Let me preface this by saying that I am not an economist, I am not investment advisor, and I am not an expert. That said, I'm going to make the following prediction:
Oil futures, currently trading at right
around $120 per barrel, are going to drop below $60 per barrel in the next two years.
Oil prices have
doubled in the last year and a half. At $60/barrel, which seemed high at the time, people were starting to talk seriously about alternatives, both in sources for oil and to oil itself. Fast forward a year and a half, and suddenly oil's at $120 per barrel. Traders are driving up the price of oil, which, in accordance to the
basic rules of economics, is starting to weaken demand.
Yet, as has often been pointed out, "
America is addicted to oil." In the face of this addiction, there are those who feel we will end up paying any price to feed it. I believe that we will find a replacement. You see, I think there are plenty of alternatives to $120 per barrel oil. With prices that high, there's plenty of incentive to develop an alternative that's profitable at $100 per barrel, or lower. As these alternatives start to enter the market (as well as oil fields that weren't profitable to develop at a lower cost per barrel) the demand for oil will weaken more, and the bubble will burst. Someone will blink, and oil prices will plummet quickly.
I further predict that
OPEC will then try to decrease output to keep prices up (by lowering supply), but by that point it will be too late. With enough alternatives available, oil will finally be forced to compete, and those that have enjoyed their healthy profits thus far will be in for some lean times.
Just remember, you read it here first.