Comment 27951

By A Smith (anonymous) | Posted December 20, 2008 at 14:39:59

Ryan, I agree with your logic regarding increasing demand against flat supply, however, where I think you make your mistake is in assuming there is a fixed level of supply in the first place. Why are we to assume that oil supply is fixed?

However, assuming you are correct, if GDP in the U.S. picks up from the tepid 1.8% of the last two years, which according to your theory drove oil to $140 a barrel, we should see oil top $200 in short order. In fact, if GDP ever again hits the historical average of around 3%, oil might even hit $300 - $400 dollars a barrel, again, assuming your theory is correct.

I tend to think, however, that you will see U.S. growth rates top 3%, probably in the next few quarters and oil will likely stay around $30 - 40. If this scenario plays out, then the notion of peak oil will have to be viewed as being a "great theory" in theory, but definitely lacking in real world applicability.

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