Oil - is it moving towards a bubble
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Tadpole
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Different energy stocks are not all the same. But if you look at the chart of Chevron at the link below, you will notice that it is still off it's 2007 highs a bit and is subject to spikes and valleys right now. Also, during the last economic downturn, it reacted to the slowing of the economy. I think it is inevitable that as we talk about getting out of Iraq, the price of oil will decrease unless bigger unrest occurs. I'm look for an opportunity to unload some of my CVX before the capital gains rates go up but I must admit that I might invest the gains back somewhere in the energy sector. If I did this right now I'd have over 700% gains/reinvested dividends since I inherited the stock, most of that in the last few years.
CVX
CVX
who knows
i was watching Fast MOney on CNBC last night and they said in the 1970's oil went up lik 1800%. so far it's up only 300% in this decade. so if we are going to be in stagflation like all the talking heads are saying than we have a lot more for oil to go up
i was watching Fast MOney on CNBC last night and they said in the 1970's oil went up lik 1800%. so far it's up only 300% in this decade. so if we are going to be in stagflation like all the talking heads are saying than we have a lot more for oil to go up
freebird5825
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
ah...memories of odd/even days in the 1970s in gas lines just north of NYC just fired in my brain. at least i got to ride in my mom's 1969 Mustang.
did anyone else do the odd/even day (license plate) thing back then or was it just limited to large cities?
did anyone else do the odd/even day (license plate) thing back then or was it just limited to large cities?
W2R
Moderator Emeritus
I don't recall, but they did the odd/even license plate thing in San Diego. Even so I remember waiting for hours in gas lines with my baby in the car with me (must have been around 1979?). Ugh.
ziggy29
Moderator Emeritus
It already is in a bubble. There's always irrational exuberance somewhere. When one bubble pops, the hot money looks for the next thing to chase.
First it was tech stocks. That popped and it went to real estate. That popped and now it's commodities. The question is, what gets hot when commodities pop? Tulips?
First it was tech stocks. That popped and it went to real estate. That popped and now it's commodities. The question is, what gets hot when commodities pop? Tulips?
I do believe there is a commodities bubble forming. I also believe oil is a bit different.
As oil is a finite resource and I believe we either have reached, or will reach (within 2 years) a point where the world can't produce any more oil any faster than it already is. Add to that the ever increasing demand from developing nations and I don't see any crash in oil prices.
Sure, the prices may go down 10% to 15% in the short term. But year over year I suspect we will continue to go up until we get a widespread alternative to oil.
As oil is a finite resource and I believe we either have reached, or will reach (within 2 years) a point where the world can't produce any more oil any faster than it already is. Add to that the ever increasing demand from developing nations and I don't see any crash in oil prices.
Sure, the prices may go down 10% to 15% in the short term. But year over year I suspect we will continue to go up until we get a widespread alternative to oil.
Yes, I remember doing that. I was fortunate to have a county car so I only filled up my own car about every two weeks.
ziggy29
Moderator Emeritus
I agree that we're in a long-term uptrend given a finite resource, increasing demand and increasing population. But at the same time, fundamentals come nowhere near justifying $105 oil. I don't even think they justify $75 oil.
There are plenty of reasons why many commodities are in a bull market, including the plunging dollar. Nevertheless, I think they're pretty much all way ahead of themselves in irrational exuberance.
amy5708
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Yesterday I heard an OPEC report on the tube that stated they are keeping supplies low because they want to enjoy the 60+trillion profit made last year off oil.
The sheiks are certain that the bust in the US will severely diminish their profit this year, as the result could decrease barrel prices as much as 70% in the coming years.
The sheiks are certain that the bust in the US will severely diminish their profit this year, as the result could decrease barrel prices as much as 70% in the coming years.
ziggy29
Moderator Emeritus
Indeed, it's the last 10% of marginal demand that probably results in 50% of oil's market price, which is based on the "final barrel." If that 10% of demand vanished, prices would fall off of a cliff.
I think a bust of 70% is overstating it, but a popped bubble dropping 30-50% is certainly foreseeable. Still, the long term trend is inevitably up.
REWahoo
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Yes, yes, and yes. I predict a decline of somewhere in the neighborhood of 30-40%, then it will start back up again. Ridin' the crude roller coaster...
Khan
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You (and many others) are assuming there is one; just waiting to be revealed/discovered by Yankee ingenuity/unfettered capitalism/Science/...
I don't think so.
ziggy29
Moderator Emeritus
Maybe, maybe not. A lot of people never thought we could go to the moon or split the atom.
And many of the technologies we enjoy today would have been dismissed as a pure fantasy 100 years ago. Never say never.
HFWR
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It will be solved, one way or another...
Will take massive mindshift, or maybe massive dislocations.
Independent
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I'd say that if modern human society and science last for another 100 years, we'll find good, new sources of energy.
However, over my lifetime, any replacement for oil is going to be significantly more expensive that oil was in 2000. We're going to see "high" prices for a long time.
The reasoning is that we've known that oil is a finite resource for a long time, there has been plenty of incentive to find something better, but we haven't found anything yet. Therefore, it's likely that there isn't anything in the near term.
