Sunday, September 24, 2006
I am confidently predicting that on this day in 2008, the price of petrol will be under $1.00 Au per litre in Townsville. Much against the alarmists which talk about the end of big oil etc. etc., it seems to me the world will be drowning in the stuff soon enough. From an economic perspective, as is the way with these things, the price has severely overshot its long term natural level. Refining capacity, oil stocks and strategic reserves are building much faster than usage is increasing. Once this process has caught up to the surprise surge in demand, even a slight flattening of this surge will result in big drops in the oil price. My speculation is relying on my theory that the whole thing has been triggered by a demographic "one off" in China. The dependancy rate there has become extremely low and is still dropping. This rate will suddenly turn and increase sharply, never to get anywhere near as low again. This is due to happen within the next couple of years, and the flow-on effects will particularly influence investment markedly. I titled this entry self-defeating because if all oil investors read this and agreed with me, they would cut back investment now and my prediction would never come true.