Lets not forget who wags whom, to this date still. If gas prices become too expensive for Wal-Mart shoppers, gas prices will either go down or increase at a much more moderate pace, which is good for stocks in both cases because the stock market has shown that it is willing for now to adapt to continuously increasing oil prices, as long as the pace of the increase is not too fast. There's not much upside for oil and not that much downside for stocks but there's substantial upside for bonds that have demonstrated their strength today. They have been going down in the past few weeks on renewed confidence in the strength of the economy (and the likelyhood of higher interest rates)and are likely to go back up now that confidence is erroding somewhat with high oil prices. Being long Treasury futures/options seems to be the safest bet to profit from the situation that was depicted today.
So uhhh, where are all those profits from shorting the market (other than the oil stocks themselves!)???
Anyone in the camp that we are in an oil bubble. Data seems to suggest the current rise in prices are overdone: eg-US crude inventories up 10% year over year. DS
Oil now down -3.41%, Dow up 0.48%. Now what if the down reverses and closes lower, and oil stays down. Oh my what will the financial media have to say. Oh heck blame in on PPI.
Well I sure didn't get rich off my own call that was right on the money. You can know the direction, know the top\bottem and still not make a ton of money...becuase of overtrading, and trying to catch every wiggle. Anyway, my call stands - oil has gone parabolic if you look at a 20 year chart. More importantly, the retail price of gas at the pumps has gone parabolic if you look at the same long-term chart. And all the sudden, there has been a burst of bearish comments coming from some very powerful people (Greenspan, etc.). And RE has topped as well. Its all downhill from here. Unless governments from all over the world figure out a way to arrest the rise of oil prices - they can do it - if they want to.
Yep. Supply and demand will always discover an equilibrium. It was the low prices (oil in the low teens) that caused many of the capacity shortages we see now. If oil stays here long enough, just about the time people stop driving will be when producers find ways to flood the market.
I totally agree with this. However, oil is the least "perfect" commodity. It's price often has little to do with demand, supply, production costs, etc. But economic law still holds with manipulated markets.