Sophisse

How Bad Is the Oil Shock of 2008?

Thank you for the excellent article. Opinions are good, but opinions backed up with data are much better.

Airlines Will Profit No Matter What

Jack - found your article from Jan 6 when you recommended United Airlines at $32 and American Airlines at $13. UA is now under $10 and AMR is under $8. seekingalpha.com/artic...

Ouch.

Airlines Will Profit No Matter What

"The reality is that we have used one trillion out of more than 13 trillion barrels of oil."

You really need to back that up. Serious oil analysts will debate about new finds, how much can come online at what price over what duration, whether the Saudi fields are as large as they say, etc. But nobody (that I've found) ever says anything like 1/13.

A few years ago, people were looking at $35 oil saying that it had to come down from its highs. Now people are hoping it will drop below $100. The futures market is currently pricing 5-year oil at over $120. Plenty of people think it will drop - but not many think it will radically drop.

Personally i could expect a drop but then starting to rise again. We need these high prices in order to justify, and pay for, the large investment needed to bring new sources of oil (and/or alternatives) online.

Prices are now permanently high, at least compared with a decade ago. Airlines are forced to raise prices, which won't even make them more money, just pays for their higher costs. Higher prices make people travel less, an effect amplified by the higher costs of food and gas that leave less discretionary income people's pockets. Meanwhile the airlines are stuck with debt, losses, and a big pile of inefficient aircraft. They need to reduce staff, reduce flights, and upgrade some of their aircraft and junk the rest. All this costs new capital. Old investors are gonna lose their shirts - whatever shirts they have left!