Monday, June 23, 2008

Hearings on Energy Prices and Speculation

We stated last year in some of our audio commentary that from our assessment that fundamental supply and demand issues would value oil in a $50 to $70 a barrel range. That excess premiums above those approximate levels were speculation on general fear, geo-political, terrorist and supply disruption fear premiums. Then oil soared to $130 plus. In recent weeks we have reiterated this view in audio commentaries. A headline caught our attention this morning as MarketWatch wrote on the House Energy and Commerce Committee hearings, where energy analysts told Congress today that energy prices could drop to around $2 a gallon and oil would drop to its marginal cost of around $65 to $75 a barrel with the passage of a law to limit speculation in energy futures. They indicated that this drop could occur in 30 days or less. This reinforces the point we were making that current oil prices were not a result of fundamental factors rather speculation. Thought you might be interested...

4 comments:

BOBB said...

Dave:
Thanks for the insight.
Robert
CANI_212

Reenie said...

Dave,

Very interesting-might have to look at some DUG-thanks so much for keeping us updated-I have learned so much from you.

Doreen

Trizi said...

What is the likelihood that bill would pass?

Would taking a look at PUTs then be appropriate to capitalize on this?

Anonymous said...

Hi Dave,

Thanks for the insight. Which sector will be affected most?

Alex