The technologies already exists. It is a matter of the technologies ramping up to replace oil that is the question, not if the technology exists.
Some areas are also easier to replace oil in than others. For example, passenger vehicles can run on electricity. However, long distance travel is not possible with todays battery technology. So batteries and oil each have their role to play with today's technology.
If I lived in a warmer climate so I could drive a roadster year round, I would have purchased a Tesla Roadster and been driving one later this year. All electrical cars are certainly possible and are starting to make their presence known.
Rustic23
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The Wall Street Journal Online - Extra
While this is a 2005 article, it points out the problem with oil. If it only cost $5 a barrel to produce, then $100 a barrel would seem like a bubble. While demand in China and India is increasing, it does not seem reasonable it could have increased at the rate of the price of oil.
While this is a 2005 article, it points out the problem with oil. If it only cost $5 a barrel to produce, then $100 a barrel would seem like a bubble. While demand in China and India is increasing, it does not seem reasonable it could have increased at the rate of the price of oil.
ziggy29
Moderator Emeritus
Right. I don't see any one thing "replacing oil" in my lifetime. I do, however, see several technologies each forming a partial replacement.
Plug-in hybrid cars are a perfect example. A pure electric car is impractical because of limited range of batteries and the hours required to recharge them (as opposed to the five minutes to refill the gas tank). But when usage includes a lot of short trips in town and short daily commutes, it seems like a good partial solution. (Of course, we still need to generate the electricity from something, but in general that's far more flexible and somewhat more renewable.)
Exactly!
Heck, even hydrogen will have a role... someday
That is one of those technologies that has a long way to go. But batteries seem to finally be reaching the level they need to for many. Now they just need to get them into production.
Switchgrass ethanol is another good technology. Corn based ethanol really won't work well. But once we get switchgrass to be economical that will open another alternative.
As for the cost of pumping oil, I think $5 is far to optimistic. It may have been that at one time. Or it may only be that if you only consider the pumping cost. However if you include the cost of finding the oil and pumping in tough to get to areas (deep water rigs, sideways drilling, etc) I suspect it is a lot more.
Heck, even hydrogen will have a role... someday
That is one of those technologies that has a long way to go. But batteries seem to finally be reaching the level they need to for many. Now they just need to get them into production.Switchgrass ethanol is another good technology. Corn based ethanol really won't work well. But once we get switchgrass to be economical that will open another alternative.
As for the cost of pumping oil, I think $5 is far to optimistic. It may have been that at one time. Or it may only be that if you only consider the pumping cost. However if you include the cost of finding the oil and pumping in tough to get to areas (deep water rigs, sideways drilling, etc) I suspect it is a lot more.
they had a guy on bloomberg last night saying he thinks oil should be only $50. he is some fund manager specializing in energy.
personally i think that for oil to hit bubble territory you need to have a chart like nasdaq 2000 or taser from a few years ago. the last leg needs to be a line almost straight up in a very short time frame as people put money in there based on emotion and not fundamentals
personally i think that for oil to hit bubble territory you need to have a chart like nasdaq 2000 or taser from a few years ago. the last leg needs to be a line almost straight up in a very short time frame as people put money in there based on emotion and not fundamentals
Rustic23
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If you read the WSJ article you will see the problem with alternate technologies. Just about the time you crank the hybrid/hydrogen/solar you name it cars, the oil producers can reduce the price of oil to say $20 a barrel and still be making 3 to 4 times what it cost them to get it out of the ground. All of a sudden gas is back to $.50 a gallon and the guy holding a $3.00 a gallon alternate technology Vachel is going to scream.
The price spike and gas station lines were because OPEC cut off the pipes in 1973. OPEC doesn't have as much control as they did then.
Crude Oil (constant dollar)
With 2 billion Chinese wanting cars, I don't think we'll ever see oil at $20 again.
chinaco
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On the bubble item. I think oil is overvalued. Not sure if it is in bubble territory yet. But it is being bid up along with gold.
On replacementfuels, I think more ethanol and bio-diesel. Plus we have plenty of coal. Gasoline prices are rapidly getting to the point where some form of ethanol might make sense. DOE has hopes on switch grass.
Excuse me but... F*** OPEC. I would rather spend my money putting Americans to work producing alternative fuels. Even if oil should be $50 a barrel. It is time to move away from it. If the put the two Iraq war surcharge and all of the other problems in that area of the world... It is probably $200/barrel.
It is time we make a major move. So far GWB has allocated some lip service and some funds... but he is not approaching it with a sense of urgency. He went to beg the Saudi's to increase production so a Republican would get elected... you can see their response.
On replacementfuels, I think more ethanol and bio-diesel. Plus we have plenty of coal. Gasoline prices are rapidly getting to the point where some form of ethanol might make sense. DOE has hopes on switch grass.
Excuse me but... F*** OPEC. I would rather spend my money putting Americans to work producing alternative fuels. Even if oil should be $50 a barrel. It is time to move away from it. If the put the two Iraq war surcharge and all of the other problems in that area of the world... It is probably $200/barrel.
It is time we make a major move. So far GWB has allocated some lip service and some funds... but he is not approaching it with a sense of urgency. He went to beg the Saudi's to increase production so a Republican would get elected... you can see their response.
