The simple economics of supply and demand suggests oil will not be back @ $100 soon

Now that the shock of oil under $75 per barrel and gasoline under $3 per gallon has begun to wear off, the debate has shifted to when oil prices will rebound. A look at the economics of supply and demand suggests that the rebound probably won't take prices back over $100 that quickly. Unlike earlier oil price collapses, this time both demand and supply moved and both pushed the prices down.

 The collapse of oil prices, when the global financial crisis morphed into the Great Recession, was driven by plunging economic activity and plummeting oil demand.



























The diagram shows why getting back to the prices seen last summer would require reversing both these moves. The initial picture in the summer was demand marked D1 and supply marked S1 intercepting at A.
Then the supply curve shifted outward to the right, so that more oil would be supplied across the range of prices. Now demand D1 and the new supply curve S2 meet at B, price is lower and quantity is larger. This was followed by a fall in demand which shifted from D1 to D2.
The new intersection is C and prices are further down. Oil consumption is lower at C than B because demand is less. Were supply to completely reverse, prices would move to E, but the price rebound would not be complete. Likewise, were demand to expand and return to D1, prices would not return to A. Only the combination of reversing both these moves could put prices back to the levels seen in June and July 2014.


Source: http://articles.economictimes.indiatimes.com/2014-12-04/news/56723401_1_oil-prices-oil-demand-supply-and-demand