Oil Prices

Generally, there is a belief that Oil Prices will go up as the world economies continue to improve. Is a significant long term rise in oil prices likely?

I think not. Now, over shorter terms there is no way to determine how the speculation will go. Especially considering the weak dollar, we may see some upward price movement. However, if you consider the basic premise that demand for oil will increase, you have to also consider the fact that supply of oil and other energy sources is increasing faster.

There have been oil supply disruptions in Iraq and Nigeria that seem to be diminishing. Also, we continue to hear about significant new finds in various parts of the world.

So the supply of oil is actually on the increase. So is demand going to go up faster than supply? It doesn't seem likely when you consider that other energy sources, notable natural gas and renewable energy sources are growing in supply. Further, there is a renewed interest in the development of Nuclear. It would take a very significant growth in energy demand to create a long term oil shortage of the type that would drive up prices.

In the US which is still the most significant user, we are seeing a move to more fuel efficient cars, more efficient energy usage and development of natural gas, coal, and renewable.

In developing countries, while oil use is increasing, they are also looking into ways to reduce use and both China and India are likely to make use of alternate energy sources on an ever increasing basis.

So, while there can always be short term fluctuations in price, the future of energy costs is extremely favorable and is unlikely to result in high oil prices.