Chirag Amin

Keeping Our Confidence in Strong Energy Stocks

Isjorgren,

Seriously, you actually stated:

'What lunatic would invest in US oil or gas companies when the federal government has expressed its determination to levy astronomically large new taxes on the industr?'

Have you ever heard of cigarettes and Philip Morris?
Have you ever heard of the concept of 'inelastic demand'?
The taxes that Obama will levy on oil companies will most definitely get passed on to the consumer.....if you don't believe it, then try figuring out why the price of cigarettes will soon be $7 a pack.....
Until you figure out a way to run your car on bullcrap, you, like everyone else will stay a slave to big oil.

Your Oil Stocks Aren't Coming Back

Let's get this stuff in the correct context....when people talk about the technology stocks of the great Internet "bubble"........many remember names such as Ariba/PurchasePro.com/... (the great B2B sector that would go up 20+ points per day....), JDS Uniphase/SDLI (the great fiberoptic tech craze), Lycos/Excite.com (the great search engine craze), CMGI/ICGE (the great internet incubator craze), as well as more "sane" tech sector picks such as AOL and Yahoo. No one should expect ExxonMobil to split 3:2 every year like Sun Microsystems did back in its heyday. On that same note, no one should expect that Transocean (RIG) could grow to $1000 stock like they wrongly predicted that Qualcomm would back in its heyday....

Then again.....these oil companies can make a profit even when oil is under $50 per barrel. Oil was less than this in the early part of 2000/2001/2002 etc. and oil companies were still making a profit and growing. Recently, due to the big oil price run up, Big Oil got a little bit crazy with regard to their cap ex spending. After all, does it really make sense to pay Transocean (RIG) a dayrate of $600,000 per day to drill a deepwater well when oil is under $40 per barrel?

But look what we're in for......Big Oil cuts cap ex.....future reserves/supply does not get regenerated and thus constricts, OPEC keeps cutting supply, refiners decrease capacity, hurricane season arrives, and the Iranian President feels like threatening the Jews again.....this, combined with recovering demand in China and India as well as in the US, and we're back at $100 per barrel oil...

Bottom Line: List all the factors that push oil prices up (several I have mentioned above) FROM CURRENT LEVELS....and then list all the factors that push oil prices down FROM CURRENT LEVELS.....and then let yourself decide if current oil prices are sustainable.....