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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (20017)	10/14/2004 11:51:02 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 110194

Here is my simplistic view on Oil: Both the supply and demand curves are very steep for oil in the short run. So the price can increase (or decrease) significantly with small changes in either the supply or demand. With several supply issues (Iraq, Nigeria, Venezuela, Russia, Hurricanes in the GOM) and steadily increasing demand, it is no surprise that oil prices have soared. However, over time people will adjust to the price of oil: new supplies will come online and consumers will (slowly) alter their behavior. If the economy slows down or slips into a recession next year as I expect, that will cause downward pressure on the price of oil too. I know ... the above is basic economics and excludes the impacts of "peak oil". If we have reached peak oil production, then we will see ever higher highs for oil prices (there will still be ups and downs). I think we are still a few years away from the peak oil production event (I could easily be wrong and it could be happening now). If I am correct, and we are not at peak oil, then we should see oil prices start to decline next year. That doesn't mean oil can't go to $60 or more in the interim. Unfortunately none of this rambling helps with investing. As Will Rogers once said: "An economist's guess is liable to be as good as anybody else's."