The oil companies are making record profits because the price of their main product, crude oil, is currently trading at historic highs. The oil companies have NO part in setting the price for crude oil; it is set on the open market by willing buyers and sellers. Why blame international oil companies (like BP, Exxon, Chevron)? Why not the national oil companies like Saudi Aramco, Mexico’s PEMEX, Vensuela’s PVSDA, etc. who control over 90% of existing production? Oil is a global commodity, so all global sellers and buyers take part in setting the price. If you do not like the price of gasoline, flex your economic muscle and purchase less of their product. It is really that simple.
So why is oil currently so expensive? The is tremedously complex subject that cannot be simplified by blaming “price gouging” or saying that “oil is running out”. There is a fierce debate raging on just exactly how much oil we can ever reasonably expect to produce, but it is clear to me and many other observers that the era cheap energy is over. All the complaining about high gas prices will not stop us from making fundametal lifestyle changes over the next 10-20 years, whether we do so voluntarily or not.
One more thought: regulation, or price controls, is probably the worst thing we can do. Not only is it un-American, but it artificailly encourages consumption. There is simply not enough gasoline for everyone to have as much as they want at the price they want to pay.
I could recommend many books, but if you read just one, let this be it:
Yes, ETFs are the way to go. A few hardcore goldbug types may recommend taking physical possesion, and I don’t necessarily see a problem with that if you are willing to pay for it (1-2% on each side of the trade and a safe-deposit box fee).
I am leery of PM’s right now. I stopped buying about 8 months ago, and I am thinking about taking some off the table. There is hopefully an entry point lower than this. I enjoy both Chris J’s and 4plex’s comments. Chris says he has a short term view and 4plex has a long term view, so I think they are both generally correct in their views.
There have been a few threads on this subject recently but I am too lazy to look them up at the moment. The conclusion from those threads is that it is better to buy at a lower price and higher interest rate, for these reasons (payment being equal):
1) Obviously, it is better to owe the bank $320,000 instead of $640,000.
2) You get a much larger tax write-off with a higher rate.
3) With a high interest rate, you can refinance if rates drop. It is hard to imagine refinancing a loan taken out at today’s rates.
I think there are a couple other reasons I am missing.
