San Diego Housing Bubble News and Analysis

I was thinking the same thing this morning. Oil seems to go lower & lower. I some believe the $60/barrel was a floor, I think we're already passed that point now:

Oil 58.08 +1.12% (07 Nov 2008 10:53 EST )

I'm gonna' be reyotch, beyotch!

LOL....I needed a little good laugh this morning......

No idea if this is the "exact" bottom. I bought a nice chunk of USO today and plan to buy more over the next several weeks/months (unless oil happens to shoot higher from here). I plan to hold for a few years.

If the USO goes to 45 I'll buy some more, 40 still more, 35 still more. If the USO drops below 30, I'll stop buying. I'd like to have about 20% of my non-401(k) money in oil before all is said and done. That depends on the price action from here. If USO starts to rise and doesn't stop, I may not buy anymore.

There are many higher dollar per barrel projects being mothballed, below 60 there are many. Opec can't cut production fast enough, and many countries are close to civil unrest due to lack of oil revenue. Also the recent plunge is changing peoples habits that the $4 a gallon seemed to curb.

OTOH, Economic activity is grinding to a halt and job losses mounting with no end in sight. Consumption is dropping like a rock.

X factor 1: How cold will it get this winter? This matters.
X factor 2: Any oil related "event" could double or triple oil over night
X factor 3: Monetary-Hyper inflation/currency crisis

Richard Rainwater billionaire energy investor just dumped like 300 million back in @ $70ish. He was one of the contributing factors of why I dumped back in July.

When equilibrium is met oil will rocket up with a quickness.

Timing is everything. Winter will be a factor. But I think unemployment will be trumping it. Check out oil prices during the recession of the early 1980's. Consumption dropped by 8% and the price dropped by 60%. Unemployment's gonna be huge in 2009. I'm thinking oil will be the call in the summer of 2009 as that may be the rock bottom.

There is too much chaos in the market now. Chaotic dynamics are deterministic but they're also extremely sensitive to initial conditions. We don't know what those initial conditions are, all we have are distributions of probabilities. Chaos overlying stochasticity.

It's hard to believe I made this post like six days ago when the USO was at 50 and now it's around 45. That's too quick of a drop for me to continue with my plan. For now, I'll stick with the chunk of USO I currently have and probably end up selling it about 25% lower from here as is my custom when I buy a stock.

Oil is done, it will have pops but that cat isn't getting back in the bag. Oil is today's cigarettes, twenty years ago you would never think cigarette sales domestically would decline but they have the same elements but oil is worse.
1. Oil and cigarettes are bad for you
2. The manufacturers of both are demonized
3. We don't actually need either we just want both
4. But only oil funds terrorists and transfers wealth out of the country. quitting smoking isn't patriotic but quitting oil is.

This country makes turns like a aircraft carrier not a pt boat, but it does turn and it is turning against oil. Public opinion has turned, technology is on it's heels. The tesla and other startups may fail and the prius was just a novel start but the auto industry is heading to entirely oil free because that is what the customers want, in 18 months the volt should arrive from chevy and others will follow, they will keep improving, faster and faster, with each car, oil loses more and the countries that rely on it have no choice but to keep pumping. In ten years cars wont run on gas and much of our electricity is being shifted away from oil (southern california edison claims it's oil free, they really aren't since they buy electricity but they are making huge strides not just publicity stunts).

We are the #1 oil consumer and we have decided we don't like it and are concentrating our efforts to get away from it. Name an expanding business where your customers are spending time and money to not be customers.

The beautiful thing about the oil price decline is that it is defunding our enemies. Russia, Iran, Venezuela, the middle eastern despots are all hurting, and are now much less likely to poke us in the eye with a sharp stick.
Let's also congratulate our (relatively) free markets and capitalism in bringing about this happy result. As TG points out, entrepreneurs respond to price signals by innovating, oil companies by drilling (if allowed to), and consumers by conserving. All the actors take time to move, and they understandably wait until a price trend looks long-term. The fear-mongering media and anti-market politicians need to stop bashing capitalism.

So who actualy walked-the-talk in this thread and bought OIL stocks?

This initial thread was launched with pretty good timing. Soon after this thread when oil fell below $42, it has climbed since off those lows.

Oil stocks are up 15% to 35% off that low, just in the last week. Good gains! PBR has been a big winner so far, up 35%.

The Million Dollar question is: "Will OPEC drive oil prices from here up above $50/bbl, or $75/bbl and manage to keep oil at those prices or above?"

Or will continued demand-destruction overpower the cuts in supply, sending oil even LOWER, despite OPEC's planned cuts?

My view is that those who have been burned are those who UNDERESTIMATED how bad this economic downturn will get.

I'm inclined to think oil will move up (on anticipation) ahead of the OPEC cut and then after the cut it will sell off again, because even another 2 Million bbl/day production cut won't save oil from this continued demand destruction.

There is another temporary demand side effect that won't last.

