1. The amount of oil in storage tanks around the world is near all-time highs.
2. Supply below ground is abundant. The world's proven reserves are now at 1.4 trillion barrels, up 12% in the past 10 years.
3. Production is set to increase. Sustained high oil prices have encouraged drilling. There are 45% more oil rigs in service today than there were three years ago.
4. The cost of production is much less than $100 a barrel, about $4-30 per barrel. Oil prices can fall heavily without making any of this production uneconomic.
5. Iranian exports aren't likely to be cut.
6. High prices are pulling back demand. Oil consumption in the U.S. fell by 1.3% in 2006 and world-wide demand grew only 0.60%.
7. High prices are forcing governments to cut subsidies (Iran, China), which should curb demand growth.
8. On a relative basis — comparing the amount of energy bought with a dollar’s worth of oil with a dollar’s worth of natural gas — the price for natural gas is now about half that of oil, further suggesting that $100 oil is not sustainable (see chart below from today's NY Times).
9. A weak dollar doesn't justify $100 oil. Since Aug. 22, the dollar is down by only 8% against a basket of currencies while the oil price has risen by 40%.
10. Speculation is artificially boosting prices.
Source: Wall Street Journal article "Why $100 Oil Can't Float"