Monday, June 23, 2008

Where Are the Shortages?

I've done quite few posts on the oil market of late. That's because it doesn't make sense. I hate things that don't make sense.

The weekend meeting of oil producers and consumers didn't clarify matters any. Saudi assured everyone that they have plenty of oil to meet demand and are prepared to ramp up production if need be. Brazil threw in that their newly discovered oil patch is probably much bigger than they originally estimated. Canada has a huge reserve of oil sand coming on line as we speak, and here in the US, although Democrats continue to oppose it, the public is now in favor of increased drilling by a huge margin. Yet, oil continues its run.

In short, there doesn't seem to be a supply problem. I don't see "No Gas" signs at gas stations, no rationing, I've heard no stories about orders for crude not being filled. Sure, we're paying through the nose, but the oil and gas are there.

All I can compare it to is the dot-com bubble. People invested in stocks that had already tripled only to watch them triple again. This actually went on for some time before the bottom dropped out, and when it did, it fell hard. I know someone personally who bought a tech fund at exactly the wrong time and saw their 100,000 dollar investment turn into 8,000 dollars in a matter of weeks.

For now, I'll continue to be baffled. If the oil market crashes hard, it will make sense again. Until then, I'll just keep watching and scratching my head.

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