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!

The Crude Oil Price Disconnect

These "huge" finds referred to are a long way from getting on the market. And the Southern Utah find is hardly "huge". The deepwater GOM finds have been POTENTIALLY huge, but remember none of them have had any extended testing and is purely based on geologic/geophysic studies and some very short term tests. History has shown many deepwater fields to be compartmentalized and much more difficult to predict. AND, there's the tiny detail about the need for technological advances to actually produce in the ultra deep water where these finds have been made. The Chevron/Devon Jack discovery will not be on line for many many years to come. 2010? yeah right. Maybe 2015 if everything goes right. And look at BP's Thunderhorse. Delays delays delays. Many years beyond the original schedule. And that's not a BP issue, its a new technology and state of the industry issue. And that's with the current crop of 40-50-60 years old running the project. Guess how bad it gets when over 75% of those folks retire in the next 5-10 years and the big "gap" hits where we had no new engineers coming into the industry during the bad times!! It aint pretty! So, prices will be high.

Oh, have you looked at the accelerating decline in Mexico's output?? Just a snippet of what will happen everywhere!