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The shortsightedness of this article (and I guess business analysts in general) is breathtaking. Isolated, it might be positive for consumers, but any increase
by sveme 11y ago
The shortsightedness of this article (and I guess business analysts in general) is breathtaking. Isolated, it might be positive for consumers, but any increase in the consumption of oil due to low prices should be feared. Celebrating Chinese buying more SUVs, the worst automotive fashion in the last two decades? Yeah, great.
We'll pay for these short term wealth transfers with a further uptick in warming and a huge shock in the future when no one's saving energy any more, renewable energy installations have come to a standstill and oil rapidly becomes more expensive again.
- oniMaker 11y agoIf you are convinced of the latter point, then it's a great opportunity for you to invest in oil and benefit from your own wealth transfer.
- fweespeech 11y agoThe problem with this is no sane human would think they could guess the timing. Being too early is the same as being wrong.
- sbov 11y agoIsn't this only a problem when shorting? You can buy and hold for forever.
- oniMaker 11y agoYou could buy and hold until a stock went to zero, for example. Edit: Whoever is downvoting obviously has never seen this happen. There was just an article about it on HN the other day, describing how Dragon lost it all when the company they sold to plummeted to zero stock value.
- vox_mollis 11y agoIf you stand for delivery, you pay to store and insure it. If you don't stand for delivery, you pay contango to roll over the contracts. Going long commodities with uncertain date of sale always costs money.
- aianus 11y agoStoring oil isn't free (and by extension, neither is rolling over futures positions indefinitely).
- frandroid 11y agoStoring oil shares is free though.
- ci5er 11y agoYou mean ETFs? If not, what is an "oil share"? Futures contracts have maturity dates. At the end you sell them (at a price you might not like), roll them over (not free or even necessarily cheap) or take delivery on the oil (also usually not cheap, depending on your facilities).
- csomar 11y agoYou are comparing oil/energy to a stock (a proof of ownership). They are too different things. You can't simply buy "Oil". So if you buy an oil contract I'll expect, on the long run, to pay fees for storage at least.
- noir_lord 11y agoEver seen the story where the guy messed that up and they delivered the coal? http://thedailywtf.com/articles/Special-Delivery http://thedailywtf.com/articles/Special-Delivery don't know if it's true and not that bothered as it's still fairly hilarious. I think there would be legs in a Silicon Valley/IT crowd style show about market traders.
- leakybit 11y agoNo, but you can buy oil options and play them just like stock options.
- soylentcola 11y agoReminds me of this recent article where the author attempts to do just that: http://www.bloomberg.com/news/articles/2015-11-03/that-time-i-tried-to-buy-some-crude-oil http://www.bloomberg.com/news/articles/2015-11-03/that-time-...
- deleted 11y ago[deleted]
- plusbryan 11y agoWhat's the best way to capitalize on this assumption? USO?
- jonknee 11y agoOr a basket of energy companies like XLE.
- AstroJetson 11y agoI always suggest Vanguard funds - Vanguard Energy Fund Investor Shares: https://personal.vanguard.com/us/funds/snapshot?FundId=0051&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=0051&... Note that this is SUPER RISKY investment fund. If you look at the chart it has major swings up and down. The fund is down 20% for 2016 (yikes!). But if you had held it from 2012 -> 2014 you would have gotten a 40% return on your investment. I like Vanguard funds since they have a low management cost to them and they tend to be a little more conservative in their selection. Good luck, remember me when you make your million!
- Ntrails 11y agoOther passive investment funds with similar or lower fees and appropriate target sector are available Also consider whether you want to invest in oil related companies or in the price of oil itself (which is just as possible). NB. I have nothing for or against Vanguard funds and have heard a few people supporting them.
- protomyth 11y agoVanguard is actually quite good just for the nice web site and ease of use.
- tamana 11y ago>Good luck, remember me when you make your million! Oldest trick in the book: fove out free advice and take a share of the wins, but don't pay a share of the losses ;-)
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- snowwrestler 11y agoBe careful, though, because when oil reaches its end game, the price will fall and never come back up. Are we there yet? Or is this just temporary drop? There's no way to know, now.
- kbenson 11y agoWait, wouldn't the scarcity of oil force a premium on the price? Wouldn't a dwindling resource with lots of legacy uses and equipment requiring it command even higher prices than when it's abundant?
- toomuchtodo 11y agoThe oil end game isn't that we run out; its we find something better (electric cars) and oil loses its value and becomes a stranded asset in the ground. Good for humanity, bad for O&G industries. EDIT: I'm fairly confident this is the start of the end. The US Congress extended the production tax credit for renewables for 5 years, along with Tesla's Gigafactory ramping up production, which means we're going to be awash in renewable-generated power and have the capacity to store it (in cars, and in stationary storage).
- kbenson 11y agoThat's an interesting argument, but as the p[rice drops, less companies will be willing to drill it, and that will provide an upward pressure from lack of supply, will it not? At some point I imagine it will stabilize at a new price (based on then demand), I guess the question is do we have models of something like this happening before?
- toomuchtodo 11y agoYou're assuming there is no demand destruction. Keep in mind: China economy cooling off, fuel efficiency standards, shifting demographics (older populations drive less). We reached peak oil, it just wasn't supply. It was demand.
- clock_tower 11y agoThat's certainly what I'm up to. MLPs are on sale right now -- and they give interesting benefits (large guaranteed dividends and capital deprecation on your income tax forms) if you're willing to buy and hold. I'm aiming for 10 years to financial independence; I might get there in 5, with the way things are going right now. I don't think there's much risk of bankruptcy for high-cap MLPs, and for low-cap ones the risk is priced into the stock (and then some). The price of oil has to recover sooner or later; the Saudis don't have an economy unless they have high oil prices, and they're the ones behind the current glut. Kuwait is already negotiating with OPEC and non-OPEC producers to raise oil prices again...
