2011.11.04 The sudden warm up does not cause the WTI to drop but the NG just fall, just a bit. Now the negative oil news of surplus oil is ignored by the market; even the Greek's default crisis. This is impressive. It should be a side note that although the price of NG is low, individual NG producer can be very high perform. In such a situation, the producer is better than the commodity. Oil should finish its correction as the double bottom is formed. There may not be any pullback until U$110.

2011.11.01 The reality sinks in; the Greek plan is not a plan. It does not only facing the Greek's resistance to give up entitlement but also create more inequality between who can live outside or inside the law of land. The deal is based on the perception that Greek will accept the terms and condition the IMF and ECB laid down without the consultation of the reality. The purpose is to put up a good show to save the skin of the German and Franch banks who hold most of the Greek bond before and during the crisis. China is standing outside the fire ring watching the side show carefully. It is not necessary that China is short of money to save her local government debt; it is the matter of timing. It is not ulgy enough. Comparing this to the plot in John Perkin's Confession of Economic Hitman, the West is doing the job for Chinese. When the debt crisis is here, the stock market retreat. The global stock markets lower by 2-3% and 4% at the low point. For hindsight, last week was the perfect time to sell high. When this happen, the commodities come down as the results of paired trade. Gold did not make any dramatic break up any resistance so it could retreat back to U$1,600 or lower. Silver broke the resistance of U$32; it has 90% staying above the $32 although it looks much volatile. Copper pulled back to just below U$3.50. It would be essential to hold above the U$3.50 but there is nothing to do with the economy. The other casualty include WTI. It sank below U$91. This will be temporary. The major player should be NG. The price keep on pushing up following the seasonal trend to near U$4.00. Worth to mention is platinum to gold ratio has sunken to 0.92.

Updated at the end of the day: While gold dipped below U$1,700, it resurfaces at the day end. Oil did not budge and did the same after submerged below U$90.  The stock index did not do the trick to pull down commodities completely. This is specially supported by the HUI which gone down slightly by 1.70. CGSI is up 10.04 2.5% and UGSI only dipped 0.56 0.1%. Choice of the horse is the trick to win the battle.

2011.10.29 It is hard to argue that energy has a dramatic turn on this week, especially natural gas. All ready for the winter? Oil has a double bottom and did not break down. This becomes the end of the correction. NG has an 8% big move on Friday shows something is coming.

2011.10.28 The market performs in a very confusing and out-of-box mode. With the higher debt, the consumer spending will be limited that is the basis for the reduced oil demand. However, oil jumps back to U$90 range with a 4M barrel stock increase. When the market reacts different from conventional wisdom the news or the reaction should be in question. In case of oil, I question the news. The more important story is told by the following chart:

Platinum to gold ration is rising from 0.91 to the level of 0.95 in just in two weeks. The rise is just as fast as the fall.

After few months of dramatic fall of silver, it has broken the U$32 resistance. When it happens, it bolts to U$35. Copper is back above U$3.5. Quietly NG jumps 8% this morning. Is the old man winter here already?

2011.10.22 NG has a out of ordinary development. Its production is higher than the seasonal trend but the accumulated surplus is align with the normal trend with the price in a steady pace. This implies a higher than normal consumption which could be contributed to the weather. If this winter's temporature is forecasted to be lower than normal, we can observe a NG price squeeze this winter. New few weeks will tell. Oil's dramatical recovery shows a high volatility of tug of war between fact and perception. While the perception remains to be American dominating the world demand and it is strinking as opposes to the fact that The BRIC catches up fast and the American is not waning the energy demand. Even shale gas or deep sea oil production seemingly produce a huge cheap supply but the fact is that they will be >$100 is not being shown. Until than how WTI being kept low remain a mystery to me because even EIA has changed to the tune of higher demand in increase daily consumption by 1M barrel next year. The WTI has been kept unreasonable low by more than $20 below the Brent. Why the Arabian agree to sell it as such a low price deserve investigating. A possibility conspiracy theory is that the finance of Arabian is in deep trouble so that they have to sell the oil at much lower price under the gun of the American.

2011.10.14 Oil has a dramatical turnaround but not NG.

2011.10.07 Oil is trading a scary wide range while NG continue to sink.

2011.09.30 No champagn but not much worry; only fustration. WTI and NG went up and then fell. See-saw market.

2011.09.28 Celebration has to wait. It is not a good day after a half hearted rally. Yesterday's gain are sent back and more. Market volatility is weighing to the down side. Mother bear is playing with the investors.

