It's official: The Oil Boom Is Over

I am seriously considering joining ziggy's noble quest for lower commodity prices, might buy something like 25 shares of USO, the $105 price is very attractive.
 
I feel confident Iran will do some chest thumping and shoot a missile to get oil back up.:rolleyes:.
 
Very interesting article on Mexico hedging its bets on the price of oil. They're essentially looking to sign contracts that would guarantee oil to their customers for several years at today's prices. There's only one reason they'd want to do that: they feel oil has peaked. Whether they are right nor not, we'll see.

Some oil producers see now as time to sell - Jul. 17, 2008



And NotMuchLonger, I agree. That is quite a racket Iran has going. Prices dip a little, just shoot off a rocket to create tension to increase the price of oil.
 
When I saw car companies offering the 3 year $2.99 gas cards bundled with their cars I figured a whole lot of actuaries spent a whole lot of time determining that 2.99 would be the average or higher than the average price of a gallon of gas for the next 3 years.
 
cute fuzzy bunny said:
When I saw car companies offering the 3 year $2.99 gas cards bundled with their cars I figured a whole lot of actuaries spent a whole lot of time determining that 2.99 would be the average or higher than the average price of a gallon of gas for the next 3 years.
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The bottom line is that "selling security" to people is subject to the same laws of supply and demand as any other product or service.

When people are freaked out about their future, that's when they are likely to put a huge demand on products selling certainty and security for the future. And that's when the most money is made for people willing to assume the risk because they can charge a higher risk premium than usual.
 
ziggy29 said:
The bottom line is that "selling security" to people is subject to the same laws of supply and demand as any other product or service.

When people are freaked out about their future, that's when they are likely to put a huge demand on products selling certainty and security for the future. And that's when the most money is made for people willing to assume the risk because they can charge a higher risk premium than usual.
Click to expand...

Insurance salesman?
 
cute fuzzy bunny said:
When I saw car companies offering the 3 year $2.99 gas cards bundled with their cars I figured a whole lot of actuaries spent a whole lot of time determining that 2.99 would be the average or higher than the average price of a gallon of gas for the next 3 years.
Click to expand...

or they just hedged by buying futures or sold the cars at a price that would cover the gas costs
 
CitricAcid said:
Insurance salesman?
Click to expand...
Could be. And it's exactly the time you'd expect to see someone pushing annuities. With a lot of people worried about their falling 401Ks not surviving their retirement, what better time to sell [-]a crappy high-fee and low-return[/-] "an income stream you can't outlive" annuity than when you can prey on fears about the market and the security of their retirement?
 
Just checked and oil is down another five bucks today. Ziggy, you're my hero.
 
cute fuzzy bunny said:
I think its going to go a good bit lower and then stay there for a while...
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Boy, wouldn't that be wonderful. Stock market would have a good chance to rally and as a result, give some of us chickens a chance to trim back our equity positions. Also give me a chance to re-enter my natural resource fund at a decent price along with giving us all a break at the pumps!:) Only problem, just sounds too good to be true.:-\
 
cute fuzzy bunny said:
Eh, we'll see. I'm pretty sure we'll go through $100 and might even hit $80.
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Wow - you're confident! I'll be really shocked to see oil go below $100.

In fact, if it does go below $100, that might be because we are in a really, really bad recession, and I sure don't hope for that outcome.

Audrey
 
We need to set a standard when we will proclaim ziggy's power very influential and as such be elevated to our savior. Is a 15% drop satisfactory? I think right now it's at -8.8% or so since he said he bought, I am tracking this with great curiosity. If USO breaks through $100, his karma will be outstanding.
 
cute fuzzy bunny said:
So far I havent really seen any concrete reasons for it to stay over $100 long term. I'm more surprised it went as high as it did.
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I agree with CFB. I have some insights into the oil market and there is nothing that resembles a shortage. There is plenty of oil on the market. Saudi Arabia is correct that they are meeting all of the demand. There has been an immense amount of "risk" factored into the price. This risk premium is driven by the speculators and hedgers.

