Price Fixing Anniversary

OPEC seems determined to take back control. The crash back to $70 reduced cash flow so severely that everyone is now paying rapt attention and if you can believe the news reports they are ready to take quick and decisive action once again. The fear prompting their call to action this time is the rapidly accelerating global recession prompted by the financial crisis. Demand has been falling sharply over the last eight weeks and some believe 2009 could be the first decline in demand on a global basis since 1983.

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All of these moves are symptoms of peak oil although most would not believe a temporary excess in production is peak oil problem.
Most peak oil theorists believe in an extended plateau where production and demand are nearly equal. As demand briefly exceeds production prices rise sharply. As prices rise demand declines sharply as we have seen over the last few months. Production suddenly exceeds supply again and prices drop sharply in response. The fall in prices, like we have seen over the last month brings back cheap gasoline, now under $3 per gallon, and consumption returns to normal growth patterns. The pattern then repeats over and over with overall demand eventually exceeding production on a permanent basis. This could take numerous cycles before the eventual permanent decline.

Rightside Advisors