Michael Ringold

Oil's Slippery Slope: Why Crude and Oil Stocks May Be Headed Down, Fast

Macroeconomic analysis is something I'm more comfortable with than trying to predict short-term swings, but you're painting a "best case" scenario in every possible way. China's attempts at 'curbing consumption' will only slow its growth in that consumption, not keep it from rising. SUV sales might be getting whacked, but the F150 still outsells any other vehicle, and Hybrid production numbers are too small to even count. I think you're also giving the consumer too much credit for self-sacrificing behavior like putting up with higher household temps in the summer and lower ones in the winter..

Why make all these elaborate points that all have such simple counterpoints when a much more traditional concept would do just as well? Something like this: Consumers fail to reduce energy consumption, and instead must make cuts elsewhere. Those other cuts slow the economy, slowing compensation growth, boost unemployment, etc. Those that aren't making as much or are out of work won't be consuming nearly as much energy, thereby moderating energy prices a little.

As in many things in life, the truth if often somewhere in the middle. It won't be doomsday, and I'm pretty sure it won't be as peachy-keen as you're thinking it will be either.... in the long run.

In the short run, you might be right, for a few months. Given that it's debated outside the investing world whether supply can expand much beyond its current level even if it wanted to though, I personally find the "reference" projection, or something slightly more cynical but not "worst case" much more believable than a long-term return oil below $40. If this were a normal business that could expand supply to meet demand, sure, but when 'god', or Earth, doesn't allow supply to expand, well then...