Betting on a fall in the price of oil

If I weren't such a chicken, I'd go with #3. I've said before on this blog that oil won't stay above $100/barrel for long. I don't have a fancy model, just an intuition that there's plenty of oil out there in costly to extract places where extraction costs -- although well above Saudi levels -- are also below $100/barrel. It's a matter if doing the engineering. And then there's the factor energy saving technologies, and development of alternative energy sources.

By the way, I think it's kind of neat that the Iraqis sat on their oil, selling so little of it when prices just a few years ago were a fifth of what they are today. It's good to see them getting in now that prices are good.

And, while we're on the topic of the high price of oil, Carpe Diem points out that it isn't really all that high. Oh, and don't blame the speculators.

Addendum: Martin Feldstein explains why a price jump can happen today even if there is no change in current supply and demand conditions.