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No Relief from $120 Oil Anytime Soon -- or Ever, says Energy Expert

Posted Jul 28, 2008 12:28pm EDT by Aaron Task in Investing, Commodities
Related: RDS-A, USO, OIL, DUG, XLF, XLE

With oil prices retreating from their all-time high of $147 a barrel on July 11 (although they edged up past $124 again this morning), there's talk that the oil bubble has finally burst. "Keep dreaming," says Chris Nelder, co-author of "Profit from the Peak" and an editor at EnergyandCapital.com.

Nelder is a firm believer that oil prices are being driven by fundamental issues of supply and demand rather than speculation, and recent data backs him up:

  • U.S. gasoline usage has dropped for the 13th consecutive week.
  • Overall gasoline demand in the U.S. -- which is responsible for one-fifth of the world's energy consumpton -- is down 2.2% since the start of 2008.
  • Places as farflung as Italy and Taiwan have had energy-usage drops of 4%-6%.

Episodes of geopolitical tension are a factor in oil prices, too, as are recent discoveries of reserves in Brazil and elsewhere. But Nelder maintains that "fundamentals have always been in play" despite the current preoccupation with speculation, and cautions that the time to get used to $120-and-above oil is now.

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