How about Oil?

[billyjoe]

I'm surprised not to see more discussion on oil stocks : producing, distributing, exploring, supplying. My local gas stations continue to say they don't make any money, but someone certainly is. If we just have to grin and pay what the pump wants, can't we at least make a few $$ enough to pay for the added charges?
Our leaders seem to have figured it out.I don't see them searching through their change trays at the station. I WANT A PIECE OF THIS !!



billyjoe

[jiesen]

I think the reason for the lack of discussion here, is that $$MM never buys oil stocks- maybe an occasional coal stock or something, but the fact that he's already overweight on the sector by virtue of his employee stock holdings in AHC keeps him from buying more oil stocks, and so we spend more time talking about the stocks he does buy instead. By the way, AHC is setting yet another all-time high today, along with the oil price... I'm so jealous because I'm so underweight in oil. That's part of the reason why I just got GFCI, since it's sort of a call option on oil, in that they make money only when the oil companies are scrambling to eke every last drop out of their wells, by roto-rooting their oil pipes with GFCI's $5000/day tools. I figure this will help me catch up, when the oil price finally gets to $90 like they keep mentioning every time they compare today's price to it. Shouldn't be long now...

But I also like that my downside is limited, so that if oil somehow does make it back to the $35 the bozo anal-ysts says it's really worth, I won't miss my small position in GFCI, especially considering how much the rest of my stocks will benefit from that.

[jiesen]

wow. Oil hits a new high today at 66. This is becoming an increasingly common occurrence!

[sowersnc]

You know I was thinking of posting the same topic latter tonight. I didn't understand why the big guy didn't go after the energy plays much, now I know.

I too was looking at oil service sector stocks such as RIG, LSS, SPN, EPEX, PTEN and GSF. I fugured that even if oil drops some it will likely stay high. This should cause drilling, exploration to become even more affordable. Does anyone else have some favorites? I'm looking to grab one of these in this sector on the next oil pull back to 60.

[dmk112]

YEs, Oil is going high but the oils really had a big run here since May and I think they have to top here somewhere - just like the retailers and home builders.

[skiracer]

The price of energy, oil and related services and goods, has been a great money maker for all the big players involved in it. They're making money hand over fist. But you can believe this or not most blue collar folks are finding their disposable income quite limited an are not spending what money they have on anything that they really don't need.
I live at the Jersey shore and have a construction company an a real estate business that caters to the high end people. I also have a couple of other businesses that deal almost entirely with the blue collar families that come down to the shore for a week or two summer vacation. The construction company and real estate have been doing great. We deal almost exclusively with the higher end professional cliental whose disposal income isn't being affected by the cost of gas, milk, bread, or the staples needed on a daily basis just to get by and live a normal life. On the other hand the steak/sub shop and the ice cream shops numbers are down at least 35/40%. We're not the only ones who are experiencing these type of numbers. Most of the other business people I talk to on a daily basis are also complaining that their numbers are way off. I don't depend on the seasonal businesses for my living but I do expend alot of time an energy running them and this season is going to suck. Whenever I'm in one of the shops I'll ask people at the counter about how they are doing and everyone is giving me the same story that the cost of gas is choking them more than anything else. The cost of staple goods is doing the same thing.
My sisters husband's family owns a good portion of the boardwalk in Point Pleasant, NJ and a number of business on that boardwalk. Their bars, amusements games, rides numbers are all off this year compared to last year. The talk is the same. People are coming down but aren't spending on anything that they don't absolutely need. These people are a big money operation and they're complaining about how bad business is this year. So it is food for thought.

[billyjoe]

Skiracer,
I started my business in 1980 and as you know good and bad times have been alternating before and since along the way. How about 1982 ? 19% interest on home mortgages. Luckily , I had some cash and good deals were plentiful. The economy never seemed to effect my retail business negatively until about 2003. Since then some of my best selling items have taken a 50% downturn resulting in a massive hit on my net profit. Unfortunately, my blue collar customers are going to have to shop elsewhere as I shift to a higher end clientele. Your observations on conditions hundreds of miles from me are almost identical here in small town midwest.


billyjoe

[skiracer]

Billy Joe,
I was lucky that my family had some money and my sister married into a wealthy family with alot of interests all over the place. But I never got anything that I didn't work my ass off for and was just lucky that if I needed cash I could always borrow it from someone in the family and they wanted to be paid back or the line of credit was cut off pronto.
I wasted alot of my younger years until I met the right girl and she gave me some direction an a reason to want to succeed. I was just starting our life together and the construction company during those years of high interest an I really had to scramble. I've been blessed and lucky that things fell into place for me but alot of people were behind me and helped us out to get through those hard times. I can't tell what the future is going to bring but I see the oil an energy situation as factors that are going to hurt all of us eventually. The small businessmen, blue collar workers, and the lower working class are going to be in for hard times if the cost of oil keeps going up. I really don't think that the politicians know or realize how serious this situation can become an all the ramifications with it if oil and the cost of it keep going up. I see it becoming hard for the working class people to make it and just get by or stay even if it continues. It's the one thing that effects so many facets of our lives.

