Comment 106865

By Capitalist (anonymous) | Posted December 10, 2014 at 11:46:38 in reply to Comment 106707

Ryan, if we are experiencing peak oil then that would imply that oil is becoming more scare and prices are rising. This is why people like you and Jeff Rubin made predictions of $200 oil. That fact that oil prices are dropping is an indicator of greater abundance.

High oil prices have encouraged innovation in places where oil is used the most like US and Europe (exactly as econ theory would predict and we have seen time and again throughout history). However these alternative oil producers do produce at a higher marginal cost. Some may go under with prices below $80 many will stay in business as long as prices stay above $40. Advances in technology have and will lower the marginal cost of oil extraction the same way it has for other resource extraction and other industries over time.

This new technology has essential broken OPEC. The Saudis are not cutting oil production for fear of losing more market share in the US (which is now the world's largest oil producer).

The innovation in the sector will now allow oil prices the be determined in the free market with less manipulation from OPEC.

You should expect to see real oil prices trend down over the long term relative to the prices of other goods and the average daily wage. Oil will continue to be the major source of energy around the world for the 21st century as its abundance and versatility has become more apparent thanks to recent events.

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