Why Oil Prices Will Rise Again

By Bruce Jackson

Posted by Zaki Bernoussi

This article was broken up into some very important vital points to understanding what was predicted of oil prices and what may actually happen to those prices. Here are some of the key highlighted subjects; It was those dastardly hedge funds again, Oil still makes the world go round, Oil is now trading beneath its floor and The oil bulls will win again.

In July of this year, the fear of Oil prices was at its maximum and the predictions of the future were grave. According to Bruce Jackson, this was the common consensus;
* The world is running out of oil.
* World demand for oil is high and only going to get higher still in the years and decades ahead.
* Most of the world's cheap oil has already been discovered.
* Oil exploration companies increasingly have to drill for oil in more and more difficult places. This adds to the cost of exploration and in the event of a discovery, the cost of extraction. Either the price of oil stays high and goes even higher, so that it makes these new discoveries economical for the oil companies, or the oil stays in the ground. Given the increasing demand and the world's complete reliance on the naturally depleting natural resource called oil, it has to come out of the ground.
* Oil was seen as a natural hedge for the falling U.S. dollar.

Jackson continues to denote these fears with the numbers of today, showing that the prices are way lower than predicted and look to be in far far better shape. But this low price may be good now but not everlasting.

"But what about the oil price? Should it be $50 or $100 or $150 a barrel? In the short-term, as we've recently seen, anything is possible. The oil price, like stock prices, was once being determined by greed, and now is determined partly by fear."
This is the crux of Jackson's argument and article.

The article itself was well written. I liked the format in which he highlighted important issues through titling paragraphs and got down to the bare bones of it all. It seems that prediction is nearly implausible and that one must realize that up or down the price will not stay that way for too long. As long as oil is still a scarce resource this fluctuation will continue. Efforts are being made to find new oil sources and an example Jackson brings up is the huge "Tupi" oil field offshore of Brazil. It is estimated to contain up to 8 billion barrels of oil. Nevertheless, with global oil consumption currently running around 86 million barrels per day, the Tupi field is only sufficient to meet less than 100 days of global demand!

http://www.fool.com/investing/general/2008/10/17/why-oil-prices-will-rise-again.aspx