Cramer says $125, Jim Jubak says $180!!!!!

Discussion in 'Trading' started by S2007S, Apr 22, 2008.

  1. S2007S


    Oil now reminds me of the days of the dot com when they were sticking $1000 price tags on stocks worth no more than maybe $50 bucks, well it seems that price targets for oil are just running wild at the moment which to me is saying there is a top in oil not to far away, well maybe a correction of 20% or more. Funny how all these price targets come about after the fact oil has run up over 800% in about 10 years...its getting really funny now, everyday oil spikes a little higher sending prices at the pump to all time records, it can only last so long before the consumer eventually does grow tired of paying just a tad too much at the pump, people were crying when oil touched $3 at the pump well $4 is here and soon maybe $5.00. Consumers are probably wondering when something will be done to keep the steady rise of oil under control, who knows but a correction is coming for oil, a big one.....

    Why oil could hit $180 a barrel

    Just when crude is becoming more costly to extract and process, producers in three key countries are short of cash. And without that money, recent finds won't do much good.

    By Jim Jubak

    Yikes! Oil at $117 a barrel. It has to go down from here, right?

    Wrong. In the short term -- say, the next two years or so -- we're looking at bad news about global oil supply that could take the price of a barrel of crude to $180.

    Needless to say, today's $3.50-a-gallon gasoline would look cheap if oil prices hit $180 a barrel. At that price for a barrel of oil, gasoline would cost somewhere north of $5.50 a gallon.

    The good news is that's about the price, experts now say, that would send global consumption tumbling and oil prices into retreat, as drivers scrambled to find ways to conserve.

    Of course, experts once thought $3-a-gallon gasoline would lead to a drop in consumption. The latest forecast from the International Energy Agency calls for global oil demand of 87.2 million barrels a day this year. That would be an increase in consumption of 1.3 million barrels a day from 2007 -- despite a U.S. economic slowdown and soaring oil prices.

    So why do I think oil prices will keep climbing for two more years at least?

    A terrible coincidence of geology and geopolitics. Just when oil is getting more expensive to produce, the oil industries in three key countries -- Mexico, Russia and Nigeria -- find themselves short of cash. And without that cash, oil production in these countries, and global oil production in general, is headed into a decline.

    The Russian oil industry, for example, announced that production had fallen 1% in the first quarter of 2008. According to the Russian energy ministry, oil production for the full year could be lower than in 2007.

    Any decline would mark a huge turnaround. Russian production has grown steadily over the past 10 years, and in its supply-and-demand projections the International Energy Agency has been counting on growth in Russian production of 5% by 2012 to offset big declines in older fields in the North Sea and Mexico.

    Continued here:
  2. William Pesek says $200.
  3. Great article - I was just reading it. This is essentially creating a "micro-peak oil" scenario. It's giving us a taste of life when we hit peak oil and it's going to be ugly.

    There is a WSJ article on a new field in Saudi Arabia that is coming on line and the hope is that this can produce 1.2 mn barrels per day and meet the ever-increasing emerging market demand. But noone knows: it requires massive and fine-tuned water injection techniques from Haliburton and other companies and it could easily disappoint.

    Brazil has recently made massive discoveries off their coast but it will be years I believe before that's up and running. (Google on Tupi if you're interested.)

    So all eyes are on the Saudi's. If this fails or disappoints, then Jubak's scenario will imo definitely become a reality..

    And all I can say is I'm glad I own Exxon!
  4. Well think about it. Americans buy more and more SUV's even with record gas prices I see more SUVs not less on the street. This to me indicates that gasoline and oil are still cheap for american consumers. American consumers love to cry poor but still pony up for gas at todays price and still drive those big honking SUVS.

    With india in the next 10 years buying cars from Tata, and China beginning to purchase more automobiles I see oil hitting 200 a barrel down the line in the future.
  5. True, but American is really a nonissue for the next couple of years. Our energy demand has actually fallen off slightly because of our economy. It's really the rest of the world that is requiring increased production.
  6. Speculation is what is driving this, and the dollar collapse. The CEO of Exxon and Saudi Oil ministers have both blamed speculation for this runup. It is the hedgefunds and pension funds doing this.

    There was an article in NY Times today about how speculation in Ag futures by big money is like a "tidal wave" and they are actually buying more contracts than there is physical product! Farmers are actually buying private insurance instead of using futures contracts to hedge. I think the same thing is happening here, big money is buying oil futures contracts.
  7. bob83


    i just wonder at what point the stock market gets smoked when people realize the smart money is in oil and that every corporation is overpriced as the assumption of cheep oil changes...
  8. S2007S


    The dollar collapse has added probably about 40-50% of the gains in oil over the last 1-2 years, everyone was happy for those rate cuts back in the end of 2007 but you can now see what those rate cuts have done, its the worst thing bernanke could have done to this economy, anymore rate cuts and oil could easily surge to 130+....until they find a way to prop the dollar back up oil will most likely continue to climb.....
  9. S2007S


    irrational markets dont care about $100 oil, $105 dollar oil, it probably wont care about $150 oil either, on cnbc there was fool who said high oil prices are actually good for the economy, I forgot who it was but if I find it I will post it, it was on the program a few days ago.
  10. bob83


    i think eventually people have an 'eureka' type moment where they realize that all these company's business plans are modeled on gas at 40 $ a barrel, and that at 3, 4, or 5 times the cost models can fail.
    #10     Apr 22, 2008