crosspost: Oil industry plans for price correction not crash

[bananas]

This was posted in LBN:

"A Reuters poll of analysts sees oil easing from this year's $78 a barrel peak to $64 in 2007 and $56 in 2008."

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2460910

[acmavm]

1. Hmmm. Coincides with the repubs being kicked out of office.

[phantom power]

2. Never gonna happen.

The ratio of demand to supply is going up, not down. There is no plausible scenario that reverses that trend.

[NickB79]

3. If hurricanes or an embargo of Iran send oil prices past $100/barrel

A worldwide depression and economic collapse could be a plausible scenario that would drop oil prices to $60/barrel. Of course, this isn't exactly anything to celebrate.

[phantom power]

4. Oh, *that* scenario...

Yes, that would reduce the price of oil, although probably not normalized against individual incomes.

[bananas]

5. Most of the price jump was because of war, not peak oil

If we don't attack Iran, the price will go down,
but not all the way down to where it was before.

[phantom power]

6. I guess the question is: can production exceed demand?

As was pointed out elsewhere, in the 1970s it was definitely possible to produce oil faster than it was being consumed, worldwide. We saw that play out via the huge price-drops of the 1980s. Today, the story appears to be very different. The theory that these prices are artificially high seems predicated on the idea that somebody, somewhere, is holding back the oil. Far as I can tell, that's not happening.

Not that I could ever know for sure, seeing as how the oil industry adheres to the "utterly opaque" theory of accounting.

[bananas]

7. All markets have bubbles

http://www.senate.gov/~levin/newsroom/release.cfm?id=257862
June 27, 2006
Levin-Coleman Report Finds Speculation Adding To Oil Prices: Put the Cop Back on the Beat
...
While it is not possible to determine the precise dollar increase in the price of oil attributable to market speculation, some analysts have estimated that speculation has added as much as $20-$25 to the price of each barrel of oil, thereby pushing up oil from about $50 to around $70 per barrel.
...