Forget Short-Term Noise: Oil Prices Are All About the Long-Term Trend

This article, an interview with "Mr. Question Man," delves into long-term oil price trends, debunking the value of short-term projections. Historical data reveals that oil prices have fluctuated around a trend line, closely mirroring inflation rates over the past 50 years. From 1974 to 2024, oil prices rose at an annual average of 3.7%, matching inflation, suggesting that betting on inflation as a proxy for future oil prices might be as effective as complex econometric models.

Short-term price swings are attributed to unpredictable factors like economic shifts, weather, geopolitical events, and OPEC supply adjustments. However, long-term trends are shaped by structural changes, such as declining population growth and increasing investments in electric and hybrid vehicles, which threaten oil’s dominance in transportation markets.

The article critiques potential U.S. policy under a future president that may favor outdated technologies like coal, warning that catering to a shrinking domestic market could hinder American industries globally. Addressing concerns about energy demands from AI and data centers, the author argues that tech giants, with combined profits far surpassing the electric industry’s, could afford to invest in private, low-carbon power solutions, rather than shifting costs to utility ratepayers. Ultimately, the piece emphasizes rational, long-term investment strategies over reactionary decisions.