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If the global economy contracts for the next 1-2 years, we might see oil at $35 a barrel. I base this number on 2003 data and with the idea that the recession can push us back by more than a decade. With several trillions of bailout dollars, a massive slowdown is likely to occur. Bailout has only avoided a sudden collapse due to credit crunch. Even $40 oil was way to expensive when it happened.

Auto industry is now in severed slump, shipping is slowing down, airlines traffic is winding down furiously. Oil must take a deep dive to kick start all of it again.

To take advantage of this estimate, I am capping my investments into oil stocks. I had sold at the peak at $140+ and got back in at a much small scale when DOW hit below 11K all the way down to 8K. But with the recession on the wall no point in buying oil stocks any more unless they are paying a hefty dividend or there is a niche play.

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