bowman711

Muted Energy Forecasts for 2009, 2010

In the short term, anything can happen to the price of oil - e.g. a further sinking into recession would surely cause the price to go lower. A significant political or military event - such as an Israeli attack on Iran's nuclear program - would certainly cause a sharp spike in price.

Long term, there seems to be nothing but higher - much higher - prices:
1.) The massive inflation of the money supply, when the economy starts to recover, will surely cause higher than normal inflation in all commodities.
2.) When the economy starts to recover, there will be an investment rush into commodities as manufacturing firms begin to replenish their supply of raw materials - such as oil for plastics.
3) A recovering economy will need oil for fuel to transport commodites to manufacturers, and products to consumers.
4.) Numbers 2 and 3 will be magnified by the growth in the China, India, Brazil, and other 'new' economies competing for limited raw materials.
5.) The low prices of oil for however long it takes for a recovery will sideline exploration and development of oil, so when the economies recover, there will be a reduced supply for a world clammering for energy to produce products and bring them to market. Economic shortage means higher prices to deal with the demand.
6.) Consumers will have put off travel during the hard times, so they will have a pent up 'demand' for travel (or just taking a Sunday afternoon drive), further increasing the demand for gasoline.

Traders can play the short term changes in price; long-term investors can hardly have a better investment than oil and commodities. [The only 'wild card' is if the Obama administration can succeed in destroying enough profit-motivated business to cause businesses to decide to not continue to produce consumer goods because the profit is taxed or regulated away.]