Will oil price ever come down?

[Spanky]

Oil price per barrel is over $60. Will we ever see an end to the increase?
It may be time to beef up your energy stock holdings.

 

[wildcat]

I have no idea where oil is going...wish I did. Everyone has something different to say, even some smart investors are saying it's going higher. I hate to buy anything at the time but earnings should be pretty strong for the sector. Been looking at iShares global energy ETF but haven't taken any action.

 

[ShokWaveRider]

What gets up my nose is, that the price of oil directly affect my spending in more ways than one, Gas, Heating Oil, Electricity, etc. Not to mention the cost of transportation etc. etc.. Well that is not what actually gets up my nose, but the government insisting that inflation is low does.

Have you seen the amount of trucks on the road lately? They seem to be procreating, and what do they run on.... fresh air? What do they deliver? Surely not groceries or durable goods?

And.. what do those big container ships run on that bring all those goodies to the continent? (Canada and USA). I bet it is not pancake syrup? The list goes on.

OK., why does the government not fess up and say inflation is out of control with relationship to Oil products and related services, then make a better effort to curb it. Instead of kidding everyone and the market that all is well and dandy.

BOUNCE............ Off Soap Box.

SWR

 

[charlie]

Eventually the price of oil will influence the price of everything we buy,
eat, make, consume or drive. It takes a little time for the price of energy to percolate through the economy, but it will.

Another sour note was featured in the Dallas Morning News today.
They stated that the restaurant industry is starting to feel the
competition for workers and they are adding more perks to entice
new hires........ that will translate into more wage inflation and
higher prices as well if the trend continues with other industries.

IMHO, higher inflation is on the way but I fear the economy will
be cooling off soon. Maybe these two forces will offset each
other?

Right now I am betting that higher inflation is coming with my
commitment to "floating" rate bonds paying 2+% plus CPI. I
am offsetting this bet somewhat with a 5 year CD ladder at
PenFed.

It's a crapshoot kids. Keep diversified and keep your power dry.

Cheers,

Charlie

 

[OldAgePensioner]

Charlie,
I'm thing of a CD ladder with 1,2,3,4,5 and rolling into fives each year. Are CD's a pain in the butt when redeeming? I bought one in Florida in 1982 (got the actual CD paper) and when I tried to redeem it from overseas, they said I had to go to the branch where I bought it.

When you buy yours will PenFed issue them to you or just set up an account?

 

[wildcat]

Charlie -

I think you are right on with your inflation thinking...I think we know the CPI ain't everything and the Fed's "don't worry be happy" attitude towards inflation is not accurate. High oil prices is never good either.

 

[charlie]

Hi OAP,

I am only on the 3 year rung of a 5 year ladder.  You can set up
the CD to reinvest automatically for the same term, or be
deposited in either a share account or a MM account with
Penfed.  You can also request a check be mailed to you.

You can also request the dividends be either reinvested in the
CD or mailed as a check or deposited in a share account or MM.
I am planning to spend the dividends so they are being deposited
in my MM account (you can write up to 4 checks/mo).  This
reduces the return from 5%APY to 4.88%

I chose to have the principal be invested in a MM account at
maturity.  When the CDs mature I plan to roll each one into
a 5 year maturity to be automatically reinvested for 5 years.

Getting all 5 rungs invested is a relatively long range project.
(1-3 years) depending on when I sell my laundromat and
how fast I choose to liquidate my Wellesley account.

This is taxable money for me.  If you want to rollover to an
IRA account you can put your money in 7 year CDs with the
privilege of canceling with no penalty and reinvesting in
a higher rate CD IF you are 59.5 or older.  What a great deal.
Inflation protection on the upside and 7 year rate protection
on the downside.  I am thinking about transferring some of
my IRA to do just that.  

Cheers,

Charlie

 

 

[cute fuzzy bunny]

Considering oil is essential for things like roadmaking materials, some prescription drugs, and fertilizers...you can bet theres going to be some non obvious price hikes.

