T. Rowe Price fund manager Shawn Driscoll is not convinced that the 100 percent rally in crude oil prices off of February’s lows will last. In fact, Driscoll is making a $5.2 billion bet that it won’t.
Driscoll believes that the 2004 collapse in oil prices was only the beginning of a 10–15-year-oil bear market and that the 2016 rally in crude prices is a result of misplaced optimism from investors.
Driscoll argues that there is a huge headwind for higher oil prices because any time prices climb above the $50 level, struggling producers will step in and ramp-up supply.
“We always say when productivity ends, that’s when we get bullish,” Driscoll explained in a recent Wall Street Journal piece.
Since Driscoll took over T. Rowe Price’s 47-year-old natural resources New Era Fund nearly three years ago, the fund has lost an average of roughly 2 percent per year.
Driscoll’s theory that new oil supply will keep a cap on oil prices is likely to be tested relatively soon when the oil market once again reaches a balance of supply and demand. Many investors are expecting that demand will begin to out-pace supply sending oil prices even higher, but Driscoll disagrees.
For now, he is…
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