Wednesday, November 26, 2008

Crude Attitude

"Six bucks and my right nut says we're not landing in Chicago."
Del Griffith (Planes, Trains & Automobiles)

Yesterday it cost me just over $20 to fill up my gas tank ($1.82/gal for premium). In mid summer, I was paying around $50.

Crude's spectacular decline over the past few months has erased about 75% of the price gains made over the previous few years.

In the near term, lower pump prices behave like a tax cut to consumers and should have a stimulative effect on the economy.

In the long run, however, the fundamentals behind oil are likely little impaired, and in fact may be improved. Why? Lower crude prices have driven many operators to curtail projects aimed at adding capacity. In fact, inefficient existing capacity is being retired.

Such 'supply destruction' should be bullish for oil prices over time.

position in crude

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