- jdamon96 11y agoI know the author of the article says 'upside potential' but I'm not sure if Blanch is quite 'celebrating' the increase in SUV sales but rather just noting it.
- bigbadgoose 11y agoit's not shortsightedness. it's conscious myopia. you are on "bloomberg BUSINESS" after all. scoped to business concerns. financial business itself is scoped to days, weeks, and quarters. now, if this tone was struck at an article in US News or Time, then yes, surely you could accuse the writer of "shortsightedness"
- AndyMcConachie 11y agoThe human race is basically just screwed. Warming is going to happen on a massive scale and there is little anyone can do to stop it. In 50 years, we'll be killing each other over the remaining usable farm land. Until then, we'll keep buying SUVs and burning more oil.
- JoeAltmaier 11y agoActually, the farmland will just move. Northern regions will become more arable. There will be disruption but maybe nothing we can't handle.
- vkou 11y agoTheir climate will become more arable... However, northern soil tends to be very nutrient-poor. Also, the southern hemisphere will have no such recourse.
- JoeAltmaier 11y agoTrue. But in modern agriculture, the soil is irrelevant. Corn in Iowa grows because of Anhydrous Ammonia applications. That's it. Eroded clay hillsides produce as well as (or even better than) black loam. So no worries there.
- AnthonyMouse 11y agoYou're not considering the politics. The arable farmland will "just move" into different countries. Russia, Europe and Canada win. Africa, India, most of Central and South America and China lose.
- baddox 11y agoWhy should I expect that to result in us killing each other over arable farm land, any more than we're killing each other over arable farm land now?
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- zeteo 11y ago> The shortsightedness of this article [...] is breathtaking. [...] Celebrating Chinese buying more SUVs, the worst automotive fashion in the last two decades? Yeah, great. Did we read the same article? There are many consequences for the oil crash. The article doesn't claim to rank all consequences - it just reports on a BofA study about the size of the wealth transfer. It also cites an increase in Chinese SUV purchases. Since when is reporting on facts equivalent to "celebrating" them?
- sliverstorm 11y agoFacts you don't agree with are to be swept under the rug, so any facts you acknowledge have your implicit endorsement ;)
- deleted 11y ago[deleted]
- sveme 11y agoYou are right and the reporter should not have been the target of my anger. The analyst's statement is for me a symptom of what's wrong in our consumer society, but I cannot blame him personally for doing what he's paid to do: identifying investment opportunities and exploring future economic consequences of today's events. Here's where my rage came from: (i) we cannot go on like this. We as a western society started with baby steps towards a future with a smaller ecological footprint. This was obviously also triggered by the last oil shock. (ii) we know that we cannot go on like this, yet many of our decisions are made considering only a single proxy of societal well-being, money. The analyst states correctly "that's where money can be made, BMW will profit!". Yet for global society, it's a disastrous direction.
- Spooky23 11y agoSo it's noble to essentially pay a tax to oil sheiks and various middlemen? Please. Give me an SUV.
- guelo 11y agoAn oil tax is the obvious policy here. A good oil tax would capture some of that wealth transfer and use it to invest in alternative energy. Of course it will never be implemented because humanity is too stupid to save itself.
- danjayh 11y agoRenewable energy will have its time, when it is ready -- and that time is coming. By 'ready', I mean 'when it is cost competitive with other technologies'. I recently read that one Chinese solar manufacturer has achieved < $0.50/watt cost for PV module production, and it hasn't bottomed out yet. At the current rate of declining equipment prices, it doesn't matter how cheap oil is, eventually solar will be cheaper ... and when that happens, we will be living in a solar-first world faster than anyone can imagine. The next question is how to deal with troughs in production due to the weather, and for that I really do hope we get back in the business of reactor innovation, because nuclear is the only option that provides the reliability of fuel-based power with 0 carbon output.
- clock_tower 11y agoAfter living with nuclear naysayers for decades (and rolling my eyes at them), I hate to be a nuclear naysayer myself; but there's been some use of "pumped hydro" for storing electricity generated by solar power. The principle is simple: build a hydroelectric dam and run it in reverse. Of course, this can't be done everywhere; you need a lot of peak solar production, a lot of water, and an easily-dammed valley, and you don't often see all three together... But it does get used to store power, and solar plus pumped hydro represent a kinda-sorta alternative to nuclear.
- rndmind 11y agoThe concept of a storing energy this way is fascinating.
- _nedR 11y agoHow efficient would that be though?
- binarypaean 11y agoRound-trip energy efficiency is reported to be > 80% for pumped-hydro energy storage. Ecological, space, and financial efficiency are more variable. http://energystorage.org/energy-storage/technologies/pumped-hydroelectric-storage http://energystorage.org/energy-storage/technologies/pumped-...
- GlennS 11y agoI'm tempted to think that the volatility of oil prices may actually push people towards renewables. They doubled in the years leading to 2008, and since then have plunged three-quarters. If Saudi Arabia's bet pays off, and they manage to choke all the alternative suppliers of oil, perhaps the price will bounce all the way back up in another 8 years? Or perhaps they won't. But then if they don't, maybe Saudi Arabia collapses or has to be propped up with US money. Who wants to bet their energy supply on that?
- ck2 11y agoI guess when too few people are buying your crack anymore, and there are too many competing sellers, you drop your price until the addicts pick back up.