Posted by: sanjayshetty | June 24, 2005

Black gold…. the oil mania

Nikhil Gupta a friend at the RichDad-Bombay club sent out an interesting link Life after the oil crash.

It’s an interesting read on the Oil crisis faced by the world.
In order to understand this more I started hunting on the web for more data.

Here’s what I found on MSNBC

“Oil prices are 58 percent higher than a year ago, though still below the inflation-adjusted high above $90 a barrel set in 1980.” – Source http://www.msnbc.msn.com/id/5612507/

So why all this concern about Oil prices?

Well the issue is that the world needs about 83.5 million barrels of oil per day.
In 2005 the demand per day is to be an average of 84 million barrels per day.

The problem? there is not enough of a supply cushion, or excess production capacity to prevent the market from a prolonged output disruption.

Ok so what happens then, well chaos is supposed to break out if the gap between demand and supply increases beyond about 6-7 %

A history lesson teaches us that in early 1970s – shortfalls in supply as little as 5% drove the price of oil up near 400%. Demand did not fall until the world was mired in the most severe economic slowdown since the Great Depression.

Well here’s one thing which I think, it seems like oil prices are on the upmove and are certainly going to stay that way. Looks like an interesting time to invest in oil futures.

Incidentally besides this black gold. Real gold prices are also at a considerable high.

Sanjay Shetty

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