Countries are broke, and will be increasingly forced to implement austerity measures. This favors a lower oil price.
Robert Rapier... I believe that oil prices will remain high, but that 2013 could see a lower average price than we saw in 2008. The price for 2012 will almost certainly be above the $72.34 from 2007, but 2013 may not average the $99.48 seen in 2008. Further, I think it is unlikely that we will see prices spike as high in 2013 as we saw in 2008 when WTI spiked to nearly $150/bbl (barring of course major events like war with Iran or widespread unrest in Saudi Arabia).
Excess Energy? There have been numerous stories in the media recently about how we now have an excess of energy (see here, here, or here). The following graphic has gotten a lot of attention recently:
It expresses graphically what I have stated above: Higher oil production and lower demand have led to the first oil production surplus since 2005. I have consistently stated that I believe the rise in oil prices over the past decade was precisely due to the erosion of spare production capacity, and it looks like for 2012 we are back into (slight) surplus territory. So do those trends continue, or does the surplus look like it did in 2005, when it vanished quickly?
However, we must not allow complacency to creep in. Even if prices are beginning to moderate and the outlook is for oil to stabilize at $80 to $90 a barrel (as forecast in one of those stories), that still stresses the economy. A decade ago we could not have imagined oil at those prices, and yet now $80 oil is a relief. But $80 oil is still a strain on developed countries, it enriches many countries that are hostile to U.S. interests, and it is still dependent upon the whims of OPEC.
One of the major points I try to drive home when writing and speaking about energy is the risk factors involved in our energy policy. As long as global oil prices are dictated by OPEC’s decisions, and as long as high oil prices threaten the U.S. economy, we must not become complacent about our oil consumption (or more appropriately, our oil imports).
Please continue reading Original Article: Future Direction of Oil Prices May See a Major Shift
