As oil continues to run higher on unrest in the Middle East and Northern Africa, big oil companies are enjoying larger profits in the short run. Chevron Corporation (NYSE:CVX) is trading at $103.52, +3.20 (+3.19%) while Exxon Mobil Corporation (NYSE:XOM) is trading at $87.22, +1.78 (+2.08%). These companies surged dramatically higher yesterday on oils strength and are doing so again today.
While higher oil does mean more profits in the short term, it is not that way in the long term. As oil and gas prices rise, global demand will start to wane. If oil prices continue to rise, global instability is going to increase as inflation continues to move higher. Eventually, as consumers recoil from the massive surge in energy, demand for oil will drop and profits for big oil may start to drop. The big question will be, at what price does this occur. Many believe it may start at $100.00 oil and others believe at $115.00. In 2008 oil reached $150.00 per barrel. The global economy was much stronger then and it still collapsed into the financial crisis we have seen. What will happen this time?