Jim,
It may well be that measured against other commodities, oil will (at least for a few years) be plentiful enough to keep its price down.
At this point, my main concern is not so much to gain huge profits as it is to make sure that the real value of my assets steadily increases or, at least, does not decline.
When I look at what the Federal Reserve is doing to try to prevent an economic crisis, it makes me worry about keeping my assets in dollars. There has never, in peacetime, ever been such a huge expansion of the United States money supply as has been occurring in the last year.
stls.frb.org
Oil may keep the same value, or even decline, in terms of other things, but investments in energy can still serve as a hedge against severe inflation domestically and severe devaluation of the dollar internationally. I don't like gold very much as an inflation hedge because most gold never disappears once it's mined and refined, and because the mining methods get steadily cheaper. Real estate is not very liquid or fungible (I admit that I have not tried to undertand REITs, which are). I don't understand other commodities at all, but I think I sort of, sometimes, understand a little about energy. One thing I do know, is that people are willing to pay a great deal more for energy than they do, especially in North America.
For all these reasons, I am unwilling to bet against energy, even when it seems temporarily overvalued and prefer to keep some assets invested in energy. America is as hooked on cheap oil as tens of millions of people got themselves hooked on cheap cigarettes years ago. Look at what people will pay for a pack of cigarettes now! |
