Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Maurice Winn who wrote (56769)	12/2/2004 4:10:32 AM
From: Raymond Duray	Read Replies (1) of 74559

Re: oil is simply not worth $50 a barrel over several years as competition will displace it. Excuse me while I laugh. There are two facts that you fail to address in your poseur's fantastic visions. One: Over the last couple decades, when crude oil supply and demand are in tight rein, prices vary by about US$ 8/bbl for each 1% of market imbalance. Two: Inexorably, the world is going to realize that there was a 25% cushion in supply in 1974 and that there is a mere 1% cushion in supply in 2004. Ergo, volatility is inevitable. Oil is worth whatever a willing buyer will pay. And as J.P. Morgan commented, "markets will fluctuate." What he did not address in that quip, but that he did address in building the House of Morgan is that value is based on scarcity. Owning producing oil wells is going to be a fantastic investment from now on. Temporary efforts to squeeze shortsellers notwithstanding.

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