No way oil goes back to $147. No way. You have to understand economics to get that. The cartel was warned that their greed would bring about a collapse in price. Well, that has happened. No matter how much they cut, oil won't be going up.
Remember, they can only cut so much. OPEC countries NEED the revenue. In fact, over the past 3 years the easy money from oil is like a drug to them. They can cut back but only 10% or so. Beyond that they will need to cut social programs and park some of their private jets, which they won't do.
Hindsight is always 20/20 but in this case it turns out oil was indeed in a bubble as so many analysts predicted (I did not, I thought it was going to $180, I was wrong too).
Further to all this, the Saudis are scared stiff that, under Obama, US Congress will will pass a myriad of legislation to give massive tax breaks for the pursuit of alternative fuels. Accordingly, they are pleading with other OPEC members to be content with prices at $70-$80/ barrel (in hopes Congress will get their eye off the ball and forget to address alternative energy).
Even at $50-$60, all OPEC members will still make plenty of money. They know this so they will only accept so much of a cut and will continue to pump from their wells no matter the price. Also remember, a lot of the price moves above $90 was due to speculators. They have now all but abandoned oil as a trading vehicle and are moving on to other strategies. Without the speculators, oil will have a hard time getting past $105.
Of course, now that I've said it, oil will probably go back up to $150... I seem to be wrong in a lot of my investment choices of late.
