ozzy43

The Oil Bubble Will Meet the Same Fate as Tech, Housing

There are some serious problems with this analysis, but the most severe is this: tracking oil prices in dollars makes little sense, yet that provides the fundamental basis for the argument being made - as though dollars were a fixed store of value!

Try tracking oil in gold prices, which is still not ideal, but is certainly better than using dollars, which are constantly manipulated by the Fed. Using that basis, the analysis looks quite different.

Another flaw is exemplified by this statement:

"gasoline shortages don’t exist and new oil is plentiful"

No evidence is given for this astonishing assertion. The US uses about 20M barrels per day - ~25% of the global total - and when pressed (begged) by the President of the US, the Saudi's - the only exporter in the world with (at least alleged) spare capacity - can only manage to squeak out an extra 200k - 500k barrels per day (and the world expects the Saudi's to generate an extra 10M barrels per day or so in the next decade??). That's plentiful? Have the Saudi's discovered a new Ghawar that I didn't hear about? Doubtful. Thus, there are very real concerns about supply going forward, and 'plentiful' is not the right word to use here.

The market is not based on whether or not there are gas shortages NOW - it's a leading indicator. Priced into oil is the uncertainty about supply and demand in the FUTURE. This analysis seems to miss this point utterly.

Further, there is a major difference between oil and housing on the one hand, and tech stocks on the other: houses and tech companies are not finite, non-renewable resources. Oil is. The same rules do not apply. How is it that so many self-styled 'oil analysts' miss this most fundamental, basic, incontrovertibly vital point?!?!

Oil prices will certainly correct from time to time, but until the uncertainty about long term sustainability of oil supply is directly addressed (and the utter lack of transparency from OPEC and the psychosis emanating from Russia are not encouraging), it's seems foolhardy to assert that high oil prices are a 'bubble', and it seems likely the uptrend, or at the very least a sideways action, will continue. In other words, concrete facts about supply will be required to drive the price trend down. No such facts are in sight at the moment, despite the speculation about demand destruction - speculation does not equal fact.