2011.09.27 Precious metals have a dead cat bounce; or not. A drop of very 10% without a period of repairing will betray the technical and fundamental analysis. After violation of technical level, repair period must elapse to ensure the wound is healed. When a major drop happens, the supply and demand shows a metastable. To go back to stable equilibrium will also take a lot of time. We should pay very serious attention to gold which at one point leaped about U$80 but at the end of day only return to U$1,650 or up U$22. Silver do better but only stay put at U$31 level. WTI is the strongest. At the dawn of the day, it rests at the gain of 3.7%. All commodities stock slides at the end of market despite strong gain in the morning. The close to 300 point gain of Industry only keeps half of it to have a gain about 150 at the end of the day. Lets do not celebrate yet. Tomorrow will be the same level of volatile perhaps to the down side. Gold stocks indicate the rally in gold is not convincing. HUI down 0.6%, CGSI down 1.6% and UGSI down 0.9%. People are selling on rebound.

2011.09.24 Oil's fall is stopped at U$80, the old supporting level. So it will be fine. NG is wondering between the huge range. Nothing can be improved. It is sad to say the divergence between USD and oil price in reverse disappeared when USD rally. We can just hope the convergence continue when U$ falls.

2011.09.17 Last weeks in-line comment for the chart below this frame was divergence will be reduced. It continues to this week. The 200MA for both the USD and the WTI price are moving in the similar direction with USD turning almost flat. This slight divergence in long term trend make the short term bigger divergence. But it does not change the big picture. Oil has to complete the battle it did not finish at the $90 and $100. The coming winter could help as indicated by the non-incidental hurricance at the Mexican Gulf does not provide a lot of relieve to the oil and gas prive. In a month, the inventory for the winter will be built. We may have seen the bottom. The price will climb. Technically, WTI is peeking to break above the U$89 resistance.

2011.09.10 The struggle waging on for oil and gas. It is in trading range.

2011.09.02 Are we seeing the turnaround of the oil and gas? Both have not be changed on the demand and supply but the investors' emotional has been motivated from one side of the pendulum to another side. Take oil as example. One week there is suplus and other week is deficit. If it is swinging then this is just normal fluctuation. But entertainysts exerberated the situation to create the fear. Because the mass participation of the retail investors, the market volatility is much over exaggerated than the real situation. As we are now at the end of the summer and hit by a heat wave with the threat of the hurricane season, energy supply should be tighten. Let see what happen. Anyway, oil has recovering to the U$80 level to the high of U$80s. This is positive in light of the Europe financial crisis.

2011.08.27 End of the summer is the hurricane season. We should see the energy price moves to firmer position. Irene may help but so far not working much but the gasoline price jumps.

2011.08.19 Dead in the water; oil or gas. Oil's head and shoulder wins. The fall is halted around U$80. This must hold or we can see U$60. NG is weak. With all the heat wave, it does not push higher.

2011.08.12 Oil bounds quickly from the bottom; gas also lifts itself up a bit when the market tanked. This is not a bad correction bottom.

2011.08.05 It hurts to see both oil and gas are down. Too much manipulation.

2011.07.29 Oil is still fighting the U$100 battle. NG is disappointing but not dead yet if it does not fall below the 200MA.

2011.07.24 Off prime time trading is not necessary the mainstream trading. Yet, it is great time to observe how some people are thinking. As long as the volume is respectable, the trend is tradable. Many worldwide panic started as the night trading of North American and day trading in Asia. The metal world has been returning to the East. So we should respect the precious metal direction. Tonight gold stared off with a high jump of U$18 to U$1,618. By this time, it is settle down at U$1,613. This makes the gold to silver ratio just a hair below the 40 because silver action is vicious, especially next 10 days. Oil hands tight around U$99 no matter what the analysts say.  Copper is also very stubborn. What do these mean? The Fed will be in panic mode to shutdown all these to prop up U$. It will repeat whatever is needed to kill the commodities. Only this time, the BRIC is watching with pens and cheque books in hand; ready to buy what is falling from the sky. Will Fed care about the BRIC to mop up the commodities. This is not a question of mopping up to squeeze the commodities price. Last time, it killed Lehmann Brothers which frozen hundreds of billions of commodities in custody accounts. When Fed let open a gap, woozed out some at lower than fire sale price because people need money. These paper commodities have completely detached from the reality but it will drag down the investor without making a dent to the inflation number.

