Lentiman, you make claims/assumptions that aren't supportable by history or the facts.
The MAJOR thing to realize is oil is in effect priced by a cartel - OPEC. Non-OPEC supply continues to decline as percentage of total supply, making OPEC ever more dominant. That separates oil from all other major commodities. When the price declined to below $100, what happened? OPEC cut production, tightening the market and prices rebounded.
Last winter CL was ~$70. Then OPEC announced a 400K bpd cut. Oil then ran to $147 and only came down OPEC opened the spigots and flooded the market and calmed the market. If you listened to the nitwits on CNBC or read your local paper, you'd be told that the drop in oil was due to demand destruction caused by "high prices" in the US. But world demand is UP yet again, so that's obviously not the answer. OPEC opened the spigots as a favor to GWB in conjunction with a serendipitous deleveraging in the financial markets causing many long positions to be closed. That is a temporary phenomenon.
Average world oil consumption has increased about 1MM bpd, year in, year out for nearly two decades and accelerated in recent years to about 2MM bpd as BRIC countries grew strongly. In the last 15 years, only after 911 recession/Dot Com crash in 2001 did US demand fall (ie about 100K bpd). But it recovered in 2002. And even when US demand fell in 2001, world demand still rose over ~1.2MM bpd.
The notion that if the US sneezes that the world will catch a cold with regard to oil and world economic growth is outdated.
This year, world demand will rise yet again despite the US using about 700-800K bpd less due to a sluggish economy and demand destruction from high oil prices.
And WORLD demand will continue to rise for the next ~50 years as Chindia et al regardless of what the US does. Their per capita consumption is a tiny fraction of what the West uses and that gap will continue to close. Looking at world demographics and it's clear that oil demand/prices has only one direction - up. The real question is if the world can supply enough and for how long.
On the supply side, it has remained stagnant for nearly 3 years despite hugely rising prices. Your claim that supply has increased strongly with the price of oil is totally in error. What has happened is that the supply cushion had narrowed dramatically. In the 90s, excess supply was estimated at close to 10MM bpd. Right now, it's about 1-2MM bpd depending on who you believe. And that's why CL keeps hitting ever higher prices.
AI
