Five Points on Why Oil Will Go Much Higher - 10/5/08

What’s going to happen in the long term?  Here are five reasons Oil will go much higher, and maybe sooner than we think.

First, global demand is accelerating.  The U.S. Energy Information Administration (EIA) said demand will reach more than 115 million barrels per day by 2030.  T. Boone Pickens has recently brought to light the term supply and demand problem.  Pickens said, “85 million barrels of oil is all the world can produce and the EIA fourth quarter predicts 87 million barrels in demand”.  Pickens went on to say supply will not meet demand so the price must go up. 

Second, production has probably peaked at nearly 90 million barrels a day.  Mexico’s oil production has recently suffered short falls.  Experts once debated the reality of “Peak Oil” now they debate when it will take hold.

Third, China and India the world’s fastest growing economies are increasing consumption at double digit rates!  This more than off sets any reduction in consumption elsewhere.  China and India need oil at any cost to keep growing.

Fourth, one day the world will learn maybe sooner than later that Saudi Arabia’s reserves are not what it claims to be.  Their stated reserves have not changed in years.  If you continue to pump oil out of your reserves without adding more infrastructures, your reserves cannot stay constant.

Fifth, Bailout Ben will be dropping trillions of dollars in the system to stabilize Wall Street.  Paulson has his bazooka ready, which suggests that as much as 95% of oil’s price drop can be caused by the dollar’s rise since July.  When the dollar drops oil rises it’s that simple.

$250 oil is very possible!

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