BTW, the weekly oil inventory reports are meaningless. The changes of several million barrels is a very small percentage of the total inventory of crude, gasoline or distillates. Every manufacturer is trying to minimize their working capital so the want these numbers to be as low as they can get them and still run their business. Now I would worry if a big refinery announces that they are cutting crude runs due to supply issues not related to maintenance or weather.

The big oil companies are doing their longterm investment plans with numbers in the order of $40 to $60/BBL. They wouldn't drill a well that needed $100 oil to payout.
 
I guess one reason for oil to drop big time would be that the US dollar finally starts to rise. Now that would be good news all around!

Audrey
 
I know there are a lot of factors involved in pricing at the pump, but the price on the corner ($4.29) is not going down at all yet although of course it went up in concert with oil prices. That drop will signal to me on a personal level that the oil boom is over....
 
cute fuzzy bunny said:
So far I havent really seen any concrete reasons for it to stay over $100 long term. I'm more surprised it went as high as it did.
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You, me and just about everyone else have been thinking that, but it kept going up. I would love to see it go sub-$100, but I've lost any confidence I had in my ability to predict the price movements short to medium term.
audreyh1 said:
I guess one reason for oil to drop big time would be that the US dollar finally starts to rise. Now that would be good news all around!
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That would be sweet. I'm not a technician and only do charts in kind of a big strokes way, but looking at the USD index I see that it stopped it's plummet a couple of months ago and has been sort of bobbling around with two shots at going higher. What's that old saying, there's no such thing as a triple top or bottom?

I would love to see the combined moves of the dollar going up and oil going down, but I worry that those would be short term moves. Long term, I think oil is going to be plenty expensive, and I see a lot of resistance to the dollar being as healthy as we would like.
 
I think you're going to see a rising dollar, dropping oil, a rising US stock market, and lowering inflation.

We'll all live happily ever after, enjoy delightful dreams and long lazy summer days that last 25 hours a pop.

And we wont hear from anybody about how the sky is falling at least until the next mini bear market...
 
cute fuzzy bunny said:
I think you're going to see a rising dollar, dropping oil, a rising US stock market, and lowering inflation.

We'll all live happily ever after, enjoy delightful dreams and long lazy summer days that last 25 hours a pop.

And we wont hear from anybody about how the sky is falling at least until the next mini bear market...
Click to expand...

Man after reading that. I can come out of the bunker and sleep well tonight!
 
If you see a prediction that makes you feel uncomfortable because of your recency bias, then just maybe you should take it seriously. It wasn't that long ago that predictions of $80 oil seemed way out there. Now some of us are having a hard time believing in sub-$100 oil. I haven't seen any good data that would convince me of any particular price for oil. All the news seems to be filled with what's going to budge it up or down -- those Nigerian guys (especially the ones with the web scams) must be having a good laugh at us.

I recall that during the dot-com craze some analyst said that Cisco was going to have a few problems, something about inventories I think. This was met with howls of disbelief. Too many were convince the momentum would last forever. The analysis was sort of missing in much of that era. Seems there are parallels with commodities today.

Perhaps stocks will end the year overall on the plus side. It happened in 1987 despite the crash.
 
lsbcal said:
If you see a prediction that makes you feel uncomfortable because of your recency bias, then just maybe you should take it seriously. It wasn't that long ago that predictions of $80 oil seemed way out there. Now some of us are having a hard time believing in sub-$100 oil. I haven't seen any good data that would convince me of any particular price for oil. All the news seems to be filled with what's going to budge it up or down -- those Nigerian guys (especially the ones with the web scams) must be having a good laugh at us.

I recall that during the dot-com craze some analyst said that Cisco was going to have a few problems, something about inventories I think. This was met with howls of disbelief. Too many were convince the momentum would last forever. The analysis was sort of missing in much of that era. Seems there are parallels with commodities today.

Perhaps stocks will end the year overall on the plus side. It happened in 1987 despite the crash.
Click to expand...

Whats scary.. Is I really don't know. To me oil going to 200 is just as probable that it hits 50. Thats how ignorant I am. Im working on it though :)


I know the ignorant part must surprise a lot of you.. ;)
 
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