Oil: A Slippery Slope Ahead?

by: Andrew Mickey December 02, 2008 | about stocks: BQI / COSWF.PK / OIL / RDS.A / SU / USO    

Andrew Mickey

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Dr. James Schlesinger says the U.S. attitude towards oil “has only two modes – complacency and panic.”

Schlesinger should know. In the 70’s he closely watched the Middle East as the U.S. Secretary of Defense. Then he would move on to become the first U.S. Secretary of Energy when oil prices were really starting to move up during the Carter Administration.

He was in the thick of the oil panic of the 70’s, and he was there, holding numerous seats on oil companies’ boards of directors, during two decades of complacency.

Oil is hovering around $50 a barrel and we’re at the middle of the road. No trader is willing to take a big bet either way for the short-term, OPEC has brought out the dogs and ponies, and oil stocks appear to have hit a temporary bottom.

Still a lot of questions hang over any near-term rebound in oil prices like, how long will the recession last? How high is U.S. unemployment going to rise? How deep an impact will a major production cut from the Detroit’s Big Three have? How big will the coming U.S. stimulus package be? How hard of a hit will China’s economy, which we discussed the other day is perfectly built for booms, take from the global recession?

All of the economic uncertainty has sparked a new era of complacency in the oil industry. If you look at history, the best time to buy oil stocks is during periods of complacency.

So, as I’m sure many of you are wondering, is now a time to buy oil stocks?

To find the answer, we have to figure out how bad the oil price drop has hit the oil industry, how OPEC could actually send oil prices even lower (yes, it could happen), the short-term impact of the oil bubble, and how long complacency will last.

Drastic Times and Drastic Measures

The drop in oil prices has taken many by surprise. Most now realize the bubble has burst. It’s been sudden and drastic and oil companies are responding with sudden and drastic measures.

The most widely noted impact is the elimination of new projects. Every oil bull will cite this as a huge problem facing the oil industry down the road.

Frankly, they’re right. However, it’s going to be a very, very long road.

If the oil downturn was just going to be a few months, oil companies would just slow down or temporarily halt production where they could. However, they are bracing for a much longer period of $50 or lower oil prices. Dozens of new projects have already been shelved, and with each passing week, more and more oil projects are added to the list.

That’s not what really has me concerned though. While some oil companies are taking their medicine now and shelving projects (which needs to be done), others are still pumping away in desperate hopes of a near-term rebound forcing them to take more drastic measures.

Last week, private oil trading firms and oil producers including Royal Dutch Shell (NYSE: RDS.A) announced it is renting oil supertankers to hold excess supply of oil. They are booking multiple supertankers to store millions of barrels of oil.

Mike Rothman, of New York consulting firm ISI, said:

The Gulf is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell.

Iran is also getting in on the action, and at last report, Iran had leased 10 oil tankers to hold 20 million barrels of oil no one wanted to buy.

Renting oil tankers is a desperate move. Regrettably, desperate moves rarely pay off. In this case, the stored up oil is going to help keep a temporary cap on oil prices when the global economy shows some signs of life again. If oil prices jump, the owners of the oil will certainly start to sell off the millions of barrels of oil they’ve just been sitting on.

When Bubbles Burst

Clearly, the glut of supply we’re facing is big. And thanks to the long period of high oil prices and bubble-like mentality of oil companies, the supply glut isn’t going away anytime soon. As bubbles form, investors and companies race to capitalize on the opportunity. When oil prices started to rise, the race to make money on oil was on.

More than 500 energy focused hedge and private equity funds bought oil. At the peak, there was between $150 billion and $250 billion of speculative capital running up oil prices. They didn’t want or need oil. They just wanted to buy it and sell it at a higher price. When oil started to turn down and all of this extra money was pulled out, oil prices came crashing down.

It wasn’t just the hedge funds though. All kinds of investors and oil companies who joined the oil race were aggressively funding new projects. New project spending was rising steadily for years. Total capital expenditure rose to $160 billion in 2005, $200 billion in 2006, and surpassed $250 billion in 2007.

Not all of this money was squandered. It was spent on new oil wells, developing new technologies, exploring for more oil reserves, and the purchase of equipment to produce more oil.

The capital equipment hasn’t vanished. In most cases, it’ll be simply standing at the ready for oil prices to recover. It’s like a giant spigot just waiting to be turned back on. If and when oil prices rise, many of these projects will be turned back on, supply will increase quickly, and oil prices will be held down.

