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Joined: 10/7/2004
Posts: 2,126
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Registered User
Joined: 3/15/2005
Posts: 4
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$60 in the short term and much higher for the longer term. Supply is starting to outstrip demand. XLE, IYE and IXE would be a good play on this move. Lots of money flowing into these ETFs at present.
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Joined: 10/7/2004
Posts: 2,126
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Agree Viperdog
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Joined: 3/10/2005
Posts: 28
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Be careful. Oil typically tracks gold with the gold/oil ratio historically around 15. It's currently around 8 - which obviously makes oil very expensive from a historical standpoint. Unless gold rises substantially - to the tune of about $300 which I seriously doubt will happen - oil will, by necessity have to come back to earth eventually to around $25 to $30.
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Joined: 10/7/2004
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QUOTE (robconley) Be careful. Oil typically tracks gold with the gold/oil ratio historically around 15. It's currently around 8 - which obviously makes oil very expensive from a historical standpoint. Unless gold rises substantially - to the tune of about $300 which I seriously doubt will happen - oil will, by necessity have to come back to earth eventually to around $25 to $30.
Before that happens you will see much higher prices. Some already talking of a possible superspike, and Mr. Greenspan has already commented on the very likely event of higuer prices.
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Joined: 12/19/2004
Posts: 415
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I believe that oil is a bull market, albeit it may be in a correction as of now. Historical valuations of oil/gold are difficult to evaluate on a long term basis, since the price of gold was regulated until the 70's, about the time that OPEC geared up and sent oil prices higher.
1. The world has a fixed quantity of oil and gas, no one knows the "real" quantity and many "smart" people have been predicting that we will run out in the "next 20 years or so". That story has been around since the 60's. BUT ,we will run out of it someday, it is not a renewable resource. No one knows for sure when that will happen, although they make predictions. Face the facts not the hype.
2. I am amused by the politicians indicating that the government should release some oil from the strategic supply. Worldwide Oil consumption is in the order of 75 million bbls per day(mbpd)(I'm not sure of the exact figure) would last about 10 days in the world, our own consumption of 20 mbpd would only last about 25 days, of course our own production would stretch that time line.
3. Oil is a very volatile commodity powered by greed and fear at different times, and with China now the second largest consumer and growing, it is quite possible for those prices to be attained.
4. Inflation adjusted the price of oil was about $70/bbl in the late 70's-early 80's when OPEC had the ability to control prices by opening the chokes and producing more to drive the price down. They don't really have the same ability in today's market. They could open and the price would fall to who knows where, but ultimately the price will come back and top todays prices or the inflation adjusted prices of the 70's.
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Joined: 3/10/2005
Posts: 28
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I don't know if I buy the superspike theory. What's going to trigger it? I agree, demand is increasing, but it's been increasing for several years. There is no reason to expect a "spike" in demand. There could be a supply issue - terrorist act, etc. - that could cause a spike. But that's something that even Mr. Greenspan can't predict - let alone you or me. And that's definitely not something on which I'd be willing to wager my money.
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Joined: 3/10/2005
Posts: 28
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QUOTE (bknight) Historical valuations of oil/gold are difficult to evaluate on a long term basis, since the price of gold was regulated until the 70's, about the time that OPEC geared up and sent oil prices higher.
This is my point exactly. Oil prices went higher in the 1970's for one reason - and one reason only - because we left the gold standard in 1971. With a floating dollar eveybody in the world had to react to the extremely higher risk of doing business. The net effect? Higher cost everything. Check it out. Every commodity in the world rose to unheard of hieghts during the 1970's.
Now, fast forward to the last 10 years. Beginning around 1995, the FOMC had a very deflationary policy allowing the dollar to rise considerably. The cost of every commodity - including oil - tumbled during this period. Are you telling me we didn't have similar demand issues then? Around 1999-2000, the FOMC's monetary policy changed and is now rather inflationary thus causing the latest rise in oil and every other commodity.
Everyone seems to think the very slow and deliberate rise in oil demand over the last few years is causing the price of oil to rise. And to a point it has. But the relatively smaller supply/demand cycle rides on top of the much larger cycle caused by factors contributed to the floating dollar.
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Joined: 10/7/2004
Posts: 2,126
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Robconley do not forget the China factor. The demand form China is putting extra stress on the infrastructure and consumption of oil. This was not an issue to the degree it is today back in the 90's. China's currency is also playing a role attached to oil.
I am do not want to elaborate on this, buy I strongly believe that China is in the way to be the next great economic power - US is just of a peak and considering current factors I doubt that there is much upside.
But this may be a debate for a different time.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Already hit the $70/br mark and counting.
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