Why Gasoline is not Going to be $5 anyttime soon

Look at this chart. It's the price of Oil for the last few years. We live under the impression that it just goes up and up and up.

That's not so. It goes up and down. The downs are as important as up. Now, in reality there is a lot of reason to expect that the trend is up. But there is a lot of sentiment that means it could go down. Notice the Retrenchments I have circled. These are consolidations and testing bottoms. They are also areas of weakness.

The most interesting of the bunch are those which have happened the last couple years. There is a lot of open interest in this market. Note the bottoms. That means that a lot of people believe these prices or at least are trading at these prices. The chart doesn't even show the most recent near hundred dollar levels.

The one I'm keeping my eye on is the $60 level which is lower than the previous retrenchment. This in chart formation is NOT a strong market. Most of the hundred buck oil we have is nervousness about Iran and Mexico and Africa. But of the 83,000,000 barrels per day we produce and consume globally they are a small component. Let just a little tiny bit of GOOD news hit the market and the crude price will fall like a stone. There is nothing fundamentally holding this market in place.

Besides, a little quiz. Who is the number ONE producer of Oil in the world far and away?
Saudi Arabia 9.45 Million Barrels
Number Two
Russia 9.4 Million Barrels
Who do YOU think is number three? Any guess?
Venezuela? NOPE.
Canada? Na.
Iran? They are number four.

We're Number Three.

GOOD OLD USA coming in at 7.6 Millon Barrels.

Listening to the media you would think we have no oil left. Baloney. We just discovered another 20 thousand barrels in North Dakota in the last few months.

North Dakota produces about 120,000 barrels per day and increasing all the time. As you read this there are 60 oil rigs drilling right now in western ND. Some will find a great deal of oil. One just did that increases production another 20,000 per day when it comes on line. This is happening everywhere and the high prices just push people to do something. Bahrain produces 183,000 barrels per day. North Dakota isn't far behind. We already are larger than Japan or Peru.

Oh, we drink too much oil. We waste far too much. IF we just cut back 10% it would be huge in global demand. That's the other think high prices do. Slow demand. The cure for high prices is high prices.

And, that is why I fill my tank with a smile on my face.