Whither the oil price?

Like a badly shaken bottle of tonic water the oil price just keeps on rising. Bean's report to the Treasury Select Committee yesterday just the latest acknowledgement that it could remain at 140 a barrel or upwards.
But this oil price has been used shamelessly by political interests as diverse as environmental doom-mongers and American nationalists to fit their agenda. There is enough oil. And supply can increase to meet demand - Saudi's have pumped in an apologetic 250,000 barrels the other day although this is offset by a Nigerian oil strike. Capital investment in new fields and exploration has been minimal over the last 20 years precisely because oil is so cheap - this is the same as the refineries problem.
So will investment increase and supply drive the price back down? Yes, but not immediately. The price will come back down like in the '70s because of a global economic slowdown - demand will decrease: The Indians and the Chinese have just announced a cutting of state subsidies for cheap oil. Opec and others are their own worse enemy, as usual. Benefitting from a unique set of political and economic circumstances (war in Iraq, high dollar) they are able to pump money into their ropey administrations in the short term, while they are unwilling to make new investment into supply because they are fully aware that when the price does come down in a couple of years it will have been a huge waste of expenditure. So the best indication that the oil price is going to fall pretty sharply is the slow rate of capital investment in utilising oil sands, exploration and new infrastructure.

Dont blame the speculators, blame the Saudi's - and get prepared to sell oil futures....