When bubbles burst, a glut of capacity is usually left to show for it, and it usually takes a while to work through it. Just take a look at how long it will take to sell thousands of Miami condos or the decade it took for demand for fiber-optic cables to pick up again. The current oil supply glut could take just as long. If you think that OPEC is going to be able to keep oil prices propped up, then think again.

OPEC Could Send Oil Prices Spiraling Even Lower

OPEC slashed oil production by one million barrels a day a few weeks ago. Over the weekend, a strategic OPEC meeting failed to produce any material cut, and the market is already expecting a one and a half million barrel per day cut from OPEC in a couple of weeks. Through it all, oil prices continued to slide and we’ve seen how truly weak OPEC is.

Here’s the thing about OPEC, its members may actually send oil prices tumbling further. As we analyzed in "The Future of Oil" a few weeks ago, National Oil Companies [NOC] now dominate the world’s oil market. They control 80% of the world’s reserves and their profits are used to fund social programs. The revenue from NOCs is drastically reduced with oil at $50 a barrel, and most countries still haven’t adjusted their spending for lower oil prices. Venezuela’s budget for 2009 was made with an average oil price of $95. Russia’s government will be running a deficit if oil doesn’t average $70 a barrel next year.

Falling oil prices puts these countries into a bind. If they cut production sharply enough to keep oil prices up, per barrel of revenue will increase, but total revenue will be lower. Basically, if you sell 100 barrels of oil at $50, you make $5,000, and if you sell 50 barrels at $80, you only walk away with $4,000.

The numbers are a bit oversimplified, but you get the picture. Many countries will be facing big problems if oil falls further or if they cut production enough to keep oil prices propped up. When hard times hit, OPEC members look at what’s best for themselves instead of the group.

This wouldn’t be the first time this happened though. It happened in the late 90’s when oil fell to $10 a barrel. Now it looks like it’s happening all over again. OPEC recently agreed to an output quota 27.3 million barrels a day. Petrologistics, an oil industry research firm, notes OPEC countries are producing 27.8 million barrels a day.

It’s a lose/lose situation that could easily keep a few OPEC members pumping oil at or near full capacity even if oil prices fall further.

That’s why I wouldn’t pay much attention to OPEC at the moment. It’s a weak organization with no enforcement mechanism for the quotas. In the end, it looks just like OPEC is doing what it does best, making headlines instead of effectively propping up oil prices.

Two Ways to Go From Here

From here, oil prices are likely to continue to fall. Frankly, hopes for an oil recovery are still too high, and as a result, most oil stocks are still priced for a rebound, which (except for maybe a few short-lived spikes) isn’t likely to happen.

For a long time now, many of you know I’ve absolutely hated the oil sands. Any business that requires oil prices at multi-decade highs ($80 just to break even), has a 10-year or longer payback period, creates unbelievably large environmental issues, and requires multi-billion dollar outlays before the first dollar in revenue is received, makes about as much sense as ethanol. However, oil sands stocks are good for one thing, as they can tell us how much hope is still around for a rebound in oil prices.

Companies which own large oil sands projects like Suncor (NYSE:SU) and Canadian Oil Sands Trust (COSWF.PK) have watched as their shares are clobbered. Still, I find the best indicator of how much hope for a turnaround is left in the markets is probably Oilsands Quest (AMEX:BQI).

Oilsands Quest is a pure-play on oil sands. So with oil at $50 a barrel (and not much possibility of oil prices rising above $80 – where it would be able to break even), it’s pretty much worthless. At the moment, Oilsands Quest has a market cap of $250 million. And if we were truly in a period of complacency, it wouldn’t be worth more than $50 million (and that’s being generous).

In the end, we can’t ignore what other commodity bubbles bursting have shown us. If every other commodity is going back to 2002 price levels and mining stocks are going with them, there’s no reason not to expect oil and oil stocks to do the same.

My money is still on the sidelines waiting for a further drop in oil prices, as I just can’t think of many good reasons to buy oil stocks right now. Massive stockpiles are building up, and the oil production projects made during the oil bubble are still in place. Oil demand continues to drop as, for the first time in decades, Japan, Europe, and North America will all be in a recession at the same time.

The only real reason to go “all in” on oil stocks now is if you expect a sudden rebound in the global economy or expect Wall Street to take the long-term view. I wouldn’t bet on either happening anytime soon. Be sure to stay current with the Prosperity Dispatch, our free e-letter, for more investment tips and analysis.

