Who Should We Believe?

There are a huge number of contradictory predictions out there right now concerning the stock market, the price of oil, the world economy, the internet of things, and just about everything else you can imagine. If you look hard enough, you could probably find conflicting predictions on whether Little Johnny will jump over the fence to chase the cow.

Since the control automation industry is so closely linked with oil production, let’s take a look at oil price predictions. Chris DeHaemer, the founder of Crisis & Opportunity and Managing Director of Wealth Daily posted on April 7 that he expects oil to hit $87 by Christmas.  He bases this prediction on past history, which shows that when the market for a specific industry’s stock crashes at the beginning of the year, it typically rebounds and prospers for the remainder of the year.  He cites the dot.com crash of 2003 and the banking industry crash of 2009 as examples.

Is he correct? Maybe in the short term. Brent Crude has shown a fairly steady increase from its January low of $28.55 to today’s price of $44.73, and the outlook for additional increase is favorable based on Saudi Arabia and Russia agreeing to freeze production, but it is still down over $70 a barrel from its 2014 high.  Will the increase continue in the long term? There are other factors to be considered.

Some analysts are touting that petroleum/crude oil is being replaced by lithium (aka metal oil) and that the demand for oil will begin to decrease in the near future as more and more companies move toward electric power using lithium ion batteries, which Tesla has supposedly now figured out a way to enhance and produce cheaply.  For example, on April 12, Laurence Knight, a business reporter for BBC News Magazine wrote that, “Lithium, a key ingredient in lightweight batteries, is already powering the modern world, and could be key to getting the world to reduce its reliance on fossil fuels.”

We are already seeing improvement in both the price and range of electric cars.  For example, the 2017 Chevrolet Bolt EV is priced at around $30k and has a range of over 200 miles.  Tesla announced on April 9 that it has already accepted 350,000 orders for its Model 3, a sleek vehicle priced at $35k, which also has a range of over 200 miles, and which won’t even be released for another two years. Because burning fossil fuels is detrimental to the ecosystem, and there is a push on several fronts to reduce their use, the production of a vehicle with extended range and an affordable price could well be attractive to a growing number of consumers, which would drive oil demand down considerably.

Who’s right?  I think I’d rather bet on whether or not little Johnny will jump the fence.

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