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OPEC: The Saudis Have Left the Building

I don't know about the truth of the death of OPEC, but the Saudis recognize their situation, and the situation of other OPEC members. They are marginal countries, accidental beneficiaries of a quirk of nature, parasites on the wealth of the West. If they destroy the West, they open the way for less benign powers to take care of the oil. Given their history in Tibet, the cultural revolution, Tiannenmen Square, how they deal in Africa, does anyone doubt that the Chinese would have a problem with just taking over Saudi Arabia? If the West wasn't standing in the way? I don't doubt it for a minute, and it is clear the Saudis don't either.

I admire what the Chinese dictatorship has accomplished for its people (or more accurately, what it has allowed its people to do for themselves once it got out of the way a little), but that doesn't make me blind to what it is capable of. As China engages with the world that will change, but I don't believe it has changed yet.

Oil's Supply and Demand

85 million barrels of oil/day at $140/barrel is $11.9 billion/day.
Hedge funds have $1,700 billion dollars.
Sovereign wealth funds have $1,700 billion dollars.
Both have an economic incentive to manipulate the oil market. And the means to do it for months of production. Like shooting fish in a barrel.

So while your analysis of demand is true in an overall sense, I think there is a lot of speculation contribution to price as well.

The end result will be to drive the developed world into alternatives, thus reducing dependence on oil. A good result from market manipulation.