 

[Bookm]

Considering oil is essential for things like roadmaking materials, some prescription drugs, and fertilizers...you can bet theres going to be some non obvious price hikes.

Just read an article where some states transportation departments are planning on foregoing roadway projects due to the oil costs. Obviously it's not cheap filling those mammoth trucks and earth-moving vehicles, they just sit there and idle all day. And I would guess they use some form of oil-based product in the asphault mix. Not a good sign for areas in need of a remedy from the increased traffic congestion.

Bookm

 

[Spanky]

IMHO, higher inflation is on the way but I fear the economy will
be cooling off soon. Maybe these two forces will offset each
other?

This is called stagflation -- Inflation combined with a downturn in the economy.

 

[Whakamole]

I posted this is another thread...

http://www.morganstanley.com/GEFdata/digests/20050616-thu.html

Oil may be overpriced.

 

[BUM]

I can't see buying oil equities now. I think hope that train has left the station. Natural gas is another story. Its lagging oil a bit and some think that nattie is poised for a 10-15% increase.

http://www.wtrg.com/daily/oilandgasspot.html

Even though its only about 1% of my port. I still like MARPS. Always a buy under $25

 

[ShokWaveRider]

Hi OAP,

I am only on the 3 year rung of a 5 year ladder. You can set up
the CD to reinvest automatically for the same term, or be
deposited in either a share account or a MM account with
Penfed. You can also request a check be mailed to you.

Getting all 5 rungs invested is a relatively long range project.
(1-3 years) depending on when I sell my laundromat and
how fast I choose to liquidate my Wellesley account.

Cheers,

Charlie

Charlie:

Assuming you have a lot more than $100k in such investments, do you not worry about FDIC insurance. When the Real Estate Bubble finally bursts, there will be a lot of defaults. Some financial/lending institutions will ultimately suffer. Or with such houses like Pen Fed, do you not worry?

SWR

 

[MJ]

Charlie:

Assuming you have a lot more than $100k in such investments, do you not worry about FDIC insurance. When the Real Estate Bubble finally bursts, there will be a lot of defaults. Some financial/lending institutions will ultimately suffer. Or with such houses like Pen Fed, do you not worry?

SWR

I have more than $100k in PFCU. I found out that I can increase my NCUA insurance (the equivalent of FDIC for CUs) by adding 1 or more "Payment on Death" beneficiaries. This means for example, if you have 2 CDs for $75k each, adding POD beneficiary to each CD would limit your exposure to $75k. The additional $75k would be assigned to your POD beneficiaries. If the institution went bust, you would receive the full $150k back. If you died before the CD matured, then your assigned beneficiary would get the money which I am assuming would supercede your will.

 

[Cut-Throat]

Listening to Thomas Friedman the other day, he said the following in so many words.

Bush made a real blunder by focusing the nation on Iraq and now Social Security" - If he would have focused the nation on solving the energy problem (i.e. developing an alternative energy source) - like we did on developing the Atomic Bomb, or landing a man on the moon, we would have created thousands of jobs, he would have the backing of the nation and would be miles ahead of where were are at currently.

This really has to be done and it is a crisis!

 

[riskadverse]

Concerning FDIC insurance, I believe the following is valid way to increase the limits.

$100,000 in your name
$100,000 in your wife's name
$100,000 in a joint account name

 

[unclemick]

I think Friedman got the flat earth part fairly right.

It does not follow - that we need to be energy independant.

Tell me why I should care.

Besides the Chinese will sell us low cost pebble bed reactors made with low cost labor - once they get their design perfected and assembly line up and running.

Seems they import oil also.

 

[windsurf]

Bush made a real blunder by focusing the nation on Iraq and now Social Security" - If he would have focused the nation on solving the energy problem (i.e. developing an alternative energy source) -
This really has to be done and it is a crisis!
[/quote

amen!

 

[Whakamole]

Higher energy prices will do more to spur innovation in fuel efficiency and alternative energy sources than any government program.

The reason hybrid cars are selling so well is because of gas prices.
Similarly, the reason that wind energy got a big boost a few years ago was because of high utility prices.