2011.07.22 Gut wrangling weeks on oil but finally it is moving very close to the U$100. This one is a keeper.

2011.07.20 Excitement was cooled down when gold dipped below U$1,600. As discussed in previous notes, the breaking of U$1,600 has no technical significant but the psychological. Now the gold bears can come out to sing and dance. Gold had 3 very active sessions. So rather than short covering, it could be the shorties sell off for profit. On the other hand USD falls to 74 range. There will be money movement which could help the precious metals. But the killer could come from WTI's surge to U$98 range. The judgment call could be made tomorrow. Updated at end of day: The picture enhanced at the end of the day. Gold satisfies the psychologist's demand to go back above U$1,600 with silver over U$40.

2011.07.15 Oil continues its battle of $90. It could be close the end because the release of 60M barrels of EIA oil could not push it down U$90. Natural gas is slipping back to U$4.546. As we are moving towards to the hurricane season, we can see natty back to the U$5 range. Energy is not being threaten by the withering American and European economy because of the BRIC's demand. Technically, oil is at a junction that can either break up or break down because there is a huge H&S and a smaller H&S bottom. If oil breaks down U$90, the H&S wins, it will be down to the U$65 level. If the H&S bottom wins, the break up must hold above U$105. Then we can see U$122. Since the resistance at U$90 is so strong, the down to up probability will be 25% to 75% in favour of the up side.

2011.07.12 Gold is on the first page news headline today. It made the all time high close. This is not a easy task. The U$850 record high in 1980 was interday. At close is at U$540. Today, the close is still all time high in U$ but not in C$. It is only C$4 shine from the record of C$1522. Not a bad day when USD is at 76. Is this the story telling people that U$ is safe heaven and money moves to U$ for wealth storing or there is another reason to have gold shot high with the U$ is high too? It is not just the U$ get rally, so does the WTI and copper and NG. There is bad news; Ireland will need another bailout. Why commodities rise when the economy comes down. Where are the entertainysts? Is this the sign of inflation? If so what causes it? And the more important question is in term of what currency, the inflation is reflected?

2011.07.09 The EIA weekly inventory statistics has become a joke that does not reflect the reality. Trader is not trading according to the supply and demand but the rumour. With all these shrouding the market, the price volatility is unbelievable and analysis does not work for short and mid term. Strategic reserve increase traditionally pushes down the price because the reserve should only replenish when the supply is ample. The release from the strategic reserve will drive the price up because the supply is tight. All these do not work anymore because of the new spin from the entertainlysts. The existing market could be just a whole market manipulation. But in a much longer term, the energy supply is endangered. With all these in mind, oil has show a very indecisive movement. It could be a major fall if it falls below U$90 but a huge rally to U$122 if it moves above U$105 firmly. We should accept the trading range for the meantime between U$90-105. NG had some nice break up but without any reason the green shoots become yellow shoot. But it seems the price is on a long term up trend since the less than $3 days.

2011.07.01 Precious metals are down especially silver is -2.5% in the morning. But the base metals are up considerably like zinc is +1.5% in the morning. The investment thesis theorist may hypothesize that the U$ is stabilized so precious metals are out of fashion. On the other hand the precious metals remain very much above the 200MA. Even silver is 5% above the 200MA. So any loss  due to the gain or loss of U$ short margin has to be compensated by selling the precious metals. This raises a very fundamental question why those believe in U$ hold precious metals if U$ is the thing to invest. Or they are actually see the inverse relationship, which is much weakly linked now, so they do the paired trade of U$ and precious metals. With the weak link between U$ and precious metals, someone will get squeeze from both sizes. This is when the stock market has an unexpected rally or dip. This could what happen today. The Dow goes up more than 100 points in the morning so someone got squeeze. When stock market goes up, this is not the signal for prosperity now. It is the signal of inflation as the American or European economy are no good. We also have to be very careful about the price of commodities and see through the fog of deception. For example, Brent crude is now about U$15-U$20 higher than WTI. This is a reverse to decade of tradition that Brent is U$3 under WTI. The explanation is that the Cushing oil hub is glut with oil because it could not ship the oil to the Texas for refinery. So where the hell is WTI (Western Texas) and how far is it from Cushing that make the oil price so much difference. Western Texas supposes to be the place oil is refined. According to Wikipedia, there are 26 refineries at Texas which is about few hundred miles south of Cushing. At Oklahoma, there are 6 refineries. For the price differential of U$15-20, it is more than worthy to truck it. Before the WTI at Cushing is lower than the Brent, the excuse was the floating tank storage that drives the price down. Now that the EIA has to release oil from the strategic reserve to balance the supply. And this is not justified enough to make the price higher. Is this interesting?