Big Players have been lately buying oil at $43/bbl and filling up supertankers, and then PARKING those supertankers in port to wait and much later unload to fill oil futures contracts later at higher prices. This story has been covered on CNBC and others in last 24 hours. This speculative buying involved many millions of bbls of oil, to fill up countless supertankers used as floating warehouses.

And people have also talked about a potential supply-side risk: cheating of OPEC members whose government budgets are in big trouble if they reduce output per OPEC quotas (given their oil revenues already way down with price having falling to $43/bbl). So lots of talk of actual world oil supply not pulling back in lock step with OPEC agreed production cuts.

IEA wants $80 dollar oil...

http://www.bloomberg.com/apps/news?pid=2......

Dec. 10 (Bloomberg) -- A further decline in global oil prices may delay or halt investment in exploration and production projects, according to Fatih Birol, chief economist of the International Energy Agency.

“If prices were to go lower, investments could be delayed or canceled and we would pay the cost in the future,” Birol said today at a conference in Paris. “We could get a supply crunch.”

Birol urged OPEC countries, meeting next week in Algeria, “to consider the fragile situation of the global economy today” and noted the need for $80 oil to ensure the viability of “marginal” production such as deep offshore projects.

my vote is for a low of approx $30 before the decline is over

I really hope you are right.

I'm personally not buying a new car until I can get a series hybrid that can run on biodiesel or ethanol.

I don't even care if I have to pay a premium for it. I'm just sick and tired of subsidizing our enemies.

I want to make a couple points.

1 - Once the world economy picks up, lowering gasoline consumption in itself will not lower crude demand. The way I understand it a barrel of oil can produce three lines of products, chemical products used by industry like plastics, fertilizer, asphalt?; diesel and airplane fuel, gasoline for autos. The percentage of each line that can be extracted from a barrel oil is fixed. I.e., lowering gasoline consumption will get you no more diesel or airplane fuel per barrel of oil. Therefore, in order to decrease world demand for oil, we need to find alternative sources for all three lines, not just gasoline, and or airplane fuel, or diesel. I've read of attempts to create bio-diesel bio-airplane fuel by doing stuff like modifying bacteria genes. However, if memory serves the estimated level or profitability is when oil is above $120/barrel.

2- Most steady industry analysts believe that oil will go back up once world economy recovers. However, no one is sure when that will occur, and just as importantly, I don't know how to safely long oil for that eventuality. I am pretty sure you can't buy oil for delivery in 2015 today. I've posted elsewhere on this blog cautioning against buying stock in oil multi-nationals because they control less and less of the oil in the ground. Most of new fields are controlled by states that are not friendly with us (Russia, Venezuela, Iran, Saudi Arabia (not directly, but via the dominant Wahhabism Islam promoted by the state), former Soviet republics). I've read suggestions to invest in companies that specialize in oil field service and oil field discovery when crude was ~$140/barrel. Well, that is assuming these companies survice the lack of activity in the next few years due to low prices.

my vote is for a low of approx $30 before the decline is over

I know a good investment when i see it. Chris_Scoreboard's opinions are a good investment!

Another brilliant post from Chris.

I think there remains incredible amounts of demand destruction still lurking ahead of oil markets

I'll say this much, I do believe oil goes below $40/bbl within three months. That means I gotta sell my long oil stocks position SOON. My overall plan on oil is to DUMP them and then wait for $40 oil again, and then LOAD UP again on oil stocks.

Big Players have been lately buying oil at $43/bbl and filling up supertankers, and then PARKING those supertankers in port to wait and much later unload to fill oil futures contracts later at higher prices. This story has been covered on CNBC and others in last 24 hours. This speculative buying involved many millions of bbls of oil, to fill up countless supertankers used as floating warehouses.

It's pretty simple really,

oil companies are drastically cutting back on exploration because it is not profitable at $40 a barrel
- they are buying what oil that they can find right now (with the bazillions of dollars they made this year when oil was at $140 a barrel)
- they know that sooner or later, all the cutbacks in oil production are going to lead to a snap back in oil prices, sending them upwards fast
- nobody is going to be able to start pumping it out of the ground fast enough again to take advantage of the higher prices
- oil companies say "Hey, it just so happens we've got all these supertankers sitting here with oil in 'em"
- stored oil is sold to highest bidder
- oil companies laugh all the way to the bank (if there are any left a year from now)

In other words, have the oil companies started their own strategic oil reserves because they know a year from now that there won't be enough oil to go round?

The market is utterly myopic like our worthless leaders. These "low" oil prices are going to lead to a supply collapse. This is destroying most new exploration and the viability of alternatives leaving us with wells and regions that are mostly in decline or have very little spare capacity. Unless anybody can tell me how we are going to deploy a few hundred million electric cars in the next year or two we have a big problem. Oil will spike again long before this recession/depression is over probably sooner than anybody thinks. Price will overshoot down and snap back up causing and ever more so chaotic world.

To put it another way, if the market was so smart wouldn't prices be higher?

If Obama starts playing up the idea of an Alternative/Green energy Manhattan Project, does that $30 prediction hold?