The most important issues that will nullify the chances of another significant drop in prices span around the globe:
- Severe Gasoline and diesel shortages in China that have lead to queues at gas stations.
- Iran's advanced plans to set up an oil bourse - where oil is most likely to be traded in Euros.
- Venezuela's threat to cut off deliveries to the US and diverting them to China.
- The strike in Ecuador's oil industry.
- The race of China and India for foreign oil companies.
- OPEC's new projections of higher oil demand in 2006.
- Disruption in Iraq's oil supply by three quarters due to a nationwide blackout.
Federal Reserve chairman Alan Greenspan had said in July he expects consumers to shift from their gas-guzzling SUV's to more energy efficient cars. Just check when used car prices take a downturn and you will be able to pinpoint the beginning of that move.
Jokes aside, it looks as if the economy is finally getting dented from higher oil prices. Although experts do not tire to point out that oil is still cheaper than in the early 1980's in real dollar terms one has to remind readers that we are only an inch away from those levels as this slightly outdated chart from Oregon State University for gasoline prices shows. For a crude oil price chart in 2004 dollars click here.