This is the current front month Brent crude contract from TFC Commodities Chartz. One item that is missing from the peak oil- price jump discussion is the FACT that crude is in the middle of a multi- year secular BEAR market! The high price in 2008 was $147 while the current price is $87 – 89. This price level appears to be a major resistance level as it has reached this level previously in May of this year.

Keep in mind that fuel prices are determined by the economy’s ability to set prices. One of the economy’s vital component is labor, which cannot bid effectively for fuel as its share of economic output is shrinking.

Another thing to consider is that fuel futures are assets subject to speculation. Crude oil is clearly not a speculative bubble as open interest in this contract indicates. During the Great Spike of 2008, a large number of new futures contracts were created to answer the demand of ‘long only’ investment vehicles. Once prices reached the level where they could not be supported either by business demand or by speculative cash flows the new contracts lost value and were unwound. The outcome was the oil panic that ended in Spring of 2009. Comparing the open interest now with that of 2008- 2009 indicates little ‘long- only’ speculative interest at this time.