Saturday, November 03, 2007

Right Bet, Wrong Year

It appears that my bet with Oroborous that oil would hit $100/barrel by December of 2006 was a year too soon:
NEW YORK (AP) -- The prospect of a stronger economy and word of possible new U.N. sanctions against Iran sent crude oil futures back above $96 a barrel Friday, while retail gasoline prices extended their own march higher.

The Labor Department reported that employers boosted payrolls by 166,000 jobs in October, the biggest increase in months and double what economists had forecast. Meanwhile, October's unemployment rate held steady at 4.7 percent. Separately, the Commerce Department said factory orders rose 0.2 percent in September, better than the 0.4 percent decline analysts were expecting.

"It suggests that concerns about the economy ... are overblown a little bit," said Michael Lynch, president of Strategic Energy and Economic Research Inc., in Winchester, Mass.

Oil futures added to their gains late Friday when the British Foreign Office said the U.N. Security Council has agreed to draft a new sanctions resolution that could be passed in November if Iranian cooperation with the International Atomic Energy Agency does not improve. Investors worry that any conflict between the West and Iran would disrupt oil supplies from the Middle East.

Light, sweet crude for December delivery rose $2.44 to settle at a record $95.93 a barrel on the New York Mercantile Exchange after rising as high as $96.05 earlier, short of a trading record of $96.24 set Thursday. On Thursday, oil prices retreated from that early record to close down more than $1, in part because of dismal reports on consumer spending and industrial activity that also factored into the Dow Industrial's 362-point decline.

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

As they say, timing is everything.


Blogger Harry Eagar said...

Yeah, but if you'd indexed your bet it would have to get to almost $105.

November 03, 2007 10:26 AM  
Blogger Mike Beversluis said...

I've heard a couple of times that the break-even point for oil-shale extraction is around $100/barrel. That would seem to be an upper-bound, but like nuclear, the mining operations might be hard to get started due to the political blow-back.

November 03, 2007 3:09 PM  
Blogger Harry Eagar said...

Not to mention that there's no guarantee oil will stay near $100.

On the other hand, the current mania for carbon taxes will soon narrow the gap between coal and oil/nuclear, and the enthusiasm for expensive power -- to be purchased by some other sucker -- will wane once people find out they themselves are expected to use the new toy.

It will be like mass transit. Everybody's for it until he has to wait for the bus in the rain himself.

November 04, 2007 10:08 AM  
Anonymous Anonymous said...

Besides, you would never win if you had bet with real money.

November 04, 2007 10:28 AM  
Blogger Harry Eagar said...

Within the next week or so, gold will exceed its nominal peak of $850.

Of course, to exceed the real peak, it would have to go to around $1500.

I think people, even sophisticates, have forgotten just how nutty the financial world used to be.

November 07, 2007 8:36 AM  
Blogger erp said...

Loonie? Great name.

November 07, 2007 10:48 AM  

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