Efsinvestment's  Instablog

This post has 28 comments:

Register or Login to rate comments »

dkcmz Comments (11)
 
I agree with ogulsev. Also according to economy news,decreasing of petroleum stocks in USA has effects on oil prices. According to data of USA Energy Information Administrating ,petroleum stocks decreased 400 thousands of barrel and became 346.4 millions of barrel.However,It was expected to increase 1.6 million of barrel.At the same time gasoline stocks decreased 3.6 million barrel and became 247million barrel .It was expected to increase 900 thousands of barrel.
6 Mar 2011, 09:27 AM Reply Like

FromAppleCity Comments (8)
 
it is amazing how everything is interconnected; events in the Middle East countries bring about the prices of oil to rise and energy stocks to become more expensive. The upswing of oil prices influences customers and even drill companies :)
6 Mar 2011, 09:48 AM Reply Like

zeynep şule Comments (11)
 
Nowadays, increasing of oil prices affects Turkey inflation and trade balance deficit in negative way because 93% of petroleum is imported in Turkey, so the problem in Libya causes the increase of oil prices all over the world and also in Turkey. Last year the oil price is $75 but today it is going up $110 in Turkey.
6 Mar 2011, 10:33 AM Reply Like

dkcmz Comments (11)
 
We can not think the economy independently. It can be affected by political changes. Not only the events in our country but also events in other countries can affect our economy. Nowadays political chaos is one of the causes of increasing oil prices.
6 Mar 2011, 10:47 AM Reply Like

Columnist Comments (11)
 
Oil is a finite resource and it’s getting harder and harder to find it. I think we’re coming to the end of cheap oil and that’s evident in the current price, which is sure to keep going up as time goes on.
I consider an alternative energy to be the only long-term solution to the current oil crisis.
By the way, we can talk as much as we want about the increase in price of oil. But, we should be able to focus on the solutions of how we can get rid of such a problem. If you share your ideas about how to cope with this issue, we can discuss more on it =)
6 Mar 2011, 11:44 AM Reply Like

zeynep şule Comments (11)
 
dkcmz is right, and fromapplecity, we can make a connection between Libya and the world. Libya is the 17th petrol producer in the world. It is qualified and high standart oil, so European countries demand Libya's oil. There is a political chaos in Libya and it affects the other countries.
6 Mar 2011, 12:06 PM Reply Like

Sanitychecker Comments (85)
 
Wow. I guess I am in the minority and disagree. Are all of the commentators above family members?

Ogulsev,

I have to apologize to you. You and I have disagreed in other forums about the level of correlation between Oil prices and Oil Pipeline and Transportation stocks. I offered that the correlation was low and you held that it is extremely high (as you also do in the article above).

I ran a number of correlations between the daily stock price of KMP and the price of oil OK WTI spot prices. I used January 1, 1998 as a starting point since I haven't been able to find out the exact date KMP was founded in 1997 and didn't want to use inaccurate data. Further, to ensure data integrity, I reviewed each day to ensure that both were traded (since the markets are closed on different days) and eliminated any dates both were not traded. I am apologizing because, the correlation of prices between 1/1/1998 and 3/1/2011 show a correlation of .8359, which is quite high and much higher that I expected based on the correlation I ran last week covering a shorter time frame. So, although the data you used was flawed (running a correlation over 20 years for a company only in existence for 14 years), my analysis bears out that the correlation does increase over longer time periods.

However, that is only part of the story. The correlation is very dependent on the amount of time used and the time frame selected:

Correlation between Oil price (OK WTI spot price) and KMP stock price ending 3/1/2011:
3 yrs .3842
4 yrs .3548
5 yrs .4279
6 yrs .4801
10 yrs .8330

You have to run a correlation over a period exceeding 6 years before it exceeds 48%. As you can see, the analysis also validates my contention that Pipeline and Transportation companies are not always highly correlated to the price of oil.

Working back in time; breaking the period (1/1/1998 to 3/1/2011) into 4 year segments you get very different results:

3/07 to 3/11 .3548
3/03 to 3/07 .6679
3/99 to 3/03 .1332

If you are trying to hedge gasoline prices, you may be more interested in a more relevant correlation experience (shorter time frame) and more recent so the data is fresh and current.

Most Exploration and Production companies, whose fortunes rise and fall with the price of oil, don't hedge their production much beyond three years due to a lack of visibility and predictability. So I would argue that although you should be aware that, over extremely long periods, the price of oil has shown a high correlation to KMP, over both shorter periods and more recent periods (the period you would be investing in) the correlation has been significantly lower.