[New-born baby]

Billy Joe, I really don't think that the politicians know or realize how serious this situation can become an all the ramifications with it if oil and the cost of it keep going up. I see it becoming hard for the working class people to make it and just get by or stay even if it continues. It's the one thing that effects so many facets of our lives.

Ski,
You're a good man. But how would you fix it? I am sure Pres. Bush and our politicians are quite aware that high energy costs suck cash out of the blue collar workers' disposable income. But what should they do?

The current high price of oil is directly related to China and India's growing economies. China is growing at a 50% rate this year! And we can't stop it!
There are three cars for every two people aged 16 or over in the USA.
China has three cars per 1000 people. That figure is up from 1 car per 1000 five years ago. And the number is growing exponentially! And we haven't talked about India yet, either. Fuel is going to easily be $3 or $3.50 by Christmas.

How to fix the problem? One solution: have the US military seize the oil fields and refuse to sell to other countries. Or two: stop China's & India's economic growth. You probably wouldn't be for starting a war to seize the oil fields in the Middle East, or Venezuala, Mexico or South Africa. You wouldn't want a war with China. You cannot by fiat declare that no US money can be invested in China. If you do, then France or some other enemy will take our place and prosper. China--until two weeks ago--had artifically pegged the Yuan to the US dollar at a constant rate of 8.27 Yuan to the dollar, thus guaranteeing much foreign investment in their nation. That means modernization for them; riches for us. We are trading paper money for goods. Nice trade! In other words, free trade helps everybody.

So what about us? Free trade means that we'll have to compete with them for oil, and that TEMPORARILY means higher prices. But it also means that some entreprenuer out there will invent some cheaper way to power our cars, and we'll adjust. In 1973, new cars got 13-15 mpg. Now they get 30.
And we insulated our homes, and that alone solved the energy crisis of 1973.
But now China & India are on the scene, and a new crisis is forming, and we'll have to rely on a free market to fix the problem. And that's what's great about FREEDOM--it fixes problems. (Compare to Communism in East Germany, where they started building a car in 1949, and when the wall came down in 1989, they were still building the same car with no improvements since 1949!).

My solution: let the market solve the problem. People will adjust by considering their own best interests. And every thing will work out just fine.

[skiracer]

NB,
I agree with most of what you stated. I just think that there is a growing disparity between the very wealthy, wealthy, and the rest of the population. The politicians running the country, regardless of party affiliation, are only looking to feather their own nests and stay in office. It's a cushy job and they will do what they have to to stay in them.
China's whole economic and political system is probably more corroupt than ours. Their banking system and the way they handle their loans an accounts receivable would never work in the real world.
I don't have the answer to any of your questions but in my gut I'm starting to feel that we're headed towards some problems.
Anytime you become a debtor person or country it is going to catch up with you in the end. As a country an a general population we have become a debtor society that operates basically solely on credit an we are overextended. Everyone needs a line of credit to operate and live. But when the credit line gets so large that the ones holding your debt can control your operation there's a problem. We've been headed in that direction for a long time an the beast is starting to raise it's ugly head.
DMK's chart is interesting in that the last time it really flattened out look at the slope of that decline.
In 1973 the cost of oil and gas an everything in between was much cheaper. We had that crisis in the early 80's and started producing cars that would get better gas mileage. Now we're back to the same gas guzzlers. But that's not the problem. The debt is the problem and who's holding big chunks of our debt. Besides the rest of the third world nations are beginning to come out of their closets and want everything we have. The one thing they have that we don't is cheap labor and untapped markets for everything that we already have two of an are in debt for owning. Capitalism works in strange ways. The free money seeks out the areas where it can make the most for the investment. If anyone can't be competitive regardless of how advanced or good the product or service is the cheaper one will always prevail over the long run.

[mrmarket]

Since I work in the business, I refrain from any direct comment on the oil industry. However, ask yourself this question:

If gasoline were $10/gallon, would you stop driving your car? If your answer is no, that means prices still have a way to go.

[Peter Hansen]

Since I work in the business, I refrain from any direct comment on the oil industry. However, ask yourself this question:

If gasoline were $10/gallon, would you stop driving your car? If your answer is no, that means prices still have a way to go.


Mr Market, unfortunately you are right on target .......that $75 per barrel prediction made a few months ago that seemed absurd .....is quickly becoming reality!

[skiracer]

Do you think wages and salaries will rise commensurately with the price of energy, oil, and gasoline? Do you think it conceivable that disposable income will be stiffled and shrink to nothing as most people will be budgeting to just buy gas to be able to go to work and be somewhat mobile as gas and energy prices escalate?
Everyone that I talk to about the subject is feeling the pinch an it hasn't risen to those levels yet. But you have to have it an people will have to make priorities as to what they will spend their extra money, if they have any, on.

[Runner]

What ya'll think of these charts. Do they have any gas in the tank to move on??

http://img325.imageshack.us/img325/2573/wtic8du.th.png (http://img325.imageshack.us/my.php?image=wtic8du.png)

http://img325.imageshack.us/img325/7323/xoi4yp.th.png (http://img325.imageshack.us/my.php?image=xoi4yp.png)

http://img325.imageshack.us/img325/7051/xle7ev.th.png (http://img325.imageshack.us/my.php?image=xle7ev.png)

[Runner]

All 3 charts look awesome. Could be moving in a EW 3, this wave is suppose to be the strongest. Could see a slight pullback then one more leg up. As for me the risk is to great to jump in now, but who knows right?

[skiracer]

From first glance they look like they could or need some consolidation. I'm with you about the risk factor right now. To much for me at the moment.

[mrmarket]

I think the reason for the lack of discussion here, is that $$MM never buys oil stocks- maybe an occasional coal stock or something, but the fact that he's already overweight on the sector by virtue of his employee stock holdings in AHC keeps him from buying more oil stocks, and so we spend more time talking about the stocks he does buy instead. By the way, AHC is setting yet another all-time high today, along with the oil price... I'm so jealous because I'm so underweight in oil. That's part of the reason why I just got GFCI, since it's sort of a call option on oil, in that they make money only when the oil companies are scrambling to eke every last drop out of their wells, by roto-rooting their oil pipes with GFCI's $5000/day tools. I figure this will help me catch up, when the oil price finally gets to $90 like they keep mentioning every time they compare today's price to it. Shouldn't be long now...

But I also like that my downside is limited, so that if oil somehow does make it back to the $35 the bozo anal-ysts says it's really worth, I won't miss my small position in GFCI, especially considering how much the rest of my stocks will benefit from that.

Looks like the ANAL-ysts will start changing their oil price from $35 to $40 in their equity models. That will tell their computers to make upward revisions in their target prices for the oil equities. Duh! Ya think???


Speaking of AHC...we're at $129.48.....SWEET!

[billyjoe]

Mr.Market,
Some call it Sweet, some call it Crude.


billyjoe

[choffman73@comcast.net]

Hey Mr. M.....Any insight on VLO this things was great over the last 2 weeks, got out of my options Fri......any thoughts, it was preforming like TOL was a month ago.....LIke the co. a lot would love to hear any insights from members...Thansk
CH


VLO 120????

[Peter Hansen]

Since I work in the business, I refrain from any direct comment on the oil industry. However, ask yourself this question:

If gasoline were $10/gallon, would you stop driving your car? If your answer is no, that means prices still have a way to go.



Barrons had article praising Pioneer Oil and Gas......(PIOL.OB) The Chart is not that stellar, but revenues are increasing and P.E. is 5.2. When Barrons writes about a stock .......it inevitably goes up! Of course this is a very speculative penny $1.58 stock ........but it may be worth a look?

[mrmarket]

sorry but I don't think it is appropriate for me to comment on other oil companies.

[billyjoe]

Just got stopped out of UPL at 40.25 for 15% gain. I would have liked more, but the plan is working. Trailing stop worked well. On to the next pick.

billyjoe

[Runner]

What ya'll think of these charts. Do they have any gas in the tank to move on??

http://img325.imageshack.us/img325/2573/wtic8du.th.png (http://img325.imageshack.us/my.php?image=wtic8du.png)

http://img325.imageshack.us/img325/7323/xoi4yp.th.png (http://img325.imageshack.us/my.php?image=xoi4yp.png)

http://img325.imageshack.us/img325/7051/xle7ev.th.png (http://img325.imageshack.us/my.php?image=xle7ev.png)


Could this pullback be a buying op?

[dmk112]

Could this pullback be a buying op?


I think there may be more downside to come...its almost identical to the last runup in energy (Jan-March '05) and then it topped and bottomed out in May... So I will wait for the XLE to get closer to the 50dma to buy some..

