T. Boone Pickens Says Oil is Going Higher

For those of you who don't know, T. Boone Pickens is probably considered the most astute energy investor period. He is like Buffet of oil, and looks like he was the 369th richest guy on the planet. (Interestingly he is a big investor in wind energy). With everyone and their mother calling for a selloff in oil, he is reversing his short and going long.

What I try to remind everyone who blames the high oil prices on oil companies is, oil is not romping in other currencies or gold. In fact, I read if the dollar was stable crude would be roughly $60-$65 right now, or almost cut in half. So it is misguided to blame oil companies as the politicians are trying to do - they need to look in the mirror (for there misguided regulation, and spending which creates massive deficits) and next door to the Federal Reserve which is printing US pesos at an alarming rate. In oil or euros terms crude oil is on a slight upward slope. The problem is the US peso...

Myself, I think crude can get to that next big round number $120, but the whole commodity space is getting frothy so I expect some pullback. The dollar also has to show SOME sign of life and make even some minor jump... right? We have 1 more cut coming on April 30th by the Federal Reserve and I assume at most we will have 1 more after that. I would think the end of the cutting might give some minor strength to the dollar but thus far, other than a few days after the last Fed meeting, it has not seemed to have much effect.

Gasoline sales are finally slowing in the US as the prices are now reaching $3.40 nationwide heading for near $4 by Memorial Day driving season (notice the strength in retailers today - woo hoo, ignoring all the facts again)... at some point higher price points create demand destruction - we finally appear to be reaching those levels.

• Boone Pickens, a billionaire energy investor, said he reversed course and adopted a long position on oil, meaning he is betting the price of crude will rise. Pickens, 79, the founder and chairman of Dallas-based BP Capital LLC, said today in a speech at Georgetown University that the price of crude oil will only continue to climb and demand will eventually be dampened.
• ``The position is long, not short,'' Pickens told reporters after his speech. ``I covered the short position, it was a mistake on my part. We missed.''
• Crude oil futures in New York touched $115.54 a barrel today, the highest intraday price since trading began in 1983.
• Pickens said he thought oil was approaching $125 a barrel. Oil will eventually reach $150 per barrel, he said while cautioning ``I won't be investing in $150 oil.''
• Pickens said his BP Capital Energy Equity Fund fell 21 percent in the first quarter of this year. Since 2001, the fund has grown 800 percent, he said. (even the best make mistakes)
• World oil supplies won't exceed 85 million barrels a day because of high depletion rates of existing wells, he said in his speech. This lends credence to his long position. ``There is only 85 million barrels of oil globally in the market coming a day and I don't think you can increase that 85 million,'' Pickens said.
• World oil demand during the four years ending 2008 is rising at an average annualized pace of about 1.4 percent, according to International Energy Agency forecasts.

And the "World of Shortages" paradigm plays on - yes the US recession will slow demand for a bit here, maybe a year or two, but demand will continue to go up globally and supplies simply are not keeping up with demand. For Americans, we need to pray to the currency gods that the dollar strengthens. Granted that would destroy the last bastions of strength in the stock market, but pick your poison - ability to drive to work without taking out mortgage? or higher Etrade account balance?

Comments

[xander:]

i will say it again -drive 55 and thrive.

2008 Apr 18 12:30 AM

[Ames Tiedeman:]

Xander:

No one wants to drive 55. Give it up. Technology will save us, mark my word.

2008 Apr 18 07:09 AM

[redbaron:]

Driving 55 to solve this problem, will not work. It is unenforceable with todays vehicles, and most will not do it. Conservation will not be enough, but we need to be working on both technology and conservation solutions. (Acutally, we should have been doing it for the past 8 years.) T.Boone Pickens is the best in the oil patch, and he has been telling us for years that the world can only produce 85 million barrells a day. Now we get to see what happens, when what he has been saying actually happens.
JK

2008 Apr 18 08:29 AM

[Mmarrkk:]

Why won't driving 55 work? If you use less gas driving at 55, and YOU are in charge of how fast YOU drive, why isn't that "enforceable"? YOU can do it all by yourself...no help from the Nanny-Obama-Hillary state! And then YOU will save money because YOU won't be burning so much gas. Is it a lot? Depends on how much you drive and how fast you were driving. But the idea that driving 55 is "unenforceable" and "won't work" is total hogwash. It can be done as it is purely at YOUR control and will save YOUR pocketbook.

