Friday, December 05, 2008

Enjoy it while it lasts.

Oil is cheap right now. If you listen to a lot of the Business news pundits, it's going to get a lot cheaper. In a few months, the Arabs may pay you to take oil off their hands. We hear about over production and demand destruction.

Don't kid yourself. When oil was at its all time high just a little over 4 months ago, production had been ratcheted up by oil producers and huge quantities were still being bought up and held out of the consumption pipeline for purposes of speculation. As the price of oil has collapsed, all that oil came on the market. There was nobody to buy all the increased production and speculative holdings. The result has been a tremendous oil glut. This does not mean that the World is using a lot less oil. The World might indeed be using a little less oil right now but World wide depression or not, oil production is in a long term decreasing trend and oil consumption remains in a long term increasing trend. The current glut of oil will be worked through. When doesn't matter. It will happen. It may seem like they are giving it away for a while. Enjoy it while it lasts.

$200 dollar a barrel oil will happen and sooner than you think.

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