Buy Oil Now

We had a tongue-twister riddle, when I was young, that went like this: "If a gumboil could boil oil, how much oil would a gumboil boil, if a gumboil could boil oil?"

The riddle would make sense if we changed "gumboil" to "gum-buyer." Then the riddle would say: "If a gum-buyer could buy oil, how much oil would the gum-buyer buy?"

In our present world, China is the gum-buyer. She has a huge surplus of cash, having had trade surpluses for many years. She has, in recent years, been busily buying up land, mines and minerals in Africa, Australia and other places. The rising value of the US Dollar has increased her wealth.

At the present moment in time, there is a surplus of oil in the world and oil prices are very low. In previous times, when this happened, Saudi Arabia cut back on oil production, to press the oil-price upwards. At present, however, the Saudis have decided to keep pumping the oil, in order to put high-cost producers, including the American shale-oil producers, out of business.

If I were the gum-buyer at this point in time, I would use my reserves of US Dollars to buy oil, before the Dollar falls and the oil rises. Pretty obvious, really. The secondary benefit would be in trade from shoring up its trading partner, the USA.

There would be two ways of buying the oil. The first is to buy current oil and put it into storage. The second would be to buy forward for future delivery - but perhaps the second would not be on the table for our Chinese.

I wonder if Ireland has any way of storing significant quantities of oil, now while the price is right!