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I noticed the guys on Leapfrog have recommended a short on oil if its gets to 100...from http://www.leapfrog.it/oil.html

Looking at oil I can't help but think that it is due for a short term correction that could see it tumble to around $70-$80 a barrel. Most would not doubt that the days of $45, $55 or even $65 a barrel are gone but true value less speculation would appear to be around the $75 mark.

According to the IEA, World oil demand is increasing at an average of 2% per annum from:

* 84.65 (mb/d) over 2006
* 86.12 (mb/d) over 2007 (up 1.73%)
* to 88.25 (mb/d) over 2008 (up 2.47%)

It was only in late January this year that oil hit a low of $55 so is oil at $95 or $100 (at $100 = a 81.81% increase) justified?

The oil bulls would argue that peak oil production is within sight but I have heard that argument every November just before oil crashed back to reality.

In actual fact, supply in the U.S. (currently at 311,862t ) as of Nov 02, 07 is 7.33% more than the U.S. had in stock this time five years ago, which was 290,533 on Nov 11, 02. It was also right about this time last year that stocks actually started rising from Nov 10, 06 - 335,973 to Nov 17, 06 – 341,134.

The oil price may well be pushed through $100 a barrel in the next few days or months, but this could be a great opportunity to open a short and or to buy companies most affected by surging prices such as transport companies and airlines etc. Toll Holdings and Asciano just to name a few.

According to the bulls production is running pretty much at full bore, but there remains the capacity for both OPEC and non-OPEC producers to increase supply as signifcantly higher prices boost profits and make harder or more difficult extraction projects feasible.

Sure demand is surging from emerging economies, principally China but this is somewhat balanced by growing evidence of an economic slowdown in the U.S. You can argue that the world's largest oil consumer at present, the US, could make changes to its economy that would result in it using less of the stuff. It could, for example, have a much more fuel-efficient vehicle fleet. The price mechanism is already making that happen.

However, the present climb in the oil price has coincided with rising demand from China who used about three-quarters of the additional supply of oil in the world last year. China may account for all the additional production this year. If China is to go on using all the additional oil that is available, or more, the rest of the world will have to get by with less. This makes the present surge in the oil price different from all previous oil shocks: it is caused by rising demand rather than restricted supply.

One has to question though which has gotten more ahead of itself. The forecast for Chinese and global demand (up 0.74%) or the oil price up 81.81% this year from January lows.