As I watch the prices of oil react to even the most minor of events, I can't help but think of a comment Don Corleone made in the movie the Godfather. As Vito (the Don) was talking to his son Michael he said, "he refused to be a fool dancing on a string held by big shots". Well I hate to tell you my friends, we are all dancing on a string held by "big shots" when it comes to oil.
Now that everyone is focused on the oil crisis, the small investor is being suckered in to buying in at the high range of the most recent move in oil stocks. I'm convinced that investments in the major integrated oils will be great investments long term, but short term (6-12 months) we may be at the high.
This morning the chairman and chief executive officer of Schlumberger, told the Howard Weil energy conference that a lack of investment in oil and gas infrastructure over the last several years will keep energy prices high for years. I have to agree. This is one reason we have SLB on our recommended list.
Chevron announced it was buying Unocal Corp. for about $16.4 billion. To add to my conviction that oil stocks may be way ahead of themselves, ChevronTexaco's acquisition price was nearly 4 percent below Unocal's closing price last week. Unocal's shares dropped over $4 on the news. Rarely do you see the stock of a company being bought sell off this dramatically.
