Oil $20 longer term ?

Discussion in 'Trading' started by Shooter McGavin, Jan 28, 2013.

  1. Before you think I'm crazy, hear me out :)

    Admitting it's a controlled market (which one isn't)
    Do the old Ben Franklin T (plus on one side minus on the other)


    1. USA just discovered the "Saudi Arabia" of oil (shale)
    (Nat Gas fell to $2 from recent dicoveries)

    Other finds - i.e. deep water off S. America, etc.

    2. Alternatives: Solar, Wind, Nat. Gas, etc.

    3. New CAFE standards

    4. Alt. Fuel vehicles

    5. Global warming


    1. Whole world is driving more vehicles, flying more planes, etc.

    2. As price declines exploration will decrease

    3. Controlled market - but supply can only be cut so much before vol.
    decreases cut into OPEC earnings.

    Admittedly this is a simple analysis. But, if supply increases as demand decreases, price declines. (I know, I know, econ 101)

    What's long term ? Good queston.
    It won't happen overnight (obviously) but we used to use horse and buggies too.

  2. rt454


    The question is, how are you going to trade your analysis?
  3. Either on the short side in oil directly (USO)

    Or short oil/oil service stocks

    Or on the long side with alternatives, i.e solar, etc.

    or beneficiers, i.e. airlines.

    Couple ideas, but easiest prob. puts on the USO.

    Timing is the issue, just something to keep on the sceen to look for.
  4. Even if a company got land for free and paid no taxes or land fees, the cost of paying people to extract the oil plus equipment would cost more than $20 alone, you country bumpkin. Without a massive unforseen catalyst, I don't see oil staying under $60 for any extended period of time, ever.

    Tough to predict where it is going. Bouncing around in the $75-$115 range short to medium term. Higher from there. I do not see absolute demand decreasing, but increasing slowly over time, notwithstanding other energy sources.
  5. Country Bumpkin ? Nah. Redneck !! (lol)

    Wasn't too, too long ago it was below $20.
  6. And ... you know what they say about opinions, they're just like something everyone else has. :0
  7. In number of years, yes, it is within memory. So gold was $400 per ounce not long ago and I can remember when I could buy a dream home for $800K 16 years ago, which is now $2.5 Mil

    Doesn't mean any of those things are going back to prices of the past. Even taking into consideration other energy sources increasing in importance, the energy demand worldwide for oil will still increase. When some folks thought the world was coming to an end in 2009, oil touched the mid-thirties for a short duration, then bounced. Oil is highly correlated to inflation. What type of catalyst do you think we need for oil to be permanently at $20? Without an almost apocalypse type of scenario, it ain't going to happen.
  8. Nothing stays anywhere permanent.

    And markets ebb and flow

    and if someone drops a nuke in the straits of Hermous (sp?) all bets are off


    With all the forementioned dymanics in play, Oil can't not trend down
    long term.

    And yes, as the price drops, more oil will be used, so it won't be a
    strait shot down, it will actually be a boon for the world economy.
  9. Plus going long most alternative evergy stocks was historically a bad bet. Most of them are not viable without large government subsidy. I would do the opposite of what you recommend. Long oil, plus if you want, a hedge of short alternative energy.
  10. With all due disrespect, most of what you are writing does not make sense. Oil use is not dropping, only increasing. In volume and in price.
    #10     Jan 28, 2013