2008 Apr 18 09:06 AM

[Chall74440:]

I drive 65 and nearly get run over by folk driving 75 to 90. If I drove 55, it would be prudent to make sure my life insurance was paid up!

2008 Apr 18 09:18 AM

[yank:]

Regarding the 55 mph idea let me just share this "real world" experiment that was carried out in Atlanta last. Ten young students from Ga Tech got in their cars at 6 AM and they each began driving 55 mph on Interstate 285, effectively preventing any driver on the road from doing more than 55 mph. The result? By 7 AM, the entire loop around Atlanta was "dead stop" gridlocked. Does that answer your question about the practicality of driving 55 mph? The idea is pure "fantasy" as a realistic way to solve our energy problems.

2008 Apr 18 10:05 AM

[chk2595:]

The answer is in increased domestic production of energy is in oil, gas, and nuclear production. We need laws and rules and regulations to dovetail into encouraging production not stopping or halting it. Congress need to look in a mirror for slowing and decreasing input in to our producing fields(Gulf of Mexico, West Coast) and non producing like off Eastern shore(Baltimore Canyon), New fields in Northeast, and Dakotas. New technology may be started but it will now replace oil, gas, and nuclear in our lifetimes.

2008 Apr 18 10:24 AM

[slowe_anne:]

the $US is starting to strengthen...fed funds futures have priced out a 25 basis point cut on 4/30/08...if rates stablize & then begin to slowly rise, crude prices will peak...natural gas isn't 100% correlated & therefore could remain firm or possibly rise...LNG remains an excellent alternative to importing expensive crude...wind power used to generate electricity could free up plenty of MCF's of NG for transportation in NGV's...Boone, is the man...anne

2008 Apr 18 10:28 AM

[J.E.C.49:]

Driving at 55 is dangerous. Especially if you're not in the right lane! There is another approach. Watch those starts and stops. My wife is heavy footed on the gas and the brake and she averages 2 3/4 miles per gallon less than I do when we last tested my theory. I travel 14% farther on the same tank of gas. Try it, it works.

2008 Apr 18 10:49 AM

[Mmarrkk:]

Drive 55 and stay in the slow lane...far right lane. Did the students in ATL drive next to each other, shoulder to shoulder?

Again, its hogwash. if you are driving 55, no matter how fast everyone else is driving, they won't hit you. They may flip you off, or pass you, but its going to be okay.

And guess what, if by driving 55 you force everyone else to drive 55, then that's a win!!!

And yes, exploring more and getting access to more U.S. land is the best answer, but the greenie weenies aren't ready for that are they??

2008 Apr 18 12:04 PM

[Mmarrkk:]

Also, I didn't say that would "solve our energy problems". But it would sold PART of the problem for those complaining about the high cost of fuel. You burn less, so it costs you less. And its VOLUNTARY. No government intervention, which never works.

2008 Apr 18 12:06 PM

[Jake2:]

Smell the roses, not the fumes.

2008 Apr 18 01:53 PM

[User 158320:]

I'd say Boon is overly optimistic in the dollar for no reason whatsoever, if anything our government is increasing the reasons for a further dollar decline (lower interest rates, more printing, more spending, more deficits, higher taxes more regulations, a less educated more numerous immigrant population).

Our leanring curve is going downhill & steepening.

We're years away from a dollar rise, for the dollar to rise we need a change in federal policies, then a painful period of digestion for the changes to take effect, then a change in dollar value, so far there's no change in federal policy on the horizon, the dollar will continue to decline indefinitely.

We stuck our hand in a flame & haven't pulled it out yet, who knows is we ever will?