KMP is a good company, paying a nice dividend in a very low interest rate environment. That may be a reason to choose to invest in it, however, there are much better choices to hedge gas prices at the pump.

Disclosure: Long KMP, LINE, VNR, LGCY, ETP, ENP
6 Mar 2011, 01:21 PM Reply Like

ali taş Comments (10)
 
l think the best solution for petroleum prices is electricity. governments should support these projects. and as we saw in 2008 the decrasing in Brent petroelum prices does not affect retail gasoline prices. there was a decreasing about 40 percent but this could not seen in retail prices.
6 Mar 2011, 01:59 PM Reply Like

mozer Comments (6)
 
Now that the world we live in is all globalized and interconnected. It kinda makes me wonder if all these liberation thoughts and movements taking place in Middle East and Northern part of Africa are just parts of this bigger plan to drive up the oil prices to help out some of the other oil producing countries to get through these tough times. With some of the major oil suppliers and countries out of the picture in oil market.- Libya owning the 3.3 percent of the oil reserves and Saudi Arabia owning almost 20 percent of the world's oil reserves-. From some certain point of view it helps other oil producing companies and governments to obtain more profit out of their products.
6 Mar 2011, 02:55 PM Reply Like

BuguOktem Comments (6)
 
With all this turmoil going on in the oil market maybe it's time governments and companies start to invest more on alternative energy sources, such as hydrogene based engines and electirical vehicles. We are going to run out of oil soon anyway so why not start now and support alternative energy sources.
6 Mar 2011, 03:32 PM Reply Like

e172372 Comments (6)
 
ı believe that there will be a long periods for countries to transform their investments to alternative energies.Up to now, oil is the major concern for majority of world and after these problems which occur in Middle East and North Africa , oil will continue to possess power to effect all of the world. So to change direction to other types of energies is not easy which is expected.
6 Mar 2011, 03:43 PM Reply Like

fatmık Comments (2)
 
What is offered as a first stage solution by automative experts seem like a good solution. Taking an action like, turning off the engine when you are idle, tuning up the engine, and so on may help to decrease environmental pollution as well. also, when it comes to the correlation between refining company stocks and retail oil prices, it's a fact that there is a high correlation between them, at least in short run. However it's not certain that this correlation will continue with such a chaos era.
6 Mar 2011, 05:27 PM Reply Like

asya.yavuz Comments (6)
 
According to the new from New York Times, other countries have never affected the oil prices too much as Libya did. Moreover, experts say this increase in oil prices will affect economic recovery negatively.Each $10 increase in the oil prices causes 0.5 percent recession in GDP.
6 Mar 2011, 06:14 PM Reply Like

ezgikurt Comments (6)
 
this problem may indicate bigger issues. maybe the question that should now be asked is whether indicated rise in the energy stocks will later lead to an energy crisis? it's always been known that oil was a limited source - and now, more than ever as time preceeds and the oil prices will go up - they would even if there wasn't turmoil in the area because of scarcity. in long term, this might, with the new inventions in the electric-hybrid car industry and such, lead to bigger crisis than what's caused by oil. so now might be good time to invest in the energy stocks, but sustainability is the main policy that should be followed in the arena of energy.
6 Mar 2011, 07:44 PM Reply Like

Alper Tokay Comment (1)
 
The rise in oil prices should was expected as the oil producing countries have some problems of their own. This however, gives us the opportunity to switch to other things since it is way cheaper now.
On another perspective energy companies' stocks will continue rising as long as the oil prices keep rising. So it may be good time to invest.
7 Mar 2011, 03:50 AM Reply Like

Koray Ucar Comments (6)
 
Nowhere is as much affected by the civil war in Middle East as Europe because only Libya has exported about seventeen twentieth of its petroleum to Europe and the uncertainty in this region may reduce the production a lot. Moreover, Libya may cut exportation of petroleum because of Gaddafi's threats to NATO and USA in order to avoid from the humanitarian aid from the Western Countries. These all factors will increase the oil prices very much. Therefore, particular sectors will be affected very negatively. It is seen that air transportation will be one of the most affected sectors since they always have to demand oil so as to continue their services.
7 Mar 2011, 04:40 AM Reply Like

Cenk Sinar Comments (6)
 
Africa continent receives not only the American but also the Russian and Chinese investors. Especially, in The Republic of Sudan, Chinese investment reached 10 billion dollars, whereas instability of the mentioned countries give rise to low circulation of the oil trade for American oil company. Although,at this time, Chinese and Russian company have a better position, the political movement will give the last shape for this picture.

