When you have a supply crunch for the most important commodity in the world, the price goes through the roof. The demand is almost inelastic. How are you going to get to work? Ride a bike? Hope you train like Lance Armstrong. I hear the talking heads say that oil's fair value is $50-60/ barrel. Those people are living in fantasy land where supply always increases to meet demand. Well, one big problem with oil: there is a limited supply, and the maximum rate at which oil can be withdrawn has strict limits.
As I stated before, demand might go down by 1% or 2% if oil goes to $120-130/barrel, that's nothing considering the Chinese are taking up all the slack. Until you get to $250-300/barrel on oil, you aren't going to get significant demand reduction for such an essential commodity.
Oil has been so cheap for so many years, people lost sight of the finite supply and how demand has continuously increased. There will be almost no pullbacks in this uptrend, there are too many people waiting to buy oil cheaper.
As I stated before, demand might go down by 1% or 2% if oil goes to $120-130/barrel, that's nothing considering the Chinese are taking up all the slack. Until you get to $250-300/barrel on oil, you aren't going to get significant demand reduction for such an essential commodity.
Oil has been so cheap for so many years, people lost sight of the finite supply and how demand has continuously increased. There will be almost no pullbacks in this uptrend, there are too many people waiting to buy oil cheaper.