2011.06.24 Oil and natty keep their new position. Oil gets whacked no matter inventory goes up or down. Natty does not have much help from the weather. This summer natty may be limping.

2011.06.17 Oil and gas have trade places. Oil does not hold as well. Gas is holding up pretty well but not sell enough to go beyond $5. It may be still on a very slow ascend. it should be observed that oil has a huge H&S.

2011.06.10 The precious natty becomes oil. Natural gas continues to rise in a steady pace for the summer. The oil is one step forward and two step backward.

2011.06.03 Oil is fighting the battle of $110 very hard because it misses the battle of U$80 and U$90. Those two resistance line were cut through like butter. The result creates a lot of speculated trading. Any news will move the direction. This does not changing the fundamental of demand from the BRIC where price control shields the real price by their huge foreign exchange. Natural gas has been forming a very wide base depending where you count. It is breaking above the 200MA and 50MA again. This aligns with the summer behavior. If it does not sustain, this will be a small rally. The momentum of demanding NG could be a surprise in the fall.

2011.05.20 Oil and gas are treading water but not too bad. The downside probability is much lower than upside due to the demand equation from the BRIC is being observed.

2011.05.13 Oil holds and gas slides a bit. It is more or less stabilized.

2011.05.06 With crude drops U$15, the oil stock should fall freely. The fact is not. They are just fine. Crude's 15% drop may be scary but it could be part of all out attack of commodities. But this time is different because China does not have to hold back. You can sell, China can buy. The confident of future energy price is reflected by the energy stocks.

2011.04.29 NG sustains its upward momentum with a bit of steam let out. Oil engineers a strong pull. This week we see both have a break up; the trading channel for oil and the pendent for NG. The confirmation may come next week. This is not just a temporary phenomenon because we are facing the hot summer and driving season. Energy demand will rise.

2011.04.21 Higher and higher. Even NG goes higher. Oil goes high if the stock falls; oil goes higher if the stock rises. It is going into the feverish state of energy.

2011.04.15 It seems oil will fall below U$100 but no, it bounds to another recent high. NG is also recovering. NG should recover because summer is coming.

2011.04.08 No matter how you cut it, NG should be higher price but the reality is not. Oil breaks the 3 years spell and charging with the help of the news. It could stay on when the Near East and North Africa settles down.

2011.04.01 NG should be the clown this week. It should do better but just frawn. Oil is the hero. It is pressing the U$110 mark but this is only a bull trap although the price should be higher. How could the oil price goes up when the inventory up by 2M barrels. These news used to turn down the price badly. The market maker can swing both until the wing is clipped. If next dip does not held below U$98, we shall see U$110 as support.

2011.03.26 NG should be the hero of this week. It is not just continue to rise but broke the 200MA. This forms a very pendant pattern with a very wide base, almost 13. The following chart shows the price trend floor is around U$4. If this thesis is correct, we see peak gas. Oil holding up the U$100 and no battle of U$90. This could be temporary. When the Middle East situations calms down, the battle may begin. If there is incidence, we see the battle of U$120.

2011.03.20 Energy is never too far from politics. Energy does not control the mobility but also the source of financial. Energy producer rarely bankrupts because it has price power. Saudi got rich but the American oil companies got richer at the beginning of the Twentieth Century because the black gold was sold to the American at dirt cheap price. Nowadays, it is still selling a the below price. Just a simple calculation. The price of oil as about U$1.00 at 1900. After One hundred and ten years and with a inflation rate of 4%, the price will be about U$75. This is based on the ample supply without any additional cost of finding and development; not to mention about the higher expensive oil. With all the additional factors it could easily double the price. Why the second part of the argument is valid? The oil pumped out at the beginning of 20th Century was basically free-flowing from underground or required very simple pumping mechanism with oil was located very close to the surface. This is contrast to the kilometers deep of oil now. This is not a new phenomenon that oil owner want to sell higher price while oil producer want to buy low and sell high. A simple way is to use political power to suppress the selling price and use the pricing power to sell at the high price. The situation can exist if the government support the low production price which could be different from the real cost. Iran was been an oil producing companies with little government owned producer during the Czar period. As the people wanted to take the oil back, there was a political change. Iraq followed but Iraq's oil problem was 'helped' by the West (i.e. American and British not the French who has French oil producer in Iraq) to liberal the country. Libya is just another oil rich country which has many foreign owned oil producers. When the people wants to take back the oil ownership by removing the government that support foreign oil ownership, the Ally moves in. This is Western Shamanism. This is interfering of the internal affair. If American led Western Ally continues to operate this, the community of Non-American Friendly will be grown by the BRIC led by China. However, if the Western Ally does not take action, they will lost the oil field in the Libya case but will not accelerate the lost of those not in the pipeline.

