The prevailing wisdom is that oil prices will move down. They have already dropped from over $78 to $72, and most observers think that is only the beginning. Troubled financial markets and the potential of a slowing global economy should being demand down.
Don’t tell the president of Venezuela, nut job Hugo Chavez any of that. He wants the world to believe that he can control the price of crude, which is only partially true. According to Reuters: "I’ve always said that oil prices are headed straight to $100 per barrel," Chavez said during a televised speech. His argument is simple. Supplies are dwindling and consumption is still going up.
Chavez must be speaking with the oil think tank The International Energy Agency. Late last week the FT quoted the group as saying: ”Undersupplying the market in this context could bear considerable risks,” the IEA said, referring to ongoing Opec crude oil production cuts.
The question before the House comes down to this. Will troubled credit markets hurt the developed nation economies enough to bring oil down much further or will long term demand and lack of supply growth drive prices up?
Oil is going to $100.
Douglas A. McIntyre
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