2008 Apr 18 02:36 PM

[WayneS:]

I carpool with two other people
I drive every third day.
I drive at a constant 60 mph on an HOV
I get over 70 mpg in my Buick LeSabre

2008 Apr 18 03:35 PM

[mcunningham615:]

Most cars made within the last 10 to 15 years have overdrive transmissions and are designed to be most effecient at 65-70 mph. Driving slower "lugs" down the engine requiring more fuel to be wasted just keeping the vehicle moving. In my 2006 Tacoma pick up w/ a V-6 engine my best milage comes at 65-70 mph about 23 mpg. At 55 I drop to about 21 MPG and at 80 I drop to about 21 mpg. In town I drop to about 20 mpg because of traffic and always accelerating and slowing down.
Technology and a willingness to devolop our domestic energy supplies are the only way to bring us out of the problem of high oil prices. We will be keeping more of our money here, thus the government won't have to keep printing more money to pay our oil bills to foreign countries, some of which are using our money to fight our military. Quit buying from them and the terrorist will go broke and won't be able to fight us as they will no longer to have the money to by weapons.. If we quit printing money the value of the dollar will begin to rise thus the cost of crude will fall more.
More and more reports are coming in that the largest oil fields in the world are right here in the US. The oil shale in a region from Colorado up to the Dakotas and Wyoming are said to hold more oil than any single find in the world. We just need to tweak our technology a little more to extract this oil. The technology is very close to proving reliable and economical enough to pursue this supply.

2008 Apr 18 06:43 PM

[Gary Smith_:]

If you like 55 then you can drive it all you like. I have a new Pick-up with a V8 and is a 4x4, if I drive 60-63 I can get 22 mpg. Not bad for a big vehicle. At 70 I will get 19-20 mpg. So it's quite simple, the faster I go the more it cost's, it's up to me if we live in a free country.

2008 Apr 18 07:12 PM

[lobsterboy:]

Who cares about whether a person drive 55 or 70, I don't think that was the point of this article.
Jeez, T bone pickens was wrong with his short in Oil. If he held on until now he was going through some serious pain. I think he made that short call when it was $90 a barrel now pushing $117. Obviously his return for the quarter reflects that.
He might be trading this thing backwards now, IMHO it's probably going to push upwards the lower 120's and pull back for now.
I would agree that the falling dollar vs. long oil is the hedge that money managers are using. The problem with this whole scenario it that inflation is now a problem and it will become will become much worst before this is over.

2008 Apr 19 09:55 AM

[JREwing:]

I don't have car, but I own RIG and SLB. So i don't care.

2008 Apr 19 02:33 PM

[Mister C:]

Lol. Why should anyone listen to Boone Pickens? He was wrong shorting oil and he might as well be wrong going long.

He clearly states that demand will wane and we know the Fed is almost done with the rate cuts.

Looks like he's a little bit late to the oil party.

2008 Apr 19 03:42 PM

[maher:]

Pickens was wrong shorting oil, and he is still wrong longing oil here.
Who would want to listen to a pale, sick looking, walking relic skeleton anyway. The man is becoming senile.

Look, oil would have fell to $70 right now, if ite weren't beacuse of the potential war with Iran.

It's Iran stupid.

2008 Apr 20 12:25 PM

[Cousin A.:]

wayneS, MMarkkkk, and CrossingtheT all have good ideas. Pick one or more and things will be better.

2008 Apr 20 12:27 PM

[User 154112:]

you mean war with Iraq ..genius

2008 Apr 25 09:31 AM

[Ames Tiedeman:]

A guy in Oregon is selling electric cars that only cost 15 cents to charge. They can go 40 miles on a single charge. Amazing technology.

2008 May 17 10:52 AM

[Eric Fox:]

World oil supply rose to 86.6 million b/d in May, up nearly 500,000 b/d from April's 86.11 million b/d as production rose from
OPEC, China and the former Soviet Union, the International Energy Agency said Tuesday. OPEC raised its crude supply to 32.31
million b/d last month, up from 31.91 million b/d in April, the IEA said in its latest monthly oil market report.

2008 Jun 10 09:17 AM