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July 29, 2008

Oil will NOT be $78 a barrel

I don’t care what OPEC President Chakib Khelil claims.

Khelil is right that geopolitical tensions have some influence on oil prices. But not that much.

As I blogged recently, Iran issues probably add about $10/bbl to oil’s price and Nigeria another $5. You could throw in another $10 for invading Iraq and $5 for increased US military use of oil and that still only gets you down to $95 from the actual price of $125, and I suspect I’m crediting too much to Iraq.

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