The fundamental demand supply equation that you are talking about would fix the price of oil around $55 per barrel but oil was touching $80 and was bound to come back. The reasons are speculative money leaving after waiting for the bad geo political news or hurrican news, that never happened. The media actually says that oil is comign down as investors focus back on fundamentals of oil price and not on speculative geo political moves or hurrican forecasts. Nobody cares what that clown Ahmadinejad said in UN anymore. The focus has shifted.
The problem with high oil prices is that once people make arrangemnets for the high oil price, they don’t necessarily go back once the price comes down. e.g. I wouldn’t sell my hybrid, people won’t remove inuslations from homes, corporate fleets will not sell the hybrids they have bought for commute and R&D money spent by Ford/GM/Toyota to increase mpg won’t go down. This is why high oil prices are actually dangerous for OPEC.
The biggest factor though is that oil is down because of fear of expected slow down in US and maybe global economy. That is why I was surprised to see oil move up today. Maybe it was tehcnical.