[New-born baby]

Here's worldwide gas prices for your enjoyment:
http://img208.imageshack.us/img208/153/chart13hf.th.png (http://img208.imageshack.us/my.php?image=chart13hf.png)

[Thomrich]

Greetings,

I think we are getting fairly close to the point where fuel cost shifts economy.With all the SUVs getting 10mpg,sooner or later its got to pinch demand,as folks will either stop driving,or trade for more fuel efficient cars.That has already begun.My friends father owns a car dealer,people are stunned by how little theyre SUV is worth in trade,as the dealer cant get rid of them.Alotof times they tell people to try and sell on there own,which really panics them,thinking theyre stuck with them.The same with sport cars with v-8s,used corvette prices are nosediving.When gas hits 3 bucks I dont want to be the cashier at the minimart.

BTW my new Nissan Sentra gets 31mpg in city driving,best car I ever bought.Cant
wait to see what I get on the highway.

And Id need drugs too If I paid over 6 bucks for gas in Amsterdam.

cordially Tom

[jiesen]

Greetings,

I think we are getting fairly close to the point where fuel cost shifts economy.With all the SUVs getting 10mpg,sooner or later its got to pinch demand,as folks will either stop driving,or trade for more fuel efficient cars.That has already begun.My friends father owns a car dealer,people are stunned by how little theyre SUV is worth in trade,as the dealer cant get rid of them.Alotof times they tell people to try and sell on there own,which really panics them,thinking theyre stuck with them.The same with sport cars with v-8s,used corvette prices are nosediving.When gas hits 3 bucks I dont want to be the cashier at the minimart.

BTW my new Nissan Sentra gets 31mpg in city driving,best car I ever bought.Cant
wait to see what I get on the highway.

And Id need drugs too If I paid over 6 bucks for gas in Amsterdam.

cordially Tom

It's 3 bucks already where I am- and I'm not even in Europe.

[Thomrich]

It's 3 bucks already where I am- and I'm not even in Europe.

Just filled this morning here in Chicago,$2.899 for the cheap stuff.I asked the cashier if flks are pissed,amazingly she told me they just kind of shrug it off.She said she reminded one guy who was a mazed at the price,that he was paying $2.50 for 8 oz. of Red bullwhixh computes to about $20.00 a gallon.

Also saw this morning with fuel this high,Gasoline inventories dropped much more than expected,by about 5million barrels.Looks like 70 a bbl is just around the corner,and if a huuricane disrupts,look for 80.

cordially Tom

[jiesen]

Just filled this morning here in Chicago,$2.899 for the cheap stuff.I asked the cashier if flks are pissed,amazingly she told me they just kind of shrug it off.She said she reminded one guy who was a mazed at the price,that he was paying $2.50 for 8 oz. of Red bullwhixh computes to about $20.00 a gallon.

Also saw this morning with fuel this high,Gasoline inventories dropped much more than expected,by about 5million barrels.Looks like 70 a bbl is just around the corner,and if a huuricane disrupts,look for 80.

cordially Tom

Just imagine, if all these refinery delays, and gasoline inventory numbers, which really have NOTHING to do at all with the supply of crude, can have this sort of impact on the price of crude, what the impact will be when a major pipeline in Iraq or Saudi Arabia blows up. I think someday we'll be looking back and wishing we could get oil for $80/bbl again.

[skiracer]

You really must go to Google and search "Hubberts Curve". About the 3rd or 4th item down is "Hubbert's Curve, It's the oil stupid", which you must read. It's a long read, 13 pages, but you should take the time to read it.
Aside from that this oil situation it definitely going to become a wrench in the spokes of our economic system and well being.

[Runner]

Not sure if this link as been posted. Many are going to pay out the butt this winter for heating oil and nat gas.

http://tonto.eia.doe.gov/oog/info/twip/twip.asp
http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

[Websman]

Not sure if this link as been posted. Many are going to pay out the butt this winter for heating oil and nat gas.

http://tonto.eia.doe.gov/oog/info/twip/twip.asp
http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

That's why I live in Florida. :)

[dmk112]

I still can't believe I'm not in any energy stocks... what a mistake that was.. Anyone think they still have room to run?

[mrmarket]

I still can't believe I'm not in any energy stocks... what a mistake that was.. Anyone think they still have room to run?

Ummm...I've basically bet my whole career on that premise.

[Runner]

Well in my town in Alabama we are running out of gas. Lines are forming at the pumps and many stations are already closed. Wow this is huge!!

[dmk112]

Well in my town in Alabama we are running out of gas. Lines are forming at the pumps and many stations are already closed. Wow this is huge!!


I hope they don't start rationing gas again as they did in the 70's (or 80's was it?). Anyway, its not going to be good for anyone...

