Monday, June 20, 2005

Oil crash coming?

I found an article on CNN's Money web site today. Since this link will probably go dead in a few days, here is a quote:

SINGAPORE (Reuters) - The oil market may be quickly headed for a massive crash as global economic growth slackens, alternative energy gains ground and financial traders sense a price peak, an economist with Morgan Stanley said Thursday.

His projection for a multi-year bear cycle stands in sharp contrast to the super-spike scenario envisioned three months ago by Goldman Sachs, Morgan Stanley's arch-rival in the world of oil derivatives trading, where they are the two biggest players.

"As evidence of weakening demand and ample supply accumulates, the market may panic," Andy Xie, Greater China economist in Hong Kong, said in a report. "I believe it could correct in the most speculative fashion -- it could collapse."


This article is further evidence that people just don't seem to understand or want to talk about the possibility of cheap oil running out soon. They say that growth will slacken, that advances in alternative energy will be made, and that economists will think the price is getting too high and is forming a bubble. Sure these things will influence oil prices for a while, but there are many people that say that these are not going to make much difference. I happen to think that oil prices will continue to go up for the foreseeable future.

The price may very well crash. It may go down into the 40s or even the 30s. But then it will go right back up again, just like it did in February. If indeed the price is headed for a crash, it presents an investment opportunity. Sell out of energy stocks and bonds, wait for the crash to occur, then rebuy into them.

No comments: