Remember early last year when you could barely open up the financial section without seeing some new “expert” claiming that oil was about to hit $200? And at the time, it seemed quite reasonable, considering that the black gold was steadily climbing to $140… right before it tanked to levels we never thought we’d see again.
These days, oil is hovering around $60/barrel, a far cry still from the $140 we saw last summer. But we have the doomsday criers once again, this time from Saudi Arabia, warning us all to expect those painful prices once again.
OPEC in general is full of a lot of a hot air, and they’ve proven ineffective in the past in controlling prices, so I don’t put much stock in Saudi Arabia’s warning this time around. Do I believe prices will probably rise in the short and even medium-term? Yes, as economic data comes in to sustain bullish hopes, oil will continue to creep up a little bit at a time.
But $200/barrel anytime soon?
The global economy is still far from healthy, and that kind of price rise can only be sustained by some sort of buyer’s market. When people back in the far more confident 2008 cut down on their driving because of $4.00 per gallon gas at the pumps - a natural result of high oil prices - how much more do you think they will at $5 or 6.00?
Investment U looks at the same situation from a different perspective, which is still well worth considering.
Gold climbs to $1250, Oil at $200 by The Investment U Research Team
We don’t know if its scaremongering, boasting, gamesmanship or true prognostication, but this morning we’re looking at a couple of reports - One from Standard Bank Group on gold’s price future, and the other from Saudi Arabia warning of $200 oil prices.
Gold has been fluctuating - it’s currently at $950. And oil has been sitting around $60 a barrel. Oil looks to be the safer of the two bets here. Besides, we’d rather see the opportunity for a 230% return on oil than a 32% return from gold.
While the Saudi’s argue that oil’s price is going to rise because of the lack of investment in production, its pretty clear that oil’s price will rise because of two big reasons.
We haven’t found a new energy source that’s economically feasible to quickly take the place of oil, and the supply of oil is finite. Nothing new, but it helps to be reminded of this.
If you look at any television screen over a 24-hour period, you’d think the entire world is already run on fuel-efficient vehicles, recycling plants, wind and solar power. The fact is: it’s run by coal, oil and gas. And nothing seems to be changing that anytime soon.
While there are lots of promising technologies coming down the pipelines, we’ve seen nothing that quickly - five to ten years - meets the needs of a voracious global consumer. Until that does, we should look to see fuel continue to be a hot topic, and a good investment.
It means that companies like BP plc ADR (NYSE: BP), Exxon Mobil (NYSE: XOM) and TOTAL S.A. ADR (NYSE: TOT) should all look for years of profits in the meantime.
