So what do people think of the latest declines in oil price and the corresponding hit seen on stock prices of oil companies? Did anyone see oil going below $65 and COP going below $60? What are the oil bulls like zeal saying and I would be interested to know how folks think the drop in oil prices will work for other equities.
I think if commodity prices keep dropping, we may well enter a state of deflation. With real estate going bust and recession on the horizon, there is not much support for oil prices to hold up barring geo-political tensions. The argument for peak oil seem to be losing ground as the latest discovery of the oil reserve by Chevron indciates and as production from oil sands become more cost efficient and OPEC reduces production to support oil prices. As per Fed, the biggest concern for inflation has been high energy prices. If oil drops and economy slows to snail pace due to housing then we may as well enter a cycle of deflation where comodities, housing and equities will all lose value.
However, as per previous experiences, our Fed seems to be more capable of handling deflation than inflation. Maybe they will come to the rescue again by cutting rates drastically. What do folsk think?
