Thursday, August 27, 2009
Does the long term real price of oil look like it is falling? Sure it may have fallen after the peak in the 70s and again recently, but overall it is up. Oil at $20 is likely gone forever. Oil at $30 is largely gone and unlikely to be seen other than briefly. Oil at $40 or $50 we should see until the next shortage drives another spike in oil prices. We have been able to extract more, but not more cheaply. We will use less, because it is more expensive. We will develop alternatives, because oil will eventually be more expensive than those alternatives. The only way it will fall in price over the long run is if it is displaced and no longer wanted.