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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (114586)	12/4/2008 8:06:38 PM
From: skinowski	Read Replies (1) \| Respond to of 206346

We have peaked, and are in peak OK, but if we enter a lengthy global slowdown accompanied by lowered demand, one may be absolutely correct about the peak and still lose money on investments in the sector. What are your thoughts in this regard? TIA.

To: gregor_us who wrote (114586)	12/4/2008 10:11:02 PM
From: energyplay	3 Recommendations Respond to of 206346

With regard to definition 1, I think that the key is economically & technically recoverable oil instead of geologically. If we look a the development of the Barrnet Shale, we see how technology and prices moving from 3 dollars to 9 dollars has turned a geological curiosity into a resource. Coal bed methane has had similar progress. Hydrocarbons don't materialize by magic, but resources are determined by technology and economics, and found by exploration. The production flows will also be determined by technology and economics. The Canadian tar sands production is very dependent on pricing. ******************* It is unlikely we will see many places which increase the flow rate over current peaks because of new technology, but I think it is likely we will see many peaks stretched out for a number of years.

To: gregor_us who wrote (114586)	12/4/2008 11:47:59 PM
From: Archie Meeties	6 Recommendations Respond to of 206346

Sorry mate, I'm just a simple stock trader. I won't stand in your way, and there's no way I can hang with your arguments and research. Heck, I had to google voluniminous to find out what it means. I'm sorta simpleminded (oil was in a bubble), stupid (energy supply is a function of price), and just had some dumb luck to think the right trade this year was to be short (supply>demand). I'll fess up, I didn't make much money doing that even. I even tried to get long recently, that was super dumb. I was actually drunk the day I wrote this, had just put back a 1/2 bottle of night train. Message 24760770 And here's what I did afterwards, although I think this was after Brucey handed me the glue bong (can't really remember). Message 24792482 Message 24820799 Message 24829033 I also got long some DTO and short other energy stuff when oil was 70ish, even though that's under your "floor" of marginal production of 90. Message 25135961 I don't know what I was thinking, again, dumb luck. To be honest, I hit the "buy" button on DTO when I meant "sell". I was drunk, what can I say. In fairness to you, your views on the price of energy were pretty much in line with just about everybody else on the internet, so I wouldn't worry about it too much. But I would try some night train the next time you decide to take a flyer in the market.

To: gregor_us who wrote (114586)	12/5/2008 8:36:34 AM
From: ChanceIs	1 Recommendation Read Replies (1) \| Respond to of 206346

>>>evidence is 6 years of flat production of non-OPEC supply, and 3.5 years of flat global production.<<< An excellent post Greg. Your quote above says it all. One of the best arguments I heard this year about why we weren't in a bubble was that prices had remained so high for so long, but there was little or no production increase. Contrast that with housing where unprecedented price growth produced a record surplus/overhang. I don't see so much evidence of a storage/production glut below. From about 2006 onwards, storage was dropping while prices rose. If production was up, and storage dropping, one must conclude that consumption was way up. You also have to figure in that the storage reflected below doesn't reflect the increasing consumption, so "relative storage" has dropped. The article below refers to a supply glut. That is news to me. Perhaps a slight drop in consumption. I think that it is much easier to slow down crude production than aluminum - think running pumps at lower speeds vice layoffs. Then there is that vicious natural depletion. ___________________________________________________ $25 Oil Could Happen Before a Return to $100 By Matthew Hougan Jim Wiandt says that oil will go to $100/barrel before it hits $25/barrel. I'm not so sure. The reason I'm confident that the Dow Jones industrial average will top 10,000 before it hits 6,000 is that stocks are a leading indicator. They anticipate recoveries, typically turning upward 6-9 months before the economy as a whole. We are already one year into the recession, so I'm guessing we are getting close to the point where stocks will turn the corner. When you add in the fact that valuations and yields are the most attractive I've seen in my adult investing life, the outlook for equities is quite good. Oil, on the other hand, reflects mostly immediate, near-term supply and demand. If the economy gets worse before it gets better, stocks might see the light at the end of the tunnel, but oil won't. It can't. Prices will keep falling as demand deteriorates in real time and the current supply glut gets worse. Remember, oil is expensive to store. For the most part, it won't just sit around waiting to be used if there is a lack of demand. (Some can be stored, but not that much). It must be sold and used at whatever the current clearing price is. And we have yet to see the magnitude of supply cutbacks in the oil market that we've seen in aluminum, copper and other commodities. The world is continuing to pump out millions and millions of barrels of oil. Here are a few facts to consider: 1. Oil has averaged a nominal price above $50/barrel in just three years in the history of the world: 2005 ($50.04/barrel), 2006 ($58.30/barrel) and 2007 ($64.20/barrel). 2. On an inflation-adjusted basis, oil has averaged an annual price above $50/barrel for just 12 of the 62 years of the post-war era. 3. The average inflation-adjusted price of oil in the post-war era is $33.65/barrel. 4. Oil traded below $25/barrel as recently as 2002. As the saying goes, "This time it's different" are the four most-expensive words in investing. So why not $25/barrel oil? I was amazed during the recent oil price retreat how quick people were to say that $100/barrel was the "right" price for oil. $100/barrel is off the charts historically, and completely neglects both the supply and demand impacts that high oil prices have. To put it another way, stock prices are now trading where they were in 1997. What's to say oil shouldn't be trading where it was in 2002? The truth is, I have no idea where oil prices are headed. But I don't think it's a gimme that they're going back to $100/barrel. In fact, if you gave me 2-1 odds, I'd bet they hit $25/barrel first. P.S.: One more thought about oil. Even if you strongly disagree with me and think crude oil is a screaming buy, please be careful before you buy a crude oil futures ETF like the US Oil Fund (NYSEArca: USO). Oil is in a violent contango. A fund like USO faces a 3% monthly headwind from contango right now, meaning oil prices must rise about 3% each month just to offset the losses from rolling contracts forward. Until that situation is reversed, investing in crude oil futures could be challenging... even if I'm wrong about crude oil prices.