The Truth About Oil Prices

If you are unsure about where oil prices are headed, read on.

After the recent surge in crude oil prices, experts and analysts alike seem to have different opinions about where oil prices are headed next. On one side, there are those who claim that speculators have drove oil prices too high and have caused a bubble which will burst sooner or later.

Others simply point to demand and supply imbalances as a reason for the spike, and they think that oil is going to go even higher (Goldman Sachs’ Arjun Murti think its going to $200 in the next 6-24 months.).

Which of these “Experts” are correct?

Actually, depending on the time frame that you are looking at, to a certain extent, both are correct.

Here are my predictions:

In the short run: Oil will continue to surge higher and higher, until it reaches a peak, where it will fall back to around $100.

In the long run:

Oil will resume its climb to $200 and, after that, to $300.

click to enlarge

Currently, oil is trading at $132. Greedy speculators will continue to fuel this spike until it peaks at $150 to $200 (The prices that T.Boone Pickens and Arjun Murti gave for oil), where people will start taking profits.

Once it peaks, everyone will be trying to get out of their oil positions, and oil prices will drop as fast as it as risen, consistent with the bubble theory. However, I won't call it a bubble bursting because there will be strong resistance at the $100 level, since there is a real demand for oil. (For example, if oil falls to $99, traders who really need oil will snap it up at that price.) Oil will continue to try penetrating below the $100 level, but ultimately, it will fail.

Once the mania has subsided, demand and supply imbalances will return to the market and continue oil’s spike

Disclosure: I do have stocks in Oil ETFs (DBO), and I am waiting for oil to reach its peak before exiting my position and then snapping up cheap oil at around $100.

Comments

[DONE_SONZ:]

It isnt a bubble you fools.

2008 May 27 10:05 AM

[Moses:]

Wow, what a terrible article, you nor anyone else have any clue what will actually happen. This article is 100% speculation and consistent with the current theory of every other idiot in the media at the moment. I want the minute of my life back that you just wasted.

2008 May 27 10:21 AM

[relax:]

I think it's "have [driven]..."

2008 May 27 10:28 AM

[pachanguero:]

Short on facts

2008 May 27 10:36 AM

[ArtfulDodger:]

Mr. Polins:

You could be right about the continued spike in the ppb over the short term, but the public is almost fully invested in energy stocks and ETFs. So the bust out is surely not far away, and this will have absolutely nothing to do with where we can drill or can't or what supply and demand is.

The ppb will crash when the momemtum players believe that every sucker in the world that can buy an Oil or Energy ETF or an oil or energy stock or a futures contract is fully invested. At that time, they will know that they and their crony touts at the Big NY Houses have sucked every cent out of every sucker.

In the long run, however, energy prices will certainly climb, if we don't get rid of the leftists now running Congress. And we should learn after their control from 1932 to 1992 that, it's hard as a New Jersey mobster to get them out of office after they get in and begin buying the votes of hoi polloi.

Because the Dumborats in Congress want to control everything we do and also think they're smarter than every other living being and think they know what's best for all of us, they'll do all they can to keep energy prices high, because they hate anything that comes from the earth, except, of course, corn and grains, which should be used for food; but those brilliant beings want us to use them for fuel.

The Controlcrats also hate with a passion that so many Americans have become so affluent over the last eight years that, even after the Y-2-K Con, the Dotbomb explosion (and terrible aftermath), 9-11, and Katrina, our resilient, hard-working people can still afford large homes and SUVs.

Leftists want to be the only ones who can ride in limos, have a home in their district (or state), one in Washington, and a million dollar vacation get away. They want the rest of us traveling by mass transit, sitting around our homes huddled up with the thermostat at 60 degrees in the winter, and fanning ourselves in the summer with the air conditioning set on 85.

For the Controlcrats, the average American being able to afford most anything he wants is too much affluency and far too much freedom. Thus behind-the-scenes, no matter what the Liarcrats say in public, they are cheering high energy prices, and they'll do all they can to keep them high.

But that doesn't mean that the recent 50% spurt of the last few months will last. Prices will crash from where they are, and the media will begin telling us how flush oil supplies are, and that will cause them to go down further.

But I doubt whether we'll ever see them back to the levels we have over the past fifteen years when reasonably priced energy has helped the nation more than double its gross production rates and also has aided so many people to become well off.

I don't like the politicians who're purposely atempting to put the squeeze
on oil supplies so that prices will spurt upward and they can brainwash the people into accepting their eco-maniac agendas. These same cynical type of people have been predicting the earth's demise for the last sixty years. They simply have to change every decade or so in they manner they tell us it's going to die; today they tell us it's going to heat up to a boiling point and explode, killing every living thing. Another hoax!

Me, I like seeing people prosper. I like their being free to choose the homes and cars they like and can afford. I enjoy seeing my friends businesses flourish, and I like seeing people happy, and getting that way the way they please.

But, of course, I'm not a Controlcrat.

Rebeldog

2008 May 28 05:56 PM

[Paul Killinger:]

Rebeldog,

Nice rant, Reb. It makes me feel better, too, when I go off like that.
But, don't worry, help is on the way. New polls show 2/3 of Americans want to drill for oil and gas in the onshore and offshore U.S. and in ANWR. And 90% won't pay a nickel for CO2 recapture or carbon sequestration. The only thing the Socialists in Congress fear more than losing big money from their green friends is losing their next election. Now all we need is a presidential candidate who isn't one of them.

2008 May 30 07:59 AM