Short Term Memory In Effect
January 11th, 2007 by Grant in: Economics, Energy, Oil & GasIt’s interesting to me to watch the effects of our short term memory play out like a stacked deck in game of hold’em.
You might remember not too long ago (2004) that crude oil was trading down around $35 per barrel. Oil started climbing gradually through the rest of ‘04, all through ‘05 and through the majority of ‘06 before peaking just under $80 and then retreating to ring in 2007 at around $60 per barrel.
In the last oil boom (which is historically followed by a “bust”) the same trend played out before the price of crude went crashing through every known support level, plummeting through any technical indicator known in the charting world, and crashing to the floor.
The bumper sticker of the day soon became:
“Please God, grant me just one more boom. I promise I won’t piss it away (again).”
Fast forward to present time and look at the language being thrown around the commodities markets.
What’s Really Behind This Oil Price Crash?
Oil plunged below $52 per barrel…
What’s Behind the Crash in Crude Oil?
Notice the key terms in the majority of the headlines dealing with crude oil prices? Crash, plunge, plummet…
And oil has only fallen 30% from its high of just under $80.
Oh what a tangled web we weave!
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January 11th, 2007 at 9:51 pm
I could be wrong, but are you, Boone Pickens Jr., finally coming to your senses that the price of crude may be due for further declines?! The markets are indeed a very tangled web, the idea is to figure out which part of the web is breaking and which part is getting stronger. By the way, I wonder if OSU will be getting any donations from Mr. Pickens this year? Or, better yet, will Pickens be asking for donations from OSU?
January 11th, 2007 at 9:57 pm
I think Boone is doing OK, even if oil goes to $20.
I think it’s very interesting that people are starting to use terms like “crash”, “plunge” and “plummet” even though oil is still holding firm above $50 per barrel. Even at $50, the major players in the patch have a >$20 per barrel profit on production. Not bad if we have truely seen a “crash” in oil prices.
I think there has been an over reaction to the price activity of crude. Once stimulated by a major hurricane, and now falling off on warm weather and lower demand, I would consider this a very normal action for a market commodity that is traditionally dormant during the winter.
Hell, if this was a crash, that wasn’t so bad.
-Grant
January 11th, 2007 at 10:05 pm
I think your right, Grant. Seems the bear words have been coming out of the woodwork lately on crude prices. Not sure I agree that this is a true CRASH.
If oil goes to $10, youcould convince me that it was a crash.
January 12th, 2007 at 7:54 pm
“Trying to pick a bottom is like trying to catch a falling knife.” The trend is down, even on the ‘bullish’ fundamentals that you, Boone Pickens Jr., and every other oil bull keep touting. Maybe Boone can afford to keep meeting his margin calls (he’s short the Dollar too, by the way), but any realist is still looking to make more money by shorting crude than by being long.
January 12th, 2007 at 8:39 pm
You’re right, short term. It all depends on your time frame. Sure, you could short crude and make money in the next couple months, but outside of that time frame I think (along with many others) that crude is going up.
By the way, Boone is not the only one short the dollar
-Grant