Oil Prices are bound to fall soon

Oil Prices are bound to fall soon…and for reasons that will appear obvious in hindsight (so why not spell them out now?):

  • Behind the recent price hikes for crude oil there is a combination of transient causes such as the Iraq fiasco, and the herd mentality that has brought many people into the Commodities markets and convinced them to buy oil alongside everybody else. When those causes will deflate, so will the oil price
  • Higher prices stimulate more research into how to extract more oil. When the market will find again its sanity, higher supply will mean lower prices.
  • Higher prices stimulate also the construction of additional refineries. These take several years to come online, and will crash the price of oil when they’ll all do at the same time: just as those miles and miles of communications cable laid down during the Internet boom of the 1990’s are behind today’s cheap cybersurfing and free worldwide calls,
  • The possibility that oil is costlier because we have just reached a peak in production capabilities is remote. Why now? Why not 10 years ago, or 20 years in the future? Why would it happen so suspiciously close to 9/11 and the crises that have followed?

The real difference this time around is that all those predictions of future doom-and-gloom will be forever available on the Internet, perhaps for a good laugh when “experts” will try to recycle themselves in the future into the “oil is a practically inexhaustible resource” camp