Jeremy Grantham: Oil price slump won’t last

published 13 February 2015

Jeremy Grantham of GMO is known for his economic and stockmarket analyses.One of his key themes is that we are in an era of dwindling commodity reserves and rising prices over the long term.When it comes to oil, he says, this is still true. US fracking is a "red herring".

The fracking glut has merely "given us a global time out from the inevitable oil squeeze". The world has never spent more in developing new oil supplies as last year around $700bn. And we have never found less, replacing only 4.5 months' current production.

Meanwhile, there is less to fracking than meets the eye. "Fracking reserves basically run off in two years", while a traditional field can flow for 30 to 60 years. Fracking costs are also turning out to be higher than estimated.

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The upshot is that US fracking will peak out in five to eight years, and the main influence on oil prices will once again be the cost of finding and developing an incremental barrel of traditional oil. By then, that will probably be over $100 a barrel. "I will continue to be a moderate buyer of oil futures six to eight years out."

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.