Donny and The Sheik Are Right

Ok, so I’m in the minority regarding crude oil prices. Bear with me on this…

Eventually oil prices will come down, simply because of alternatives. I say eventually, because I’m not doubting that prices couldn’t move higher from here. However, the “oil isn’t going down” arguements are blatantly assinine, imho (sorry). 

History has shown that there’s a 10 year gap between the growth in oil discovery and oil production. In other words, we discover oil reserves ten years before we consume them. This is documented in an interesting book called “Predictions” by T. Modis. This ten year gap has been remarkably consistent for almost 100 years.

So, all these folks who are predicting that we will run out of oil, don’t know the facts. We will not run out of oil. The U.S. has more proven reserves than ever. We know this to be true.  It’s just a matter of tapping into them.

We have four major sources of energy in the U.S.: oil, gas, coal and “nukular”, as Bush would say. Oil will begin to lose market share to other alternatives, as it’s current price may eventually trigger it’s decline as a primary source of energy. It is setting up its own demise, so to speak (think: whale oil). More attention is being turned to coal, gas, nuclear and other alternatives at the same time that Americans are crying, “EGREGIOUS !!” to $4 gas.

The market will begin to discount all this as time goes on.

I don’t doubt that sometime in the future we could see $80 – $90 oil, or even lower. What we’re seeing is a bubble in oil prices, which could get bigger. But like all bubbles, they go “pop!”—-and often it’s due to some factors we haven’t thought about.