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Hello Crazy Types,
As oil continues to hit new price levels, it might be useful to remind you of the maths associated with supply and demand.
The price of oil is rising because of various factors, including politics and geography. But the biggest spur to soaring prices is supply and demand.
Now many folk think that if demand improves over supply by 5%, then the price of oil will rise by 5%. But it doesn't. It will rise by much more than 5%, possibly 20%.
One reason for this seeming anomaly is that the suppliers know that as demand goes up, they can wack up the price and still shift the stuff pretty easily.
Now as prices for oil rise, folk will stop using as much. But it will probably have to go up by much more than 5% before they ease back on their use.
So this suggests to me that the price of oil will keep going up until all those folk who have gas-guzzling cars, like to fly around the country and wear T-shirts in the middle of winter, while wacking up the central heating, all finally see sense.
Therefore, in my humble view, the demand for the black stuff is likely to rise more than 5% before demand slows. And the fact that the Chinese are burning more and more oil will also raise the clamour for oil as supply continues to dry.
And taking all this into consideration, I will continue to invest in oil, while at the same time cutting down on my car miles. Rocking on!
To find out more about Malcolm CLICK HERE
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