Today's column: the oil bubble
Oil bulls are yelling at me for being "bearish." I didn't think the column made a very good bearish case, did you?
The Fed is printing money to clean up the housing bubble, which was fueled by the money it printed to clean up the Internet bubble. The only question is what kind of bubble the new money will inflate.Bet on oil and other energy.
Unfortunately for energy users, which is all of us, it may be years before the oil foam settles down. If this were the Internet bubble, we're probably closer to Nasdaq 2,500 in 1998 than Nasdaq 5,000 in 2000.
Every bubble needs a story. The Internet story was that the whole economy would shift to the Web. The housing story was that people don't trade Cape Cods and ranchers like penny stocks and that Wall Street knew how to lend to high-risk borrowers.
The energy story is that the planet is running out of oil, and we must pay $115 a barrel or more or return to the Stone Age. The "peak oil" theory, a fringe doomsday scenario a few years ago, is now an investment philosophy.
Like the other bubble stories, the energy tale contains substantial truth. It's just a matter of how much the truth is going to cost you.
Read the rest of the column HERE.
Comments
Hi Jay--
I don't know from "bullish" or "bearish" but your characterization of the concept of "peak oil" as a "theory" sure strikes me as analogous to "intelligent design." If you think it's a "fringe, doomsday scenario" then you live on a different planet from mine, which is named "Earth," in the Copernican solar system and is about 8,000 miles in diameter--NASA can give us a more precise number--and so according to my high school physics and geography and geology there is a FINITE amount of oil on this planet. Arguing about whether "peak oil" has occurred, will occur tomorrow, or will occur in 5, 10, 15 or whatever number of years--yes, this is kind of kooky. But--peak oil WILL occur.
You do us a disservice by putting the COST factor AFTER your statements about peak oil. The cost--and return on investment--is the story here. The "miraculous" oil shales-sands-mud-whatever in Manitoba and the northern US are INFINITELY (in human terms) costly to get the oil out of; it's not only the energy inputs it's the eternal environmental damage that goes into the equation--and it's the same for "huge" new oil reserves--at the North Pole. Please--does anyone in her or his right mind believe the international community would allow oil drilling near the North Pole, even if the exploiters could show they were making a couple of cents on the dollar. What I'm saying is--there may be lots more oil out there somewhere but it's not easy to recover.
John Bosley
Posted by: John Bosley | April 21, 2008 9:47 PM
Hello, Jay....What if oil is renewable? The earth's core, I'm guessing, contains more heat (energy) than mankind could ever consume? Could it be that oil is the result of the core's ongoing activity? I believe the peak oil theory is scarring the avg person into this scheme of suddenly higher oil prices. This somehow is playing into the hands of speculators via CFTC's recent rules changes. Just like Al Gore's global warming theory is leading us towards paying his tax of carbon credits through his Chicago based carbon credit trading exchange. People need to educate themselves or suffer the consequences!
Posted by: Dale Clayton | April 22, 2008 6:27 PM