, a "pure" war premium will disappear as soon as the market is assured of the extent of supply disruptions resulting from military conflict. If Saddam succeeds in staging a "scorched-earth" fina...

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