Oil Could Fall Back To $30 If Demand Continues To Go Down

I can’t think or write about oil or stocks any more.  Oil and stocks are simply taking a vacation.  They are gone for a while.  Some day they will come back.   In the meantime, no lower price for stocks or oil is out of the question.

This market is out to decimate as many people as it can.   That means providing short periods of encouragement followed by longer periods of breath-taking decline.  Panic happens to be the theme of the day for now as everyone contemplates a possible global depression and the liquidation of funds continues to force institutional selling. But that will probably change with some sustained up days at some point in order to bring more cash back into the market to be destroyed later.

The price of oil can be any number in the short term.  There is simply more supply than demand and it is yet to be determined that OPEC is able to change that dynamic.  With substantially reduced demand, prices could probably go back into the $30’s without stopping enough current production to make much difference.   I don’t expect that but I’ve gotten to the point that I don’t let myself expect anything.

As I said, eventually the panic will pass.  Some day home prices will bottom, primary consumer demand will begin to grow and some version of the world we were accustomed to for so many years (since 1982) will return.  But for now it is best to think about something else.

So here is something you might want to consider:  why not change the term of the presidency to one six-year term with a president being unable to run for re-election immediately but able to run again after an intervening period?   That way a president would have a long enough term to get some serious work done.   The president would not be in campaign mode during his term with all the distortions of national power for political purposes which the present system encourages in a first term.  But a president could also be re-called to duty after an intervening administration so we would not eliminate the possibility of bringing back a former president for a second and final term of office after a respectable layoff.

In that system, the only incentive that a president would have during a first term would be to do such a good job that he would be fondly remembered six years later.  There would be no incentive to do particular favors for particular power centers just to secure a re-election.  There would be no incentive to attempt any short term glory actions (like starting a war that might seem easy to win).  There would be time for the electorate to obtain some historical perspective on a president’s term before having to decide whether or not to re-hire him/her.

The only down-side I can think of to such a system is that it would require a Constitutional amendment, a process that is fraught with risk.  Otherwise it seems to me like an abundantly superior system of government in every respect.

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Comment by Eric

2008-11-02 18:12:16

I think oil will fall below $30 a barrel. It was speculation that drove the price up, and now that the speculative bubble has burst, I see no reason why oil should not keep going down.

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