Mmarrkk

Why Oil and Gold Are Headed Much Higher

While we can agree that demand destruction is occurring, do you know that supply destruction is also occurring? Look at the press releases concerning cutbacks in drilling budgets. This will start to crimp down on the amount of new production. Then there's our old OPEC buddies. They will be shutting down production. So as these things go through, you'll probably see supply drop as fast as demand, keeping the market balance pretty tight. At $50/bo, drilling in Canadian oil sands and deepwater GOM comes to a stop. While we may see a short term price drop, in a year or so, our production will be very very low and at low prices, our consumption will start to grow again. Hence, you'll see $4 gasoline pretty soon. Maybe during 2009!

Now, Shortages of Natural Gas

Agreed if you are considering the US market or North American market. But look at Japan, where a lot of the LNG is going. Spot prices for cargoes are running almost $15/MCF, still not 6:1 but more like 9:1. Partly due to the speculative bubble in oil and mostly because now that natural gas has become more of an worldwide commodity, its price will go up. The price in the US is mainly suppressed because we CURRENTLY have a pretty good supply. But when we start bringing on expensive gas, you'll see prices going up and getting closer to parity with global prices.