Price of Oil to continue rising
Don’t rejoice in lower oil prices just yet. Enjoy them, but don’t count on them.
Rises and drops are always attributed to news events by politicians and the media. When Katrina was about to hit, I wrote here that oil would soon be breaking the $70 mark (regardless of storm damage), but that it would be blamed on the upcoming hurricane (of course, no one knew how serious Katrina would be). At the time, there was much discussion about $70 being a giant ‘psychological barrier,’ just as there was epic discussion later on about the $100 barrier.
What history shows is that these ‘psychological barriers’ are just bullshit terms for the pundits and politicians to toss around, and that in reality they don’t exist. The price of oil drives it’s own path based on the primary factors of supply & demand - just the way commodities are supposed to work.
The graph above shows that while events do cause temporary moves in energy prices, there is a long term trend that is much simpler to explain. It has no relation to ‘psychological barriers’ or wishful thinking.
The next big barrier they will talk about will, of course, be $200. Don’t kid yourself - we may be looking back shortly at the good old days of $140 oil. The president of OPEC warned of $200 oil recently, and Goldman Sachs has announced that oil could exceed $200 in the next two years.
And remember, the ‘experts’ have consistently misjudged the price of oil for years: