I read an article in the seeking alpha that discusses about the oil price. This article indicates we need to ready for both direction Increase or decrease oil price. According to article and book If we look in short run market than definitely oil price will rise because in the short run, supply is inelastic, meaning that higher demand, leading to higher prices. In short run no new productions add in market so we can`t see new firms` supply effect in market.
On the other side in long run oil supply is elastic, meaning that higher price will bring new supply in market. But here I think oil price will rise in 2010. Because supply will decrease in next year. According seeking alpha article data oil price picked about $ 150 last summer but very less change in supply. Demand will increase about 87 million barrels and supply will decrease less than 83 millions barrels in 2010. Also in developing countries demand increase day by day. I believe according to supply and demand theory price will go higher. According to Higher demand as the global economy improves will push U.S. crude oil to average about more than $100 to $150 a barrel in 2010.
In long run oil price is elastic and when global economy improve income also improve. On the other hand the government pumping more money in market. Because of this inflation rate increase. Inflation is very effected in any higher price. Thus these all factor also effect to higher oil price.I believe oil price rise and reach average more than $ 100 in next year.
What do you all think oil price will increase or decrease in 2010?