7 Mar 2011, 05:06 AM Reply Like

economist_cagri23 Comments (9)
 
I think although it seems that crises in Africa and Asia has directed by political issue ,it is about tricking of some big oil company. I think after months oil preice will decrease and loss making oil companies will benefit from this economic fluctuaion. Many countries' officals said that Libya is the small piece of oil povider. It should not change the balance of the oil prices. According to this ideas some companies are dissatisfied with global economical balance. May be some oil companies (such as BP ) think that increasing the prcie of oil in this crise decrease their losses.
7 Mar 2011, 09:59 AM Reply Like

s.aydin Comments (5)
 
In today`s world , processing step of industrial product is based on oil.Recantly transportation system has improved so people need an consume more and more oil.Eventually ı can conclude oil is very crucial for our life.It is inevitable that oil price is affected by many political situation and international relationship.Considering Africa and Middle East posess %70 of oil reserve oin the world . In this area political situation have an impact onoil price greatly.
7 Mar 2011, 02:42 PM Reply Like

m.ede Comments (6)
 
As long as the world is dependent to oil we need to get used to sharp raises on oil prices. Sure the oil will continue to be the major energy source for many years but there should be alternatives and the world should learn how to deal with its consequences to continue to consume more and more each year. Electricity consumption, as a clean and cheaper energy source, should be supported. The government should raise the number of wind power plants, especially in industrial areas. Politics is the other fatal reason of this problem and it seems that the only solution is generating alternatives to oil.
7 Mar 2011, 07:52 PM Reply Like

mustafayilmaz Comments (19)
 
Gaddafi refuses to be as easily dismissed though and vows to take the country down with him. It is clear for all to see that the situation in the Middle East will be getting a lot worse before it gets any better, if it does. Most of the OECD countries rely on the Middle Eastern nations for most of their fuel needs. They will be in a lurch when matters get worse, if they do not find a trustworthy alternative source of fuel.
8 Mar 2011, 01:38 PM Reply Like

Outsider elephant Comments (6)
 
Algeria and Libya are 2 members of the 12 OPEC which in trouble with riots in recent 2 months. This riot wave is spreading all around the North Africa and Middle East. 8 of 12 members of OPEC is on the Middle East and North Africa. This uncertainity about the near future in this area must cause rise in petrol prices.
8 Mar 2011, 03:06 PM Reply Like

ebirced Comments (3)
 
The reasons that are written about the oil price boom, are logical and i agree with that. The political crisis' in the Middle East might also effect the oil prices. Therefore I think governments should preapare some precautions about this situation.
8 Mar 2011, 03:40 PM Reply Like

gizemakar Comments (6)
 
Political chaos in the Middle East and North Africa caused an increase in oil prices.Since people demand more and more oil day by day,this price increase affected everybody.In order to stop this energy crisis,alternative energy resources have to be found.
8 Mar 2011, 03:59 PM Reply Like

senelozturk Comments (5)
 
I think.This is not only about political crises. These energy companies are the most powerful companies so they speculate the oil price. Also they hide their real aim. Especially; they increase oil price dramatically and then decrease a little bit. People get used to new price. In 2002 oil average price is 20 dollars but now we are talking about 100 dollars. As a result, people pay much more than before.Moreover; each year number of oil companies are increasing. They don't want to lose their profit and they are playing with the oil price. These are all about wild competitions.
8 Mar 2011, 05:32 PM Reply Like

dilara Comments (8)
 
The politic chaos and conflictions in North African Countries dramatically have been affecting the global economy. Libya is one of the most important countries in having crude oil and in oil export. Actually, these conflictions and restless conditions in that region caused a decrease in oil supply. In the news, it is written that speculations have made oil prices go up. You offered that investment in energy stocks is good to gain money and make profit.It is a good point because tha data you gave above shows the high correlation between retail oil prices and energy stocks.In the period in which oil prices have growing trend, making investment in energy sector is quite rational for investors.
9 Mar 2011, 11:14 AM Reply Like

sinem Comments (2)
 
Firstly,thanks for providing me to see the interdependence of oil and gas companies.Secondly,before reading this article I have not thought that rising oil prices can benefit someones.For example;who has an energy stocks.It is so interesting for me
4 May 2011, 11:59 AM Reply Like

BuguOktem Comments (6)
 
Now, there is another factor that might effect the oil prices. Osama Bin Laden's death might cause a chaos in the Middle East and it might effect the oil prices to increase.
8 May 2011, 08:51 PM Reply Like