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The price of oil is going up.
The current price of oil reflects its increasing production costs and scarcity. Supply, demand, and inventories are not influencing prices much at this time because the world has a spare production capacity of around 3 million barrels per day (Mbpd) right now. In less than two years supply and demand will meet and prices will go up to reflect this.
Our oil consumption in the USA, at 19 Mbpd, is 2.5 Mbpd below its July 2008 peak; this means we have spare refining capacity and high inventories in the USA. Global oil demand, on the other hand, is already higher than where it was in July 2008, at 86.9 Mbpd, mostly because the Chinese are burning the oil we no longer burn. Our high oil inventories are a reflection of the US market, not the global one.
Most global oil producers claim it costs $60 or more to extract a barrel of oil today and will not sell for less than that. I fear prices will go up not down. I hope I'm wrong. Production costs set a bottom for oil prices; who would sell oil for less than it costs to produce it? Would you sell at a loss? It's a bad idea.
Every barrel we add to production today comes from expensive deep offshore, highly sulfurous, tar sands, or shale oil. All the big old sweet oil fields are in decline. Visit the EIA and IEA websites for more info.
Global demand for oil is increasing fast in developing nations and this will keep raising prices no matter what happens with the US economy. The US DOE forecasts global demand to reach an all time record of 88.2 Mbpd next year.
It costs more than $60 to add a barrel of oil to current production and the cost keeps going up, we will never again see oil for $40 or less. We have run out of cheap, easy to extract oil.
The NYMEX trading volumes are low now proving there is little speculation in the futures market at this time. The situation was different two years ago when oil was over $140; there were a lot of people trading oil futures back then.
We must prepare for Peak Oil or we will regret it.