Analyst predicts $300 per barrel of oil

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rl's picture
rl
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Analyst predicts $300 per barrel of oil

 

 

http://www.marketwatch.com/news/story/Position-yourself-now-300-a/story.aspx?guid=%7B9C42CE1C%2DB7C8%2D4C22%2D8907%2D3A8D60BE1F0B%7D NEW YORK (MarketWatch) -- Human beings are a predictable bunch and we tend to wait until things get to a painful crisis mode before taking drastic action. My question is why does it always have to get to that point? Take the most recent run-up of oil prices, when crude hit $147 a barrel and gasoline was trading around $5.

... Any economic recovery results in higher energy prices -- it's elementary. That means $300 crude oil could be one year away or three years away, but certainly not much more.

...

High energy prices will be back soon for those that don't prepare. So will the pain, unfortunately.

 

strabes's picture
strabes
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Re: Analyst predicts $300 per barrel of oil
Quote:

Any economic recovery results in higher energy prices -- it's elementary.

Correct.  But the assumption of an economic recovery within 1-3 years is tenuous.  Actually it's just wrong.

And Kevin's characterization of this economic cycle as "recession and credit crunch" shows that he's out of touch.  I used to follow Kevin's energy options recommendations, but he doesn't get the systemic shift that has yet to happen.  This is the beginning of a depression.  It's not a credit crunch which assumes credit just needs to "uncrunch" and everything will be fine. It's a debt/credit deflation...a systemic shift from illusory debt-based growth fueled by crazy innovations in debt/credit, back to savings-based growth.   

Farmer Brown's picture
Farmer Brown
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Re: Analyst predicts $300 per barrel of oil

Strabes,

I agree with you on your assessment of the economy, but it does not follow that higher commodity prices have to be preceded by economic recovery.

Jim Rogers lays this out very well in his book, Hot Commodities.    He shows that in periods of recession, commodities have risen in value every time. 

As I'm sure you know, prices are a result of supply and demand.  Demand goes down in a recession or depression, but so does supply, often more so.  Commodity production is incredibly capital-intensive.  If there is little or no money to invest, new oil wells, mines, farms etc are simply not going to come on line, and all of those which were tetering before the slowdown get wiped out pretty quickly.  

In his book, Rogers references a study done by some hoity-toity ivy league university economics professors (I think Yale - no offense to any alumni on this site!) which tracked every recession and commodity prices as far back as they could.  In every case, commodity prices rose in bear markets and fell in bull markets.  Furthermore, the cycles take 17 years, on average if I remember correctly.

strabes's picture
strabes
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Posts: 1032
Re: Analyst predicts $300 per barrel of oil

Yeah I read Hot Commodities...and lost $300k (on paper) on his advice over the last year.  No doubt he will be proven right in the end, but the issue remains of how to define bear market, when this one will be over, at what appropriate time will commodity prices follow what Jim is saying.  As long as debt deflation and the deleveraging of the derivatives world continues, pretty much all prices in all asset classes have to come down...commodities came down faster than a lot of other sectors. 

But I wasn't debating Jim or the 17-year hypothesis above.  I was really just trying to say "I would not buy oil expecting it to be at $300 in 1-3 years."  I'm pretty sure Jim agrees with that.

Farmer Brown's picture
Farmer Brown
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Joined: Nov 23 2008
Posts: 1503
Re: Analyst predicts $300 per barrel of oil

Agreed.  I don't see it getting that high unless of course the $ collapses, but then we wouldn't be talking about $300 of today's dollars.  I do see it recovering to at least the $60-$70 range in the next 12 months, and possibly spiking the year after that, just due to declining production

Sorry about the $300k!.

strabes's picture
strabes
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Posts: 1032
Re: Analyst predicts $300 per barrel of oil

  Laughing

plantguy90's picture
plantguy90
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Joined: Jan 26 2009
Posts: 271
Re: Analyst predicts $300 per barrel of oil

Total global oil consumtion increases every year.  Even recent consumption decreases are less than 10%, yet oil prices have collapsed from 150-40 in the same period.  The deleveraging of the oil speculators has to stop soon.  Enjoy the cheap gas for now, I wish the average joe had a way of storing tons of it or locking in today's prices.  Its going back up. 

Another statistic I saw recently was that 83% of money managers thought we will have deflation this year vs. inflation.  I'd position myself against that thundering herd of losers of other people's money any day.  Most of those guys are typical beneficiaries of the FIRE economy, I wouldn't put any credence to their track records.

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