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S&P reckons oil market not like the 70s but good for gold « Peter J. Cooper’s Weblog
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by arabianmoney | May 26, 2008 at 04:07 am
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Mr. Kolts is of the opinion that the oil market has undergone a structural shift with demand way out of line with the capacity of existing installed infrastructure to deliver supply. This is very different from political interference – the Arab oil embargo of 1973 or the Iranian revolution in 1979 – and makes a correction in price far more difficult.
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Most RecentMost Recommended Comments (4)
at 20:45 on May 26th, 2008
There will not be a real correction in price until good substitutes are plentiful and maybe not even then. Supply is relatively fixed until Canada's oils sands are in full production. That will add a significant supply to world output but it is expensive oil and will not be available except within a high price regime. By that time we will likely already have seen $200+ per barrel oil and $10+/gallon gas in the US and double that in Europe. The added supply may moderate the price but it will not be able to compensate for the huige demand surges in India and China. You are gonna need a second job to fill up that big SUV.
at 21:24 on May 26th, 2008
Yes I am thinking of selling mine! But this oil price spike is going to make an already worrying recession significantly worse, if it is not about to blow over quickly as some hope. I recall in the late 1970s how high oil prices eventually produced a nasty recession by 1982 when I was trying to find my first job. The S&P guy is interesting because his views must be close to the Wall Street consensus and if that is what they really think then heaven help us. Buy gold and silver and keep your head down!
at 21:40 on May 26th, 2008
I think the S&P guys are pretty on-target. The fundamentals are all there. Unfortunately the writing has been on the wall but North American politicians have been trying to pretend they could come up with a solution. They can't. So the US recession will be inevidable but out of it we should at least have a thriving alternative fuels industry. In the mean time buy gold, silver and mining stocks.
at 22:02 on May 26th, 2008
Agreed - as the alternative investments (housing, hedge funds, mutuals, bonds, etc) look sick retail and professional investors will be funnelled into precious metals - it is a narrow market and so the price will go up sharply. Silver is the narrowest market of all.