Perki

Oil Price Lower on Inventory Numbers, But It Can't Go Much Lower

The demand forecast is interesting. If demand holds up, of course the price will have to go up. However improbable it may sound now, world-wide demand COULD drop by a large amount. What would happen to oil prices if we have month to month demand collapse, for an extended period, on the order of 2-3% per month?

The first warning sign will be defaults on delivery obligations for crude oil futures contracts. Given the current economic situation, any thing can happen.

Crude Reality: How Long Can Oil Stay Down?

The most interesting point of this article is pointing out the falicy of predicting increased GDP and predicting lower oil demand. At the moment ( adn for the next several years, GDP is a function of oil demand and vice-versa. Witness the recent correlation of s&p 500 increases or decreases and the instantanous increase or decrease in oil prices. This coupling in a very new phenomenon. The market "gets it". However, this will link will likely desolve over a longer time frame as the economy "learns" to grow without using as much petroleum through innovation focused on that result ie alternative energy and especially conservation. Japan in the '70s is still a good model for the later.