Opinion: Oil Prices to Plunge as early as 2009
Reported in Barron’s, Joel Kurtzman, a senior fellow at the Milken Institute and publisher of the Santa Monica, Calif., think-tank’s The Milken Institute Review, says, “We’ve gone back as far as 1995 to look at the long-term trend in demand. It has increased by 1.5% per year. Consumers have used 300 billion barrels of oil and 330 billion barrels have been found. So in terms of supply, we’re in good shape,” he says.
The day the Iraq war began, oil was around $33 per barrel. Since then, demand hasn’t jumped and Iraq is again producing some crude, but prices have more than doubled. Says Kurtzman: “We’ve had three or four years of steady demand and increases in supplies, yet prices — it doesn’t add up. I think we’re going to see a drop that could be fairly precipitous.”
In addition to fear and uncertainty, the current price of oil also reflects compensation for a 30% decline in the value of the dollar, says Kurtzman. “It’s the ’70s all over again.”
What do you think?
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2 Responses to “Opinion: Oil Prices to Plunge as early as 2009”
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I completely agree with you I believe that approximately 30-40% (possibly more) of the current let’s say $130 barrel of oil is complete speculation, demand really has not increased everyone simply believes that India and China are simply drinking oil, which is not the truth, I believe that both China and India cannot truly afford anything over a $100 a barrel of oil, and that they are such a new industrialization that they will easily become a part of a new energy way such as electric cars, nuclear power plants etc. I believe much of this speculation is because of a crippled US economy, which has completely been taken out by the knees by both internal affairs as well as the rise in all energy prices. Outside foreign investors have looked upon various things and see oil (and gold which has been trading up to 35 percent above 1 year ago (Which really in truth is not in any demand)) and so they invest, because they figure everyone needs it and it is traded in a dollar which is immensely low at the moment and for the past 12 months (since middle of 2007), and besides that point everyone figures oil is pretty much a blue chip commodity, and it will not fall. Now a few people do this, and before you know it the price is up, so more people invest, guessing that it will go up again, and more and more money is constantly put in, including by companies which have computers set up to automatically buy when the price hits a certain number. It is like a bunch of people blowing up one balloon, the balloon can expand, but it at a certain point it is going to blow up right in there faces, it is all a matter of time, and price until balloon pops by itself or someone takes a pin or a flame to it.
If you have a response to this e-mail me at danielwjanzen@hotmail.com
Wow, what a call you guys made. Daniel pretty much called the top real time, and Eric saw far into the future. I am one of those who thought oil would continue to rise forever due to peak oil. Live and learn. I hope you guys were able to profit from your insight.