bearfund

We're Nearing Crunch Time for Oil

blackbody, he actually started out saying that there's definitely going to be an end to the rapid price increases; he even explained the 5 factors he expects will cause it. I happen to agree with all of this - the current oil dependency has been brought on mainly by a history of cheap oil; with more expensive oil, we should expect the market to invest differently and eventually adjust. There are longwave demographic shifts (the return to urbanism, especially among post-boomer generations) already in progress in the United States that will reduce demand for oil, or at least growth in demand for oil. The other four factors he notes will surely play a role as well.

I doubt very much we'll ever see $50 oil again, just as we'll never see $1 wheat or $1000 houses again. As our author once again points out, that's more down to the devaluation of the dollar itself than anything else, but rising demand and limited supply will surely take their toll in coming years. That doesn't mean that substitutes won't be found, that living patterns won't be adjusted, or that new sources of supply won't be brought online. All of those things will happen. Whether or not we have reached peak oil or monotonic decline from that point is inevitable, the market will adjust to higher prices and any period of rapid appreciation must eventually come to an end. All of this is fundamental economics, and I do not believe anyone here has suggested otherwise.