Oil hit $100/barrel today. Why? Oil inventories are plummeting. Could this be the beginning of the hydrocarbapocalypse (Note: I invented that word)? Probably not, but it could be our first taste of it (beating my original July estimate by ~6 months). I’m going to explain why but first here’s a graph to better illustrate my points:

There’s two things that are scary about this graph and the price of oil reflects it pretty accurately: First, the “norm” of oil inventories rising briefly in November never happened this year. Second, the weatherman is predicting one heck of a cold winter for much of the U.S. and we’re already burning oil more rapidly than normal (we typically have a slow decline in oil inventories between December and March).

So here’s my prediction for the next few weeks: If the inventories continue to fall at the rate in this graph, the price of oil will likely hit $120/barrel in two weeks. If after two more weeks inventories continue to decline investors are going to freak and we’ll start seeing $200/barrel by the end of January. However, at some point during this crisis (depending on the intelligence of the President) the U.S. will likely try to counter the problem by releasing oil from the Strategic Petroleum Reserve. This will cause inventories to rise back to their historic norm which will be immediately followed by OPEC announcing slightly increased production at the beginning of February. The resulting “normalcy” of things in March will bring the price per barrel back down to the $100 range.

During this time frame it is likely that the U.S. Congress will do something meaningless that SOUNDS like it might help—such as passing legislation that allows drilling in the Arctic National Wildlife Reserve (ANWR). Any increase in oil production from such a law being passed would take decades to bear fruit and the media will be nearly silent of this fact.

I still hold that the real hydrocarbapocalypse will kick off on the weekend of July 4th this year.