I'm not sure how much these kinds of threads contribute. But for sure it can be therapeutic to read / post. It's nice to see the depth of critical thinking (and knowledge) here. I don't think any rational person with a fair amount of common sense can be satisfied with current oil pricing. For sure consumption behaviors are adjusting. Demand destruction is in play. How the markets react will, on balance, show us all how much todays pricing is really driven by supply / demand issues v.s. out of control speculation / manipulation v.s geopolitical tension. Barron's did a great job in an article in early 2000 outing the dot.com stock incentive share issue. I remember reading it and thinking, holy shit, these stocks are going to crash big time. I'm not sure Barron's recent attempt to draw parallels between the dot.com bubble and oil pricing is a valid comparison. Thanks to the OP and all others who've taken the time to post. Maybe a running commentary is order here as things unfold? So far the Bull case is supported by: Peak Oil Theory. Geopolitical Tension / Potential Supply Disruption. Hurricane Season (US). Global Shortages in Refining Capacity. Demand Growth in Developing Economies. Weakness in the US$. [/list=1] The Bear case is supported by: Demand Destruction / Economic Impacts of Price Action. Increased Producer / Consumer dialog. Investigations into Market Functioning. Producers Increasing Production. Eur/US$ correction? [/list=1] BR/ FreeMarketRider
During the boom, I kept wondering why people would buy something that was valued at 700 times next year's EXPECTED earnings? Like, if everything goes exactly right, it MAY justify its current price? or why a 6-person company with a web-based idea and no sales was valued at $100 million... I didn't ride the boom up or down. I stayed out.
Too bad. We were a 4 person company, with a great web-based idea, some sales and valued around $40million. It never took off, but we all profited handsomely! hehehe, stupid is as stupid does. I may not be a smart man Jen-aaay, but I do know the value my expected earnings.
whatever. you guys dont know how good you have it with your cheap fuel. in the UK we're already paying the equivalent of $11 a gallon at the pump today. If you need to drive, you have to pay whatever the price is.
Good advice for sure. I'm a novice trader, who is returning to markets after a number of years of inactivity. Right now I'm putting time into finding a better approach to markets. This is a great forum for exposure to ideas and concepts, the only requirement here is an ability to sift the wheat from the chaff. There are a lot of successful traders here who us many different approaches. I listed the 6/6 arguements primarily for discussion purposes. I traded about 3 years full time - on a part time basis (I had a work life that offered about 6 months off a year). In the end of that period, my track record was pretty close to break even. My best trades were instinctive ones, but my own distrust of operating purely on instinct is hard to overcome. Here is my own instinctual response to the items I've posted. So far the Bull case is supported by: [*]Peak Oil Theory. Not applicable - just window dressing to justify long big positions taken in oil in the last year or so. [*]Geopolitical Tension / Potential Supply Disruption. A big concern - Between Iran, Israel, and US sabre rattling - This situation could blow up. If the US strikes Iran - Forget about it. I believe todays version of realpolitic could permit this unfortunate outcome. [*]Hurricane Season (US). Things look benign right now, but require watching. [*]Global Shortages in Refining Capacity. This raises product pricing and insures refiner profitibility (ie Crack Spreads) but in the end is price neutral. [*]Demand Growth in Developing Economies. Globalization at it's best. But growth demand only exists as long as these economies can either export profitably or grow internal demand. China holds a lot of $ assets - They have little choice if they want unfettered access to US markets. China's recent price subsidy action suggests they want to lean against the Bull case. [*]Weakness in the US$. Definately a factor in the rise of many commodites. The Fed's choice to defend the financial sector at the expense of inflation (strong dollar policy) will be hard unwind. Expecially being an election year and all. [/list=1] The Bear case is supported by: [*]Demand Destruction / Economic Definately a factor that will play out over the next year. [*]Impacts of Price Action. Chartists will be looking for the "end of the trend". [*]Increased Producer / Consumer dialog. More than anything else this will challenge the underlying trend and will cause many of the recent bulls to exit back month positions. [*]Investigations into Market Functioning. Beyond nailing a few folks to the cross, the greatest risk here will be US regulators killing US oil trading, not global trading. Markets mitigate risk, killing markets raises risk. [*]Producers Increasing Production. They are doing their best, but in this political climate, many producers are happy to punish the US for the Iraq war with high oil prices. [*]Eur/US$ correction? Posts here suggest that Europe is in trouble because their failure at political unity dooms monetary union. I bet the Eur/US$ situation is directly tied to arabian asset diversification. The path of least resistance will be a lower Eur/US$ next year. [/list=1] How would I trade oil? Assuming I had the capitalization - I'd look for an opportunity to short oil (double top, declining open interest). Lack of geopolitical problems & hurricanes vs demand distruction will provide the opportunity. I don't favor options, because my experience with them is limited. I've been told that most pro's use them consistantly to limit trade risk. Buying puts has got to be looking good to those saavy enough to find the best deals. eagle - Thanks for your reply & reality check. I'm here to improve my skills. This thread is about where oil prices are going - For sure down. I certainly don't think $2 gas is a reality, but I'll bet we're in the low $3's this time next year..... BR/ FreeMarketRider
Drive the average distance U.S. drivers do to work, and you'll end up in the English Channel or North Sea.
Oil pricing is a funny thing, retail petrol prices in Europe have been higher than US prices for years. That being said it was not un-common for a 15 to 20 cent US wholesale price excersion to trigger gasoline imports to the US (when freight rates were right). Yep - Lack of a substitute is certainly what has given this market wings. We're all feeling this. The perenially under-estimated capacity is conservation. In the US, national speed limits were reduced to 55 for years to mitigate energy shock impacts. None of our political figures have taken this old page out of the play book yet. But DRIVERS are SLOWING DOWN everywhere. BR/ FreeMarketRider
really hope so, there are too many supporters of oil going higer on this board, that it is old news and really begs the question, why are they supporting all efforts to talk this thing down?