Big Oil

Remember oil prices? They were supposed to strangle the economy. Well, it didn’t work out that way.

Six months ago the “peak oil” crowd were all agog with predictions of economic Armageddon based on oil prices. Since oil was headed for $200 or $300 per barrel, they said, we all had either better start learning Arabic or strap solar panels to our hybrid cars. But a funny thing happened on the way to the panic. The market didn’t go along.

Now market mavens are predicting $30 and even $20 oil. Environmentalists who decried the additional drilling that $100 oil engendered are now calling for subsidies when $50 oil threatens their green projects.

The problems with oil price forecasting is that it assumes that reserves are known with precision, that the levels are fixed, and that demand can be projected with accuracy over a long period. Clearly, these assumptions are flawed.

We saw price overshoot and correction in the `70s and `80s when OPEC emerged. My bet is that with the emergence of China and India as consumers, we’ll see it again. It’s not different this time.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-04T17:00:26+00:00 December 16th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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