The chart below pretty much tells the story as far as I'm concerned. Nothing naturally goes up like that and continues to accelerate at that rate. It's not natural.
If economics works at all, then supply and demand work in tandem. That means that when prices rise to an excessive level, demand begins to decrease and supply increases. Demand for oil is decreasing as Irwin Kellner says in his excellent article:
"What is even more interesting is the reason for this plunge. It is not so much due to increased supplies of crude as to decreased demand for the black stuff. This is indicative of a major change in lifestyles, personal and corporate.
Take gasoline, the biggest use of oil in the U.S.. Instead of rising 1 or 2% a year as it usually does, gasoline use has been falling, year-over-year, for most of this year.
In March, the yearly decline was a bit over 3%. That was the biggest drop in miles driven since 1942. May's drop of nearly 4% over last year was the most ever, according to the Transportation Department"
When you see a chart like the one above, where there is a sudden and massive spike upward, be afraid, very afraid. And remember that gravity is one of the elemental forces in the universe. What goes up, will come down.
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Related Articles:
Goldman Analyst Suggests Oil Could Go to $200 a Barrel in 12-24 Months by JRodgers - May 06, 2008
Oil Crosses $125 and hard times are definitely a comin! by JRodgers - May 09, 2008
Oil Spikes to $139; G-8 is speechless by JRodgers - Jun 08, 2008.
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