** the oil shock of 2006

Could oil be heading back into the 40s or even lower?

Consider these facts:

1. There have been too many oil bulls recently.

2. Oil appears to have double topped around US$70.

3. 2006 is a US election year. Low oil prices are politically beneficial.

4. Announced US oil stockpiles are at record levels. (Whether the figures announced are correct is another matter. But Big Brother knows that announcing high stockpiles is enough at present to keep the price under control.)

5. Oil prooduction is at record levels. Saudi Arabia has also announced they will be massively increasing their refining capacity.

5. The US had a much warmer winter than usual. Another one that the oil bulls got wrong. Listeners to "Financial Sense" will recall serious predictions of a much colder winter than normal based on the above average hurricane activity. This prediction was way off and of course in the first instance statistically flawed - there were simply not enough past examples.

6. It's less than US$8 to the 40s. Not that far to go. The way oil falls it could only take a week if oil is really hit. Then we might be talking US$30 oil or less. Who knows?

7. Don't forget 1980. We were all told then how the world was running out of oil, that the era of cheap oil was over. All sorts of logical arguments were presented. If anyone then said that 20 years later oil would be around US$10 they would have been told they were crazy.