A while back, on The Other Blog, I said that I had privately predicted that oil would top out around $150-$160 a barrel before crashing again. This, obviously, happened. Unfortunately, since I didn’t post it, there’s no way I can prove it. I also predicted that the financial bailout would help the economy. Of course, things haven’t improved that much, but, then again, the money hasn’t been handed over to the banks yet. We still have to wait and see on that.
Anyway, now I am predicting that oil prices will actually stay pretty low, at least over the next five-year period. It may fluctuate, but for the most part (meaning 50%-75% of the period), a gallon of gas will likely stay under $3.
I think this because it was all speculation. Well, not all speculation. There is greater demand for oil today than in the past, but not enough to justify $150 a barrel. Back in 2002, oil was only around $20. Really. So, maybe $40 or $50 today is about right (leading to an average annual increase of 12-16%). The rest was because people saw a rise in demand for oil and started buying. That act of buying led to a price increase, further fueling (ha) buying and price increases. Once people realized that A) it’s not going to last forever, and B) really high oil prices are severely hurting the rest of the economy, they started selling, which, of course, caused a crash. This boom-and-bust cycle has happened over and over in the past. It will happen again in the future.
The thing is though, oil won’t last forever. It just won’t. We really are running out of cheap oil. We have several centuries’ worth of expensive oil locked away in shale, but what happens when that runs out? Human civilization has been around for thousands of years. The Earth and the Universe have been around for billions of years, and will be around for billions of years yet. What do we do over that length of time?