The window to invest in oil stocks should be open for at least a year. For me, there are just too many expectations for an oil recovery that are just too high, and when it comes to investing, great expectations usually lead to great disappointments.

There will be some amazing opportunities in oil over the next year, but for now, it’s best to keep plenty of cash on hand and wait for them to fall even further. As oil prices slide down a slippery slope, it’s a buyer’s market and we don’t have to chase anything.

Disclosure: None

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This article has 45 comments:

  •  
    Dec 02 11:43 AM
    “If sentiment gets worse and equities move lower we could see oil go to $40.” said Gerrit Zambo, an oil trader at BayernLB in Munich.

    Oil sentiment is still very bearish on the pits.

    oiltradersblog.blogspo.../
    Reply | Link to Comment
  •  
    Dec 02 12:05 PM
    Very insightful piece. Thanks very much.
    Reply | Link to Comment
  •  
    Dec 02 12:08 PM
    Oil companies are heavy borrowers and depend on healthy credit markets to finance drilling projects. Hence, that is why new drilling has ceased for numerous projects. Also, the fact that many of these new projects do not expect to yield large supplies of oil (the world is running low on large scale pockets of oil) shows that we will again experience a supply/demand issue for oil when industrial consumption and manufacturing resumes. The world is not done growing (population is exploding, and we will contain to see an influx of global urban growth) and will need commodities again to fuel this growth. Oil companies have contracted their proposed drilling projects not because they believe oil will permanently remain at $50/barrell, but because they are simply short of credit. This article ignores a big aspect of the oil industry, and therefore, shows this writer did not fully research the issues. If anyone truely believes that oil prices will remain at this level for a sustained period of time and global growth is finished, he or she really needs to stop investing as they completely do not grasp the concept of buying low and selling high.
    Reply | Link to Comment
  •  
    Dec 02 12:11 PM
    Great Analysis.

    John
    Reply | Link to Comment
  •  
    Dec 02 12:52 PM
    Interesting point about OPEC's inherent weakness. Indeed, the 'unfriendly regimes' (Iran and Venezuela and non-OPEC Russia) need very high oil prices to fund their expenses. They are caught in a prisoner's dilemma and will probably not implement OPEC's suggested production cuts.

    Also, very interesting about the renting of tankers to store unbought oil. I did not know that at all, and shows how weak demand really is!

    Where I strongly disagree and where I find you lack adequate research is for your Oil Sands argument. Let's set something clear... Cash costs for Oil Sands ARE NOT 80$ per barrel. You mention Canadian Oil Sands Trust. Had you read their quarterly report (biz.yahoo.com/cnw/0810...) you would see their cash costs per barrel are at 35$ and funding for their investment projects are 10$ per barrel, meaning they are profitable and self-sufficient at 45$ a barrel (more or less). Suncor and other oil sands companies also have cash costs in the low 30s. Low natural gas prices and weaker demand for oil workers will actually make that cost go down.

    Oil sands in Canada are often misunderstood. Some 'unconventional projects' indeed might have marginal costs of 80$ a barrel, but these have already been shelved. Most active fields actually have quite low cash costs, so the barrel would still need to come down a lot in order to cause important losses.

    Whether the barrel will go as low as 30-35$ is another question to ask, and of course I do not have the answer... But I guess if speculating sent the barrel to 147, speculating can equally send it to 30. Just by listening to the trader sentiment (on Fast Money) on oil, it is insanely bearish.

    Anyways the market is setting itself up for a supply squeeze in 5 years that will send oil prices back up again.

    Conclusion: Neutral/Bearish short term and Bullish long term

    Disclaimer: I own Suncor shares
    Reply | Link to Comment
  •  
    Dec 02 12:52 PM
    Jim Jubak on MSN.com offers a good write up on why OPEC might not be able to prevent its members from cheating on production quotas or even agreeing to them. As the author notes, budgets by many OPEC governments such as Iran and Venezuela has assumed $80-90 oil. If they cut to pump the price up, they will only go broke quicker as they watch each other cheat, sell stockpiles, etc. Then there's Russia! Bottom line is, OPEC is a mess.

    This is actually horrible for us, as conservation and alternative energy will be soon forgotten as we buy millions more, now govt-subsidized, Chevy Tahoes and Dodge Ram V8's, thus setting ourselves up for the next oil recession.
    Reply | Link to Comment
  •  
    Dec 02 01:02 PM
    "Basically, if you sell 100 barrels of oil at $50, you make $5,000, and if you sell 50 barrels at $80, you only walk away with $4,000."

