Is Oil Headed The Way Of Homebuilders?
There is a never ending debate as to whether we are running out of oil. At some point I will post accumulated data on this topic if I get a chance to gather it all together but my belief is that this is not the case. Another common argument is that peak production has been hit if the world does continue to demand more and more oil. I'm not convinced of that either.
I have a chart somewhere which shows demand and supply for the past forty years on a chart. I wish I could find it because it is so telling. I'll look later today to see if I can find it and post it but nothing, and I mean absolutely nothing, has changed in those forty years as both demand and supply are tightly correlated and have rising in unison to higher highs just as they did forty years ago. ie, The world has plenty of oil in the supply line. A comment continually made by Lee Raymond the former CEO of Exxon Mobil. Now we hear a modified story as the peak oilers back track in defense of their arguments. It's not that we won't find more oil, it's that it will be very hard to extract. Well, again, the new CEO of Exxon Mobil, Rex Tillerson, has also made the statement of "What's new?" regarding this argument. He has said easy oil passed us by long ago so what's the point? It was hard to mine new supplies in 1998 at $10ish a barrel.
To confirm this fact, we now have OECD oil stocks at the highest levels in nearly ten years. Know how much oil was then? How about around $10 a barrel. Maybe excess supply is tighter but I am extremely confident it is actually for more nefarious reasons. The only question is when these reasons correct themselves. If they do, oil will drop significantly. If they don't, oil will still likely drop. I think we could see $38 dollar oil within twelve to twenty four months. I'm not predicting it but I believe it is a possibility. I realize I'm likely considered a loon by posting this but...........
So, is Valero headed down the same path as Toll Brothers? They went up for the same reasons. Why wouldn't they go down for the same reasons? Below is a plot of Toll Brothers- red/green price plot & scale on the left- with Valero - black/clear price plot & scale on the right. Housing is leading the market decline and oil will likely follow. To what extent? If it happens, first stop for Valero is likely the mid $30's. Remember, Valero is falling rapidly and the return over the last year, depending on when you bought, is 0% to down 20%. Commodity stocks typically lead actual commodity prices. Commodity profits are propping up a very expensive stock market.
I have a chart somewhere which shows demand and supply for the past forty years on a chart. I wish I could find it because it is so telling. I'll look later today to see if I can find it and post it but nothing, and I mean absolutely nothing, has changed in those forty years as both demand and supply are tightly correlated and have rising in unison to higher highs just as they did forty years ago. ie, The world has plenty of oil in the supply line. A comment continually made by Lee Raymond the former CEO of Exxon Mobil. Now we hear a modified story as the peak oilers back track in defense of their arguments. It's not that we won't find more oil, it's that it will be very hard to extract. Well, again, the new CEO of Exxon Mobil, Rex Tillerson, has also made the statement of "What's new?" regarding this argument. He has said easy oil passed us by long ago so what's the point? It was hard to mine new supplies in 1998 at $10ish a barrel.
To confirm this fact, we now have OECD oil stocks at the highest levels in nearly ten years. Know how much oil was then? How about around $10 a barrel. Maybe excess supply is tighter but I am extremely confident it is actually for more nefarious reasons. The only question is when these reasons correct themselves. If they do, oil will drop significantly. If they don't, oil will still likely drop. I think we could see $38 dollar oil within twelve to twenty four months. I'm not predicting it but I believe it is a possibility. I realize I'm likely considered a loon by posting this but...........
So, is Valero headed down the same path as Toll Brothers? They went up for the same reasons. Why wouldn't they go down for the same reasons? Below is a plot of Toll Brothers- red/green price plot & scale on the left- with Valero - black/clear price plot & scale on the right. Housing is leading the market decline and oil will likely follow. To what extent? If it happens, first stop for Valero is likely the mid $30's. Remember, Valero is falling rapidly and the return over the last year, depending on when you bought, is 0% to down 20%. Commodity stocks typically lead actual commodity prices. Commodity profits are propping up a very expensive stock market.
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