johngonole

60 Minutes on Oil: Did Anyone Verify Anything?

Long term oil is going to continue its uptrend for two reasons. First the cost to maintain oil reserves is going up and will continue to go up as the easy to get oil fields continue to deplete. Second is that the US government and the Fed are collaborating on a huge increase in supply of paper dollars which oil is traded with.

In the short term the ups and downs of oil price is controlled by speculaters speculating on the near future price of oil. Long term the realities of supply and demand will control the long term moving average. I think this is why oil suppliers are so slow to shift capital expenditures and drilling plans. In the late 90's oil plummeted and even with falling prices they were slow to respond. It makes sense to respond slowly since the oil futures swing so dramatically. Personally It would be interesting to see the inflation adjusted 200 moving average of oil. I'd expect to see it rise pretty steadily based on slowing rising demand and the increasing difficulty of extracting it from the ground.

I continue to expect US based oil supply to drop.