Is Sub-$100 Oil the New Normal? - Real Time Insight
Even with conflicts sprouting up in the Middle East between Israel and Gaza, along with Northern Iraq, crude oil has managed to find itself well below the $100 per barrel mark. What happened to all those magazine covers that were plastered with fears of "peak oil" and oil crippling our economy at $200 a barrel?
Well the fact of the matter is oil prices have been going down. Even during the summer which is historically a stronger season for the commodity. Dollar strength and, more specifically, Euro weakness is partially to blame. But there are stronger issues at hand here.
Think about the modern, fuel efficient cars that are out on the road. The US auto fleet is the oldest its been in a generation. As these cars finally come off the road you're going to find yourself behind the wheel of a car meeting very high MPG standards. Perhaps this is enough of a demand shock to offset any increase in the amount of drivers on the road globally.
Look at how oil prices have struggled as of late. After failing at the $106 per barrel mark, oil had dropped since mid-June to the $97 level it trades today. Yesterday it had dipped as low as $95.70. Even with today's rally we find ourselves trading below not only the 50-day moving average, but also below the 200-day.
The question, is sub-$100 per barrel oil the new normal?
I don't think so. I think $100 has been the standard for the last several years and price action above or below that point eventually finds its way back to the $100 mark. We may dip below, we may rise above, but eventually we find ourselves back to that level.
What do you think?
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