It's been 1.5 years since my last post. I'm happy to report that my predictions were very conservative and I wished I had listened to myself. I bought one oil future contract at $39 and panicked when it hit $45 and sold. I bought again at $42 and sold again around $47 thinking that the price was rising too rapidly due to speculators. I ended up buying 2 contracts in the mid 50s and sold during Katrina when it hit $62.

All in all I made about $15,000 during the last year or so. My prediction of $60 in 7 years seemed outrageous at the time and everyone laughed at me. Now we have been at $60 for months with no end in sight.

When will demand destruction start? $80? $100?. Demand dipped for a month or two but we are on track to see at least 1% growth in 2006. I suspect that gasoline will have to hit $4 or $5 gallon to get any meaningful conservation. 2006 SUVs will be driven until 2016 unless people turn them into very expensive boat anchors in their garages.

Perhaps it is time to buy a contract or two again....

Very rough conversion of price per barrel to $ per gallon

2003 $29 $1.50 2004 $37 $1.85 2005 $50 $2.00 katrina $70 $3.00 2006 $60 $2.50 2007 $70 $3.00 2008 $80 $3.75 (Bush leaves office) 2009 $90 $4.25 2010 $100 $4.50-$5 2011 $110 $5.25 2012 $120 $6 (presidential election) Scenarios that will cause above predictions to be incorrect: Iran bombing after 2006 elections? $120 $6.00 US Dollar collapse due to excess deficit - equivalent rise in oil prices. Other bad hurricane season - $80 or $90? Mexico or Saudi Arabia or Kuwait depletion rate exceeds 4%.