[sowersnc]

Anyone out there have any ideas on the cost to manufacture ethanol and soy biodesiel? I was curious at what gas price it becomes a cost effective solution.

[New-born baby]

Anyone out there have any ideas on the cost to manufacture ethanol and soy biodesiel? I was curious at what gas price it becomes a cost effective solution.

The USA had a drought this year. Yields for corn and soybeans are lower.

I don't know, but--I am ignorant, so take what I say with a grain of salt--we need soybeans to feed the cattle and hogs. We need the corn to feed the cattle and hogs. It isn't a good solution. Corn is going to be the next oil, i.e. in short supply.

I think the solution to the oil problem lies in the oil sands of Canada and Wyoming. Canada has 2 Saudi Arabias in it in oil sands alone, and oil sands can produce profitable fuel at $35 per barrel (oil is currently $70+, so it is very profitable right now). Therefore, I think oil sands will be a better investment than biodesiel. Remember, I could be wrong.

[sowersnc]

I wasn't saying it was a good solution. I was just curious at what price point gas needed to be at for it to be profitable. Their is also a matter of the government subsides that go into these programs.

Here in Iowa they are trying to find value added programs for corn and soybeans. These programs fit into that. They are trying to make it more than crap they feed to livestock.

But on to oil sands I have been reading about that too. It would be a nice solution because the existing transportation and delivery system seems like it could be used, unlike some other alternatives. If $35 is correct then I would like to look into this. The only oil sands company I know of is SU. Do you know of any others?

[New-born baby]

I wasn't saying it was a good solution. I was just curious at what price point gas needed to be at for it to be profitable. Their is also a matter of the government subsides that go into these programs.

Here in Iowa they are trying to find value added programs for corn and soybeans. These programs fit into that. They are trying to make it more than crap they feed to livestock.

But on to oil sands I have been reading about that too. It would be a nice solution because the existing transportation and delivery system seems like it could be used, unlike some other alternatives. If $35 is correct then I would like to look into this. The only oil sands company I know of is SU. Do you know of any others?

There's a boat load of them in Canada, and I need to research it. I think that part of my portfolio ought to be in one or more of these companies.

[jiesen]

Anyone out there have any ideas on the cost to manufacture ethanol and soy biodesiel? I was curious at what gas price it becomes a cost effective solution.

I don't really know, and I don't think anyone else really does either, but from what I've read, it's likely that biodiesel or ethanol will never be a cost-effective solution. The only way people in this business would be likely to make any money at all would be if the government subsidized what they're doing. The problem is that it may take more energy to produce a barrel of ethanol energy than you get by using it. This is still not fully known, as the full-scale economy process hasn't been completely optimized, but consider this simplification- your tractor uses 1 barrel of oil harvest your corn, from which you get 1 barrel of ethanol. Now, consider what happens if the price of oil goes up- so does the cost of your ethanol! But wait, there's more. Not only do you have to fuel the tractor, but you also need to pay the capital cost, including the energy that goes into making the equipment, other materials, etc. Soon, you see that you're actually paying more than a barrel of oil's energy for just one barrel produced- a losing proposition that just gets worse with increasing energy cost.

Someone making ethanol now may be putting in just half the energy they get out, and thinking they're being productive, but when their entire energy cost is considered, they'll likely be doing much worse than they thought, and probably working towards a net energy loss. Think of a company's income statement where the CEO thinks they're doing great because gross profit is going up with ever-increasing sales. It doesn't matter at all if the bottom line NET profit keeps going further into the red. At any rate, the easiest and cheapest way on earth to get energy is to just drill a hole in the ground and pump it out. The only other way that has a shot at being cheaper is nuclear fusion, and that has just a very slim chance of success. And if our cheapest source of energy is lost without a similarly cheap replacement, then we're in a world of hurt. I'm sorry, NBB, but oil sands won't cut it either. While they may be profitable as long as prices are over $35, that's still 10x more than what the Saudis have to pay to get the oil out of their sand. So if you don't mind paying $30/gallon for gas instead of $3 then oil sands will be a fine substitute, but for the 99% of us who don't make over $1M/year, that's going to severely cramp our style.

I just hope that this project is able to get off the ground before spiraling energy costs make it economically impossible to finish:
http://www.iter.org/index.htm

Ok, I admit I'm rambling and taking the ultra-pessimistic view of some of the peak-oil theory floating around out there. And I'm no expert... but I do like to throw the question out there- just what if we're about to run short of this stuff? Not knowing the answer can be pretty damn scary. I believe that the peak oil hype must be overblown to some extent, though, if only because the alternative is just too depressing to consider.