Oil Price Forecasts: Talks of a $300 Baril Emerge

Babak over at Trader's Narrative flags this Barron's report titled $300 Oil by 2020. It requires a subscription that I do not have, but here's an excerpt:

Charles T. Maxwell, an analyst who's been toiling in the energy business since 1957, all but shrugged off the toppling of the dictator. He's sticking with a bold prediction: Prices will climb to $300 a barrel in 2020, or about $225 in today's dollars. The world simply won't have enough oil to meet demand, he says.

Not only Charles T Maxwell missed what the readers of this blog now: the fundamentals of oil are in a sorry state (at least on the short to medium term, I can't forecast long term), but he seems to be assuming a fair amount of monetary inflation (2-3% per year until 2020) in the face of Japanese style deflation.

Irrelevant of these points, and even more importantly, these kinds of crazy forecasts happen only in periods of extreme and irrational exuberance. It is fair to assume that two years ago, when oil dropped to $30 a baril, the supply and known reserves were about the same as today and that the fundamentals over a period of 10 years didn't change so much during these past two years to justify a price move from $30 to $300. So my opinion is that Dow 36,000 and Oil $300 and Gold $5,000 forecasts are generally made close to long standing market tops than floors. I'm thinking that oil will trade at $20 before it trades $300.