    50% reduction in consumption WOW!!

    most dire state reduction in oil consumtion worldwide is still less that 10% but for argument sake even with 10% reduction at $80 revenue would still be 90*80=7200

    Reply | Link to Comment
  •  
    Dec 02 02:33 PM
    The oil consensus is WRONG again. Just a few short months ago when oil was $140+/bbl and going to $200/bbl the experts forecast ever rising prices on the back of supply shortfalls. After all geological limits were overtaking supply and forcing it down through depletion at a rate of 5% - 8% per year.

    Clearly, then NO ONE factored in DEMAND! WOW!!!


    Now the price is down, and the 'experts' are forecasting even greater loss of demand and gigantic increases in supply. What a crock! The loss of demand was about 2 million bbls per day. With gasoline back to $1.50/gal all of this demand will soon be back. Meanwhile supply is still declining due to depletion and few, if any, new supply is coming to market next year. We will soon be bumping back up against a peak oil supply of about 86 million bbls per day. If this goes on long enough, the world peak of 86 million bbls per day will NEVER be acheived again due to massive depletion of major oil fields.

    Clearly, NO ONE is factoring LOSS of Supply into their equation! WOW!!


    As for OPEC - history isn't going to repeat. This time around they will CUT and force the price back up, perhaps not instantly, but within six months to a year. Here are some good reasons why this will be the case.

    1. OPEC has a larger marketshare than it did 25 years ago. The world is more dependent on them than ever before.

    2. China and India are new customers than didn't exist 25 years ago to any great extent.

    3. The Russian economy collapsed faster in the late 1980's than its oil production. This allowed for greater exports. Now both the Russian economy and oil production are falling due to depletion. This could still be a factor, but not the BIG factor it was 20 years ago.

    4. The North Sea was new and a high producer then. It is now almost gone. If OPEC cuts, it cannot make up the difference.

    5. Mexico and the Gulf of Mexico were new and high producers. These are now almost gone. If OPEC cuts, they cannot make up the difference.

    6. The 1973-74, the 1979-80 and the 1991 oil price spikes were ALL political events and mostly War related. The 2005-2007 price spike was NOT War related. Iraq's oil production remained around 2.5 million bbls per day throughout the period. It fell briefly in 2003 at the start of the War, but was restored. The cause of the 2005-07 price spike was geological depletion - production could not be increased fast enough to keep up with demand.



    Reply | Link to Comment
  •  
    Dec 02 02:34 PM
    Where are those $200+ Goldman's geniuses when the longs need them? Looking for a bailout from their pimps in Congress? Maybe Goldmans executives are hiding out with the Ivy League professor who wrote the book on Dow 30,000 in 1998 or so.
    Reply | Link to Comment
  •  
    Dec 02 02:54 PM
    A few thoughts:
    1) Oil IS headed higher. You think recession is the major factor? All it will take is one geo-political event in the right location.
    2) Tax policy -- Are you sure the oil majors are holding off on development projects because of the temporary slack in oil demand? That won't last. How about looking at the more relevant factors: Dems have total Federal control, despise Big Oil and want huge windfall taxes imposed, and are planning tax breaks for alternate energy spends along with cuts to tax credits for oil producers! There's your real story.
    3) Infrastructure spending stimulus -- why build out roads if driving (vs. mass transit) is evil?

