The talk in the media right now is all about the price increases that are constantly going up. And everyone is screaming “Get used to it!”. Now, I’m not a professional futures trader nor am I in the business of oil & gas production but I do know trends – especially when they are obvious. So, I did a little research and found a telling article that I agree with. They blame the increase on 3 things: value of dollar, geopolitical problems and speculation!
Seems to me that this is forming a bubble. When oil levels out, most likely the speculators will move somewhere else (perhaps to a week dollar) and that will cause a rebound. While we can’t predict political uncertainty, taking 2 of the 3 reasons off the table will definitely help.
Moral of the story… DON’T FREAK OUT! The more people freak out the more the speculators will drive the price and the more we’ll have issues. Keep in mind that in 1998 people were saying the stock market would never drop. Then in 2004 it was housing (lets remember what speculation did there!). Now its 2008 and its oil. Everything is cyclical. So if you want to make some money on the way down, maybe look at transportation (when oil starts declining). AMR and CAL were down 24% and 13% respectively. Bottom pick on those and some refiners (VLO!) and make some money when everyone starts being frantic in the next bubble. I can’t wait to see what it’ll be.
