What happened to efficient markets? We heard about the terror premium when oil was at $50, and then $60, $70, $80 etc. I have no doubt that yes there are hedge funds and 'speculators' in the oil markets. If I was a speculator and thought that global supply was reaching some sort of plateau imminently, I would be long oil too! :)
In terms of the US dollar oil is getting more expensive but for the rest of the world it hasn't risen nearly as much. Saudi Arabia used to defend a price band between $20-$30 per barrel in an effort to maximize profit and to ensure alternative energy didn't get a toehold. We've been over this price band for over 3 years now, so where is OPEC and Saudi's spare capacity? Maybe they have judged that the world can tolerate $100 oil? One doesn't have to believe in geological peak oil because as the WSJ article suggested, there are plenty of above ground factors that will choke back the rate of production including politically hostile states, lack of petroleum engineers, and more remote and challenging drilling environments.
The price is always set at the margin so there maybe isn't enough oil at $50 to satisfy the entire market but at $90 there is.
On another note, there recently has been a divergence between oil stock s and the price of oil. The market believes that these stocks are still cyclical and are only awarding them low P/Es. Although I think there will still be cycles, I believe the long term trend will be upwards. The WSJ article referred to peak oil as "fringe". The 'fringe' I believe is where you make the most money when people adopt the 'fringe' theories as mainstream. Even Lululemon was at its early stages 'fringe' yoga wear, and we're capitalizing on it being mainstream.
Hey, I believe in efficient markets when it serves my purpose! :) Actually, there's nothing incongruent about oil prices and market efficiency; buyers and sellers of oil futures have been bidding up the price based on all avail info. A lot of it is based on geopolitical factors rather than geological ones, this article suggests. Nothing wrong with that. And I totally agree with getting in on the "fringe" before it becomes mainstream. That's why I'm still interested in HAL and SLB, if you want to buy both ;)
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What happened to efficient markets? We heard about the terror premium when oil was at $50, and then $60, $70, $80 etc. I have no doubt that yes there are hedge funds and 'speculators' in the oil markets. If I was a speculator and thought that global supply was reaching some sort of plateau imminently, I would be long oil too! :)
In terms of the US dollar oil is getting more expensive but for the rest of the world it hasn't risen nearly as much.
Saudi Arabia used to defend a price band between $20-$30 per barrel in an effort to maximize profit and to ensure alternative energy didn't get a toehold. We've been over this price band for over 3 years now, so where is OPEC and Saudi's spare capacity? Maybe they have judged that the world can tolerate $100 oil?
One doesn't have to believe in geological peak oil because as the WSJ article suggested, there are plenty of above ground factors that will choke back the rate of production including politically hostile states, lack of petroleum engineers, and more remote and challenging drilling environments.
The price is always set at the margin so there maybe isn't enough oil at $50 to satisfy the entire market but at $90 there is.
On another note, there recently has been a divergence between oil stock s and the price of oil. The market believes that these stocks are still cyclical and are only awarding them low P/Es. Although I think there will still be cycles, I believe the long term trend will be upwards. The WSJ article referred to peak oil as "fringe". The 'fringe' I believe is where you make the most money when people adopt the 'fringe' theories as mainstream. Even Lululemon was at its early stages 'fringe' yoga wear, and we're capitalizing on it being mainstream.
Hey, I believe in efficient markets when it serves my purpose! :)
Actually, there's nothing incongruent about oil prices and market efficiency; buyers and sellers of oil futures have been bidding up the price based on all avail info. A lot of it is based on geopolitical factors rather than geological ones, this article suggests. Nothing wrong with that. And I totally agree with getting in on the "fringe" before it becomes mainstream. That's why I'm still interested in HAL and SLB, if you want to buy both ;)
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