Old paradigm analysts cannot fathom a reality in which oil demand adjusts to supply limited by investors who see a finite future for oil.

Analysts who beat the drum about under-investment and say like Goldman’s Jeff Currie that “there’s no supply increase in sight”, either aren’t paying attention or are too busy pitching their own bullish book to care.

The problem with under-investment and super-cycle arguments is that the market has to be wrong for them to be right. I’m not predicting an imminent collapse in oil prices. I am saying that higher for longer seems like an improbable outcome based on what we know today.

If oil is going to $100 as some think and others hope, inflation will soar. If that happens, I fear for our fragile economic recovery and for oil demand.

Falling inventories are an artifact of OPEC+ export cuts and not a sign of under-supply. The present reality is that the world appears well supplied for 2022. Prices rarely increase when supply seems adequate. Markets are smarter than that.

The good news is that well performance increased before the Covid collapse in March 2020. The bad news is that as rig count and completions recovered, production has stayed flat or decreased somewhat.

When Jeff Currie says that $4 or $5 gasoline is not a problem because the economy is strong, I’m sure he’s right for Goldman Sachs’ clients. I doubt he talks to the second economy in the UK where he works. I wonder if his company isn’t already shorting oil.