 

[cute fuzzy bunny]

Higher energy prices will do more to spur innovation in fuel efficiency and alternative energy sources than any government program.

The reason hybrid cars are selling so well is because of gas prices.
Similarly, the reason that wind energy got a big boost a few years ago was because of high utility prices.

Actually, no.

The most improvement in fuel efficiency and alternative energy came about with the CAFE programs run by the government. Alternative energy programs grew from tax grants to the manufacturers. Where no CAFE limits exist (SUVs primarily), there has been very little effort by the manufacturers to improve fuel economy and buyers have lined up in droves to pay for them.

Most people buy hybrids not because gas is expensive but because the buyers want a more environmentally friendly vehicle. Simply because you pay so much more for the vehicle vs a similar gas model that you'd never, ever make up the difference in cheaper gas.

Wind also got its big boost from tax friendly programs.

 

[Whakamole]

Actually, no.

The most improvement in fuel efficiency and alternative energy came about with the CAFE programs run by the government. Alternative energy programs grew from tax grants to the manufacturers. Where no CAFE limits exist (SUVs primarily), there has been very little effort by the manufacturers to improve fuel economy and buyers have lined up in droves to pay for them.

Most people buy hybrids not because gas is expensive but because the buyers want a more environmentally friendly vehicle. Simply because you pay so much more for the vehicle vs a similar gas model that you'd never, ever make up the difference in cheaper gas.

Wind also got its big boost from tax friendly programs.

The problem with CAFE is one of unintended consequences.

Say you are an automaker and you've got a large station wagon that gets relatively poor gas mileage. Since it's considered a car, it hurts the overall mileage of your fleet.

What do you do? Turn it into an SUV (light truck.) It gets worse mileage, but it both helps your fleet mileage for both cars (by getting rid of a marginal car) and even trucks (because the smaller SUVs get good mileage for trucks.)

BTW, there certainly are CAFE standards for SUVs. See:
http://www.policyalmanac.org/environment/archive/crs_cafe_standards.shtml



Now, as far as why people are buying hybrids: I disagree. Quite a few people think that oil prices are going to head even higher ("peak oil") and have bought either hybrids or other fuel-efficient alternatives (VW diesels, small compact cars.) For some of them - like the VWs - it doesn't take very much time at all to start saving money. Even for the Prius - if you compare it to the Camry, it takes about (last I checked) seven years to make up the difference. Most of us cheapskates drive cars for seven years


Wind is helped by tax incentives, but it's still one of the more inexpensive sources of alternative energy out there. Even without the tax credit, it can cost as low as 4.5 cents per kWh. See:
http://www.awea.org/faq/cost.html

 

[Nords]

Bush made a real blunder by focusing the nation on Iraq and now Social Security" - If he would have focused the nation on solving the energy problem (i.e. developing an alternative energy source) - like we did on developing the Atomic Bomb, or landing a man on the moon, we would have created thousands of jobs, he would have the backing of the nation and would be miles ahead of where were are at currently.

Gosh, Bush has been drilling as many new wilderness areas as he can get his hands on. How many more alternative energy sources do you think he could find?

Oh, you mean alternatives to OIL?

 

[charlie]

SWR,

My taxable account at PenFed is under a revocable living trust
and it contains a lot less than $100k presently. Eventually it
will have over $100k, however. I need to call PenFed to see
what the total insurance is, but I am not really worried as they
are a very strong financial institution (one of our posters in the
business of credit evaluation checked them out last year ... brewer?)

Anyway being over the insurance limit is a very small concern .....
think about all those marines, special forces, rangers, etc getting
pissed off).

Cheers,

Charlie

 

[Spanky]

Gosh, Bush has been drilling as many new wilderness areas as he can get his hands on. How many more alternative energy sources do you think he could find?

Oh, you mean alternatives to OIL?

Yes, may be "safe' and 'clean' nuclear power.

 

[Nords]

Yes, may be "safe' and 'clean' nuclear power.

Oxymoronic-- despite the fluidized pebble-bed hyperbole. But in the long run, possibly cheaper.