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I'd say there are few endeavors more frustrating, or more dangerous to one's financial health, than seeking a simple answer to complex questions.

Theoretically, there is a lot of Oil. I am reminded that, also theoretically, the bumblebee cannot fly.

The current supply crunch pertains to "Light Sweet Crude" which is the preferred grade; and the one whose price is commonly quoted. I believe that there is ample proof that developed oilfields are depleting, new supply is increasingly difficult( expensive ) to find and produce, and much of it is in geopolitically unstable or 'controlled economy' countries.

Mitigating technological and geophysical advancements have staved off "peak" to this point. Every year it gets tougher to produce further incremental improvement.

Contrary to popular belief it is very seldom easy to find or develop an oilfield. Improper development can result in an inability to maximize production. A single offshore well can cost a $100mm dollars or more to drill and be a "bust". The best geologists and scientists are employed by companies whose Investors want a return on their capital.

How many countries will soon declare oil to be a "strategic asset" and make it unavailable for export? Brazil and Russia have already done that with uranium.

Much of the 'new oil' is of heavier grades. Each grade is progressively more expensive to produce and process; and generally more polluting.

Now that the supply of Light Sweet is decreasing it will not be long before the same factors carry on down the chain and affect less popular grades.

There is also no doubt that worldwide demand continues to increase despite improvements in efficiency and successful 'weaning' like Brazil's. The U.S. is no longer the prime factor re demand - it is worldwide, especially Asia.

At some point, the price of gasoline will affect demand. Right now there is a slow progession towards adoption of alternatives and I cannot guess what price will represent a "tipping point" turning that into a more rapid one. I think that only the political will to ban the internal combustion engine would be an historical signpost; but I see little evidence of movement in that direction.

By many comparative measures, Oil at $ 70 is still a bargain!

I have no idea of what the "right price" should be; and I also think that best bargains in The Market right now are oil companies who continue to increase their reserves and production.

There are risks. There is probably a 'fear factor' in the current price. It is also no doubt in the best interests of some parties to limit production; and they could change their policies.

The IEA says "20 years". That may be reassuring to me; but I doubt that it is to anyone who is 40 years younger ( i.e. half of the world's population ).

Best 'o' luck
wayne



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