2011.03.18 WTI continues to close above U$100. This is a strong psychological support. NG is quietly rose above U$4.00. Both are showing strength now. WTI could continue to flutter about U$100 +/- U$10. As long as it does not fall below U$90, the foundation holds. NG is building a very wide and strong base. When it moves, it will be spectacular. The NG stocks are moving ahead of the NG price.

2011.03.11 Oil holds the gain but NG is coming back in a very stealthy way. NG supposed to fall because accumulation starts in May but NG stays near U$4.00.

2011.03.05 It is a mystery why NG is sleeping while crude is roaring. With such low cost NG, the generator should run the NG part rather than the oil part. Why don't they do that? The next target will be U$122 which could face a lot of head wind. It is possible that there may be a few correction below U$100 before climbing to U$122. But the battle of U$90 could return too.

2011.03.02 Now that WTI rises above U$100 with Brent above U$110. Is WTI supply in surplus? The following charts show there is continuous sell-off of WTI to keep the price down or the famous word shorting. If the chart is right, the WTI is suppress to keep the price down not necessary glut. Brent continues to rise without the sell-off. When the price is high enough, the shortie will have cover. This could trigger the catch up with the Brent. The short covering can create an explosive rally. The right chart of Brent shows the continuous buying can come to a halt or level off.

2011.02.27 Monday could be the judgment day of many longie or shortie of WTI. Brent continues to rise. WTI could not be held back too long. The supply and demand remains the ruler of the universe. Libya only supplies 2% of the world oil. The rest of the Africa is not the major oil supplier to the North America. The biggest beneficiary are China and Japan. Saudi UAE always claim they can pump additional a few percent on demand. Why there is panic unless oil has been short for a long time while UAE could not pump any more. Matt Simons' Twilight in the Desert reports that Saudi has peaked their oil production. Their reserve is less than they claim. There is no real oil glut. Can the world survive oil shock? We had been enjoying ridiculous cheap oil squeeze by the American. This does not mean it has to be staying there forever. European learns to drive small and more efficient car. American does not. One could not continue to use the influence to keep the price down for their extravagance oil consumption. Move back to the city and don't live in single house; live in apartment.

2010.02.25  WTI could break loose the curse of the lower price than Brent. Watch the NG stops falling.

2010.02.24  WTI price shots up to U$100 and Brent above U$114. So where is the oil glut. Libya only provides 3% of the world supply. It is heavily guarded by the oil companies militia even Qadaffy could not enter so what is the exposure? The exposure could be the pipeline which is not operated smoothly anyway because of the local stealing oil and the insurgence attack. The bottom of all these market panic origin from two pole of information. People being jerked from oil slut to oil supply interruption. The panic was further exaggerated by saying the spread of oil supply interrupt to the rest of Africa or even Arab. These are just pipe dreams. This is part of the market manipulation. Media should be more rational and more analytical and more critical on the facts rather than sensational reporting. Oil supply should be tight all the time. All these oil glut are smoke and mirror to hide the true of oil supply. The market maker makes money by swinging the market. News is the vehicle of the swing. How can we know supply is tight? The WTI contango is always there. Small retailers should be very careful. After the oil, natural gas will also have a major price swing without any change of the fundamental.

2011.02.21 Overnight, the rally of oil and precious metals continues with natural gas lonely left behind. Brent is not traded until later part of the day. Whether it will catch or not will be left to be seen. So far, the sprint of prices are extreme. Copper is going to shoot for all time high again. Gold recovered back to U$1,400 level. The most worth noted is silver. On Feb 9, gold silver ration was 45. Last night it was 42. This morning, it dropped below 42 despite of gold's strong U$14 jump.

