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I guarantee that the price of oil will drop today, but... (The Oil Nonbubble)

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May 13, 2008 – Comments (8)

I can virtually guarantee that the price of oil is going to drop today.  How can I be so sure you ask?  Because I am going to talk about how I believe that high oil prices are here to stay and that they will eventually head higher from here :).  According to Murphy's law, whenever I make a bullish statement like that the price of whatever I was talking about will temporarily drop.  For a number of months, I was one of the lone voices who disputed the fact that we are in a commodities bubble.  Some people are still staing that, but the media has backed off of that prediction and is instead hyping the current astronomical rise in the price of oil.  Here are a few of the pieces that I have written on the subject:

- Barron’s is Wrong Series Post 4: New ethanol plants and declining oil production in major countries support the prices of food and oil

- Barron's is Wrong Series Post 2: Increasing Consumption from Emerging Markets

- Barron's is wrong, the price of corn is going up (alternate title: the Government's Nuts) 

- Corn and Soy Bean Prices are Headed Lower…for Today

- Commodity Prices are Headed to the MOON!!!!

There's a bunch more, but you get the idea. 

Anyhow, the point of this blog post is to mention a good New York Times OpEd article by Paul Krugman on the subject that was written the other day.  Here's a link:  The Oil Nonbubble.  He basically states that analysts have been stating that there is a massive oil bubble since oil hit $50 per barrel in 2004, but "the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China."  He basically believes the same thing that I do, that oil prices may very well pull back in the short run...possibly to even less than $100 per barrel, but that over the next several years the price of oil (and I personally believe natural gas as well) are headed higher, possibly dramatically higher.

 

Deej

8 Comments – Post Your Own

#1) On May 13, 2008 at 10:02 AM, AnomaLee (28.71) wrote:

Welcome... I'm glad you decided to hop on the train.

Now, I am starting to worry if oil will be $90 a month from :)

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#2) On May 13, 2008 at 10:20 AM, TMFDeej (99.31) wrote:

I've been on the oil train for a while, AnomaLee.

Deej

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#3) On May 13, 2008 at 11:34 AM, madcowmonkey (< 20) wrote:

Natural gas will be on the rise, because they will be using it to heat the oil shale and oil sands projects that they have thrown so much money at. Oil will stay up because of built up demand, cost to produce, and the fact that it is getting more and more costly to produce the amount needed. Investors are making fortunes on oil, rightfully so, but my only hesitation is that a viable alternative will be pushed off to the side, because people are in love with their money. Where does this leave us in 20 years?

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#4) On May 13, 2008 at 11:41 AM, LordZ wrote:

Yeah keep guaranteee ing nonesense meanwhile I'll simply smile and watch my oil money grow...

OIl drops but while turn higher and higher and higher till people start to cry Uncle... and it wont stop... no matter how much you scream..

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#5) On May 13, 2008 at 1:04 PM, TMFDeej (99.31) wrote:

Ahhh LordZ, did you even read my post?  I think that oil is going up.  Why are you so angry, condescending, mean, racist, etc... in your messages?

Deej

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#6) On May 13, 2008 at 3:05 PM, madcowmonkey (< 20) wrote:

Deej, don't take it to heart. Z was out in the sun catching some rays and couldn't read your post from the glare:)

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#7) On May 13, 2008 at 9:33 PM, CBeeks1984 (< 20) wrote:

Never guarantee a one day price swing in any commodity unless you have the crop report ahead of time.

 

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#8) On May 14, 2008 at 6:53 AM, TMFDeej (99.31) wrote:

Ha, great username CBeeks.  Do you have any good orange juice futures tips for me?

- The Duke Brothers 

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