Oil Hit $32 As We Predicted… But This Isn’t The End!

On August 5 last year I forecast that oil would hit $32 or a bit lower by January.

And it’s happened right on cue!

Along with iron ore and coal (down 70%-plus), oil has been one of the worst-performing commodities – down 80% from its 2008 top. And ultimately it’s headed lower, all the way to $10 or $20. I’ve been saying this since oil was $115, and look where we are now!

The reason I’ve been so bearish on commodities, including gold, is simply my 30-year Commodity Cycle. It works like clockwork, which is why I’ve been forecasting since early 2013 that the continued commodity collapse would be one of the key triggers for the next larger crisis. No one else saw it coming, and sure enough it’s turning out to be the next stealth crisis in a global economic turndown – like the U.S. subprime crisis before it.

Falling oil prices might seem pretty okay right now since you’re not paying as much at the pump. But just you wait!

Whatever consumers might be able to save from low oil prices, it doesn’t make up for the devastating net effect to the economy and markets.

Low oil prices basically ensure the demise of the U.S. fracking “revolution” as well as the tar sands in Canada.

These two alone have added six million barrels of oil a day to global supply just since 2009, with another million about to come out of Iran with sanctions being lifted.

How is that supposed to play out with Saudi Arabia hell-bent on wiping these high-cost producers out by refusing to cut production to prop up prices like in the past? Global supply keeps going up while prices and demand are falling.

This doesn’t end well for the frackers, or the U.S. economy. Fracking is a $1 trillion industry – and worse, it’s a bubble industry. The only reason they’re still around is because global QE helped prop up the price of oil and made junk bonds so affordable. Now that the bubble is clearly popping, the frackers don’t stand a chance as they have always been among the highest cost producers! They’ll keep pumping their wells until they run dry because their operating costs are low. But their up-front costs of creating new wells are gargantuan. And with the junk bond market cratering, who in their right mind would give this doomed industry a loan? Nobody!