This Fund Manager Says Oil Prices Could Be In For Another Decade Of Declines

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.

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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 content holding the minority view.

“I do think bear markets have a way of grinding people down,” he concluded.

So far this year the United States Oil Fund LP (ETF) (NYSE: USO) is up 8.0 percent.

Disclosure: The author holds no position in the stocks mentioned.