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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!