World Bank Commodity Presentation 6/2007 $$

Regarding oil…”If a tsunami of rabid investment and speculative commodity derivative demands hits the commodity markets, it must drive the forward price more above marginal cost than in a
normal bull cycle. The higher the price is driven above marginal cost the more new supply will be encouraged. These high prices will also lead to a more assiduous effort by commodity consumers to economize and substitute, thereby rationing demand. If unusual commodity derivative demands take prices very high and on a sustained basis, the resulting surpluses that will eventually take down these prices will be all the larger.”

Here is the presentation on Oil, Metals & Gold
Veneroso Frank-World Bank Presentation Commodity Bubble Metals Manipulation-6!14!2007

Publish at Scribd or explore others: Business Presentations & Slid kuwait bubbles

It is a thesis I agree with. Oil was in a bubble in 2008, and the downside now is the overreaction to that bubble popping. Somewhere is the middle is a good price. Fortunately, the middle is about 100% higher than current levels. We’ll see..

Tickers to play oil: (USO), (DBO), (DXO)

To play gold: (GLD)

Disclosure (“none” means no position):Long DBO, DXO, none
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garding oil

Here is my view on oil:

http://changealley.blogspot.com/

I have been investing heavily in oil and gas since 2002-2003, and began short-selling oil in the summer of 2008. I currently own no oil futures or companies.

A trendline price for oil would be about $75 per barrel. But my prime concern is that higher oil prices have become the consensus view. Guys like Jim Rogers are now the guru figures, whereas they were virtually unheard of back in 2000. The consensus view is never correct; or at least for very long, until it ends poorly.

My current view is that we’re undoubtedly going to go through another “tight” period where oil either reaches or exceeds its old highs, but that could be five years from now, comparable to what happened in the 1970s.

You figure, in 1973 there was the Yom Kippur War and oil skyrocketed; but then it didn’t reach its peak again until 1979. But, for the intermediate period, 1974 to 1978, oil traded flat at roughly $13 per barrel.

Even in the middle of a bull market, oil can prove to be a bad trade for fairly extended time periods. And when it does heat up, like most commodities, it tends to be a sharp boom and bust.

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