    You want the answers?
    1) Obama & Dem foreign policy is a joke - go ahead, sit down with the likes of Chavez & Ahmadinejad. Appeasement didn't work with Hitler either. Iran will attempt to annihilate Israel (not my theory -- Ahm. stated this goal publicly more than once). Obama's lack of real action against Iranian nuclear progress will embolden Iran, and the Middle East will erupt. Watch crude prices skyrocket.
    2) The answer is mandating fuel efficiency standards, not giving tax credits on a per-type basis for certain energy sources -- their economic viability must stand on its own, but we must become more efficient at the usage side of the equation. Oil corporations should not be subject to windfall taxes -- they already pay "mineral extraction" taxes above and beyond the regular corporate taxes. Let's not kill the economic viability of these companies, which provide many thousands of good jobs!! Look at how so many in the industry are relocating HQs abroad to obtain lower corporate tax rates...HAL & RIG are just two examples that come to mind in the Oil Service industry.
    3) The government should be building roads when and where they are needed...not as a "stimulus", but based on need. And I hope the liberals are not conflicted to see the "Messiah" touting the building of roads, given their hatred of those who drive rather than take buses and trains to everywhere, despite the fact that they don't cover half the needed destinations, are not always conveniently timed, and have in many places become a risk to one's safety! Most people don't want to be told what size vehicle to drive...or whether to drive vs. ride public transport! This looks like a win for personal choice.
    Reply | Link to Comment
  •  
    Dec 02 03:04 PM
    Virtually everything in America runs on oil or natural gas. Lower oil prices mean falling costs and expanding profit margins for US companies. It puts $$$ in consumers pockets and thus tends to lift consumer confidence. Falling oil prices also puts less money in the hands of people who do not like us very much. While its true alternative energy will be at least temporarily slowed, strong leadership from an enlightened government can keep R&D alive in anticipation of the inevitable reversal. In the meantime lower oil is a huge positive.
    Reply | Link to Comment
  •  
    Dec 02 03:13 PM
    'Scuse me? We keep hearing of record profits. Heavy borrowers? Please back up these statements...if you can.

    > Oil companies are heavy borrowers and depend on healthy credit markets
    > to finance drilling projects. Hence, that is why new drilling has
    > ceased for numerous projects.
    Reply | Link to Comment
  •  
    Dec 02 03:36 PM
    Socialism,

    OK, then what's your plan to prevent us from having periodic oil recessions? To prevent sending trillions of dollars to our good friends in Venezuela, Iran, Russia, and that theocratic dictatorship Saudi Arabia? To prevent our oil money from paying for terrorism, Russian militarism, or Venezuelan/Cuban communism? To reduce our largely oil-based trade deficit? To insulate our totally vulnerable economy from the whims of Iran, Venezuela, and Russia?

    What options do you suggest? Military conquest of the middle east at a cost of millions of lives? Would you die for oil?

    Are you one of those people who thinks infinite oil lies under Daytona beach or Yellowstone park?

    Are you suggesting the status quo? It looks like the status quo is an economy dependent on oil that is sure to result in poverty and war.
    Reply | Link to Comment
  •  
    Dec 02 03:48 PM
    I think everyone here with a non-flat EEG reading understands world events will and can influence oil prices. If Iran or Israel act up that oil will move to the upside quickly. However, I am okay with holding these discussion factoring such events out. I don't think there is disagreement if something boils over in the Persian Gulf region oil prices will dramatically rise.

    It has long been known Iran has been stockpiling crude oil (albeit mostly sour crude and in a time of historically high prices) for some time, I recall seeing such talk at this site and others. What is new now, is others are starting to do that in a more rational strategy to capture higher market prices (in a period of relatively low prices). However, that will probably slightly raise prices and then cause them to fall further when the tankers start to race each other to offloading points.

    Right now, the sour economic mood is driving the oil market. Any OPEC cut to be announced is most likely already factored into pricing, and looking at the latest chart from the USEIA I see oil stocks are pushing the upper end of the average range, if you look, despite the rapidly dropping oil prices we see a large uptick in stocks. If the economy was humming that chart would look a lot different.
    Reply | Link to Comment
  •  
    Dec 02 04:01 PM
    The high cost of production of Canadian oil at 50$ will mean that they will be shutting down their operations and then this silliness will soon end.
    Reply | Link to Comment
  •  
    Dec 02 04:05 PM
    I agree with annyone and enviro111.

    A small shortfall in supply can trigger a significant increase in $/bbl. I suspect OPEC is lying low because they do not want to be blamed for the recession and would be happy to see some of the hysteria over alternate energy dissipate.

