mrexcessive

Oil's Gains Are Due to Fundamentals, Not Speculation

Dollars are just pieces of paper, Oil is actually useful. If the dollar declines then people will cease accepting dollars for oil and ask for something else instead, gold ?


Re. Shale Oil/Tar Sands etc. Watch the energy, not the dollars. The EROEI (Energy Returned On Energy Invested - ie. how many Barrels of Oil you get for each Barrel of Oil used during production) with these is certainly below 5:1 and quite probably below 2:1 for the foreseeable future. Whereas light sweet crude, even now, has an EROEI more like 20:1 (and was close to 100:1 in the early decades of oil).

Dollars don't matter, if some country has all the oil and another country has all the dollars why would the owner of the oil want to swap these days - the dollar is in decline. You can't power your car with dollars, you can with oil products.


I think that Either
a) Oil will hit $1000/barrel by end of 2010 due to Peak Oil and very high dollar inflation
OR
b) There will be such a severe worldwide recession - including the BRIC countries (Brazil, Russia, India, China) - that worldwide consumption of Oil will actually fall for 5 years or so.

I think that either way, once we get to 2012, the dollar will no longer be the World's reserve currency - something gold based probably (or oil based!)