And Oil Continues Its March to Zero

And Oil Continues Its March to Zero

I joked last week that cotton futures were heading towards zero – apparently oil took exception to my joke, and has accelerated it’s speed towards the basement.

Can you spot the trend in the oil chart?

Many folks, myself included, thought we’d never see sub-$50 oil again. The speed of this decline has been absolutely breathtaking.

What’s next? I wouldn’t try to pick the bottom yet. But there will be a bottom eventually. This is a result of forced selling. None of the supply/demand imbalances have been corrected.

They say the cure for high prices is high prices – and high prices sure did the trick when oil topped $140. The global economy basically stopped working, and demand dropped.

Well the flip side of that coin is that the cure for low prices is low prices. Unfortunately all of our energy conservation and alternative energy efforts take a back seat in our minds when gas is back under two bucks ($2 gas again! I almost dropped my bottle of beer as we walked our dog around the neighborhood last night and saw 1.97 unleaded on the sign down the street.)

Demand will come back eventually, provided the world is not ending – and the world does have a habit of not ending. And when demand comes back, we’ll see oil above $150 or even $200…likely sooner than we think.