    Once the global economy starts upward again, oil will start back up as well.
    Reply | Link to Comment
  •  
    Dec 02 04:07 PM
    Not all oil wells produce cheap oil. Many new new oil operations are only profitable above 50$ a barrel. Who is going to sell oil bellow the cost. As soon as these facilities shut down for being unprofitable, Saudis will no longer control the price oil any longer and then say hello to astronomical numbers.
    Reply | Link to Comment
  •  
    Dec 02 04:16 PM
    jepittman,
    "enlightened government" ha, that's a good one. If they were enlightened, they would probably gradually raise taxes at the pump, let's say over the next ten to twenty years. They should get rid of the MPG standards and let the market do its thing (people would want fuel-efficient cars to pay less tax). With increased tax revenues coming in from the pump, they can use some of that to invest in alternative energy R&D and other mass infrastructure. Also, higher gasoline taxes would accelerate private investment in alternatives as these would become more viable economically. But then again, those tax dollars would quickly be "reallocated"... to other stuff that congress deems so-very-important.
    In any case, what the article didn't factor in was the US dollar. Currenly our enlightened government is running the presses as fast as they can. What are barrels of oil denominated in? Federal Reserve Notes aka dollars, cash-money, etc. There is some deflation now, but with all these dollars being pumped into the system, we could see an inflation spike in the not too distant future. WIth that oil will go through the roof.
    Reply | Link to Comment
  •  
    Dec 02 05:27 PM
    When the dollar bubble bursts, then the value of $-priced commodities like oil will spike and stay above $100. It is a price that we can afford and that may create some political stability.
    Reply | Link to Comment
  •  
    Dec 02 08:15 PM
    This article is a joke.
    You made up numbers anytime it suited you.
    Just 2 examples:
    Chavez has oil budgeted at $95...False...$80 was the figure from many differrent sources for months now.
    Oilsands need $80 for breakeven...False...Un... the huge run up in prices that caused a shortage of labor and equipment oilsands breakeven was %$40-50 a barrel.

    Much like most things on SeekingAlppha you artice is written to serve your already decided conclusion, not an independant analysis.
    Between that and the perma bear this site loves to publish it is a wonder you guys haven't all committed mass suicide yet.
    Reply | Link to Comment
  •  
    Dec 02 08:43 PM
    Jackass analysts predicted oil prices to the moon back in July. Now a mere 4 months later the same morons are predicting extended periods of $50bbl. See a trend?

    Inflation is about to come unleashed in 2009, and the USD will be devalued big time. Think oil will stay at $50 then?

    Disclaimer: I hate 'analysts' and 'experts' and I own a recently purchased boatload of Suncor.
    Reply | Link to Comment
  •  
    Dec 02 09:54 PM
    Petroleum is a finite, exhaustible asset. No more is being made. A commodity that becomes increasingly scarce but retains widespread use will see its price rise (eventually).

    Warren Buffett's stake in ConocoPhillips provides clarity here. He bought something he thinks will generate predictable earnings for a long time.
    Reply | Link to Comment
  •  
    Dec 02 10:20 PM
    my b.s. meter just pegged.
    Reply | Link to Comment
  •  
    Dec 02 11:44 PM
    Where's Tom Clancy when you really need him? BIG OIL contains all the ingredients of a geo-political pot-boiler: greed, money, power, stupidity, whacked out political regimes, Al Queda, centrifuges/nukes, Israel, Somali pirates, complacent consumer nations, treacherous cartels, social unrest etc. As Socialism Cannot Compete (SCC) expressed, ".... one geo-political event in the right location". It's not too difficult to imagine a dozen lively scenarios.
    I agree with SCC that political risk has been too heavily discounted in oil futures and projections.
    Reply | Link to Comment
  •  
    Dec 02 11:53 PM
    Cameltrader, The book is called Red Storm Rising, Islamic terrorists blow up a crucial refinery in the USSR and The Bear decides war is the solution.

    I too agree with you, geopolitical risk is not adequately priced into oil. I would think given a serious event in the Persian Gulf region we could see oil 2x in couple of weeks.
    Reply | Link to Comment
  •  
    Dec 03 12:10 AM
    Thanks, Marcus. USSR? It may be out of print!

    Anyway, it wouldn't take much to spark a run on the refinery. Your x2 prediction would be low if there were a serious event (or a coordinated series of events) in the Gulf and elsewhere.


    On Dec 02 11:53 PM Marcus Aurelius wrote:

    > Cameltrader, The book is called Red Storm Rising, Islamic terrorists
    > blow up a crucial refinery in the USSR and The Bear decides war is
    > the solution.
    >
    > I too agree with you, geopolitical risk is not adequately priced
    > into oil. I would think given a serious event in the Persian Gulf
    > region we could see oil 2x in couple of weeks.
    Reply | Link to Comment
  •  
    Dec 03 12:22 AM
    In the timespan I limit it to?
    Reply | Link to Comment
  •  
    Dec 03 07:00 AM
    Jim Rogers has been buying oil. He is a very good long term player. As he says Oil will go higher, eventually. Supply is being killed and so as demand, but demand will come back in a year or two.


    jimrogers-investments..../
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