Boy, the news on energy seems to be getting better by the day. This morning we woke up to more magic about oil prices when Chevron, Devon Energy and Statoil announced thats its deep-water tests revealed that they may have found a huge oil and gas discovery in the Gulf of Mexico. What timely news!
It is amazing to watch what the some very powerful people can do.
I have been saying that oil prices will magically decline as we approach the November mid-term elections. Whether we like it or not, it looks as if consumers are being lead by the pied-piper of Hamelin. But, do you know the rest of the story?
Here is the story of the Pied-Piper of Hamlin, as edited by me in parenthesis;
"In 1284, the town of Hamelin was suffering from a dreaded rat infestation (High Oil Prices). One day, a man claiming to be a rat-catcher (Oil Cartel) approached the villagers (Politicians) with a solution. They promised him a schilling (Higher oil prices in the future) for the head (Vote) of each rat. The man accepted and thus took a pipe (Drove oil prices lower) and lured the rats (Voters) with a song (Good News on Oil Prices) into the Weser river (Voting Booth), where all 999,999 drowned (Voted back in the oil politicians).
Despite his success, the people (Politicians) reneged on their promise and refused to pay (Allow prices to rise immediately after the election) the rat-catcher (The Oil Cartel), reasoning that he had failed to produce the heads (A Change in Political Sentiment). He left the town, but returned several weeks (Months) later.
While the inhabitants were in the church (Gloating about their political victories), he (Oil cartel) played his pipe (Began driving oil prices new highs) again, this time attracting the children of (Consumers who feel they were duped) Hamelin. One hundred and thirty boys and girls followed him out of the town (Protests began to take place), where they were lured into a cave and sealed inside (And, many protestors were thrown in jail). The Piper (Oil cartel) returned the children after the villagers paid several times (Allowed drilling off the coast of Florida and in the Alaskan ANWAR.) the original amount of gold (Where the oil cartel made even bigger profits).
I was just playing with the Pied-Piper story to see if any of the additional words would fit. As it turns out, they did.
What we will probably see is a decline in energy prices that could last 6-9 months. In addition, I believe we will see commodities correct as well. Most of the decline will be due to a slowing economy here at home which will eventually spread across the globe.
This decline will be nothing more than a sharp pullback in a longer term bull market. My focus is to invest in energy and commodity related companies who have the potential to be acquired by larger companies.
Oil reserves will be a big topic in the months ahead, and now that US oil companies are being thrown out of countries around the globe, they will eventually report that their reserves are not as larger as what has been previously reported. We saw this recently with BP and Occidental Petroleum.
Comments (1)
Thanks for your posts regarding the correlation between the price of oil and the November elections. After reading your previous posts the recent news headline "Successful Test Well in Gulf of Mexico Means U.S. Oil Reserves Could Grow More Than 50 Percent" (source: CBS Marketwatch) seems like blatant manipulation of public opinion.
Todays WSJ article states the oil well in question was discovered in 2004 by Chevron and Devon. Further, it has been producing oil for a couple of months. So why is this suddenly front page news? Also, why is the media suddenly extrapolating that based upon other wells and 'potential' discoveries in the area U.S. oil and gas reserves are 50% larger?
Now that you have more evidence to support your theory regarding a short term drop in the price of oil what investment strategies and/or trades are you implomenting based on this theory?
Posted by Brad | September 5, 2006 1:25 PM
Posted on September 5, 2006 13:25