ANTS

Oil Majors Should Just Buy Real Gold

Ok then, I read the conclusion too.

As a shareholder in an oil company, I would be horrified if management were to start trading in gold on the basis described. In fact that of itself would be an extreme breach of management duty to shareholders, which is to produce oil. Look at Metallgaslshaft if you want to see what happens when management starts to consider fiddling in commodity markets.

As to ratio of commodity prices, I'm just passing on some personal history. When I started resources analysis, it was suggested that we could look at various ratios. But it was pointed out to me that a mining company just has to be aware of supply issues in particular, and on reflection that is the most important issue in project planning. Thats why they spend so much time estimating industry cost curves and why they are obsessed with production costs. They learned long ago that basing mine planning on price forecasting is a waste of time.

Oil Majors Should Just Buy Real Gold

As soon as i saw reference to a oil/gold ratio i stopped reading.

How anyone reconciles the effect of supply/demand on prices, and then refers to such ratio analysis is beyond me. My pet question refers to the 3 Magi and Christmas (appropriately enough). The three gifts were gold, frankincense and mir (sorry if the spelling is wrong). The question is, what was the ratio of gold to oil in those days, and by extrapolation, what is the long term ratio of oil to frankincense ?

No answer, usually (most times because no-one even knows what the other two substances are, much less why they were deemed to be comparably as valuable as gold).