2011.02.20 "WTI closed at U$86.20 on Friday while Brent was U$102.52; a spread of U$16. Anyone has any common sense will know that all those 'surplus oil stored on the supertanker just park off the coast'  should turnaround and set sail to Europe to capitalize the spread. This spread was not just only a day, a week. It was building up since beginning of January when the spread was U$3.00. Any surplus oil should send to Europe. If someone says that Europe could not use those oil because there is a contract. The contract was drawn when? When it was U$30 or U$40 with a mark up of U$102? These fluctuation is very suspicious. Tonight, the WTI jumped U$5.00 when tomorrow is a holiday at North America. Now, who is willing to pay U$5.00 more a barrel of oil?

2010.02.18  WTI and Brent has an over U$10 split. This is historical. With all the surplus in the floating tanker, why don't they ship to Europe. The price can be controlled somehow in the States to suppress the consumer price index. This will have consequence.

2010.02.11  WTI and NG tank together but not Brent. It holds up very well. Why there is divergence?

2010.02.04  WTI gyrated around the U$80 about a quarter before staying above U$80. It is déjà vu again at U$90. NG remains dull. But not some specific NG producer stock. There is a good mid-term view.

2010.01.28  Egyptian riot helps the energy too. NG is doing OK but the shortie almost kill the WTI. Don Coxe mentions that if the brent continues to be at a high premium than the WTI, the oil will go to Europe rather than North America. The result will jack up WTI.

2010.01.22  NG's weekly chart has shown higher demand. In a small way, it has translated into high price. WTI is another story. WTI leads the Brent price. Now it is behind as much as U$9 this week. At the end of the week, Brent still leads by U$8. EIA has changing the song sheet to higher demand. This is key to long term price.

2011.01.21 Canadian oil producers have a lot of suitors showing up at their door steps today. A few of them has very high volume. This stages a strong rally or fall. It is more likely to be a rally because other than BTE, others are closing higher.

2010.01.16  Is oil rising too fast? From the bottom at the end of 2008 to now seems to be. Short term is deceptive. The following is a chart showing the price of WTI since 1998. The top trend line shows that during the 2009, the jump is abnormal. The current WTI price level is below the trend line. Higher can be expected. The top could be above $100.

2011.01.14 C Oil is hanging on the U$91 level with NG climbing. NG's performance is just normal winter rally. But oil did not go down or rally with the Mackenzie pipeline problem shows the news is barking the wrong tree. Shorter trend is unpredictable.

2011.01.08 Conflicting information drive the oil market wildly to the end of spectrum. You may wonder why no body critics on how come the other extreme (excess supply) is being corrected after someone took the profit.

 2010.12.31 Today is the New Year Eve. With 20/20 hindsight, we can conclude the last decade belongs to commodities. The following two charts shows the major leader (so to speak) of the pack. It shows gold has moved in an parabolic manner that closes above U$1400+ for the year. The chart shows a growth more than 5 fold since year 2000. This is impressive. However, if you use the nominal high of U$540 (rather than the interday high of $850) in January of 1980, we see the compound growth of 3.2%. Let do not get emotional about gold bug or not. Gold prices was on a steady rise from 1978 to 1980. Number crunching can give you excitement. If we use the U$175 since 1978, the annual compound growth is 6.7%. This is amicable return. But we also observed that 6.7% may be also the number we are familiar with: great mortgage rate during the 1950, the average inflation rate during normal year and so on. By alleging gold is the best performer of the year, it is fact but we may also taking fact our of context. This also illustrates the importance of asset allocation at different period. Now lets turn to oil. Oil was about U$5 before the oil shock during 1970 (which is about 7 year before the gold historic high in 1980). Today we have oil at U$90. It is 7.5% annual compound growth rate. Is oil price at $90 reasonable. It is because the $5 oil did not start from 1970. You can trace it back to 1920. Then the growth rate is 3.2%. Is this realistic? No it is too low. While rapid rise of oil price will harm the economy but the rise is necessary to reflect the true value of the good. The cost to produce oil in 1920 is far much lower than the deep sea oil or tar sand oil today. So oil still cheap. The question is can the economy work with the $100 oil. The answer will be yes. The demand is there and it is inelastic. In the West, the social structure build on it either the transportation or home comfort. The East is demandingly increases their Quality of Life that demand more energy consumption. So the Arabian will sell either to the West or to the East. There will be higher oil. If we ignore the spike in the chart below, oil is actually rising on a steady trend. Steady trend is the trend the difficult to change. In the coming year, commodities will be growing fast. West has been spoiled with abundant material. When the price is adjust to fairer value, they cry foul because the East what to share it. Gun does not work now. Suck it in.

Archive of Oil & Gas Notes 2008 - 2010