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How unusual is a "bear market" for oil?
Monday, August 11, 2008
A story in USA Today today began "Finally, investors have a bear to get excited about. Oil now is in unofficial bear market territory, with the price of a barrel of crude falling to $115.20, down 21% from its July 3 peak."
A good question to have asked prior to writing an article such as this, something that apparently doesn't occur to the new "oil bear market" enthusiasts, is whether a 20 percent decline in the price of crude oil is unusual or statistically significant in any way.
It doesn't take too much work to realize they happen just about every year.
4 comments:
Great point. I got stopped out on Jan. 15th 2007, I think that was the reversal day. Crude oil is almost certainly going to be more expensive in the future (if geologists are to be believed), and Mcdep considers xom stock safer than treasuries. I concur.
It also doesn't take much work to realize that oil is up, overall, about 900% in 10 years (from about $15 bbl in 1999 to about $140 bbl in 2008).
That means, on average, oil has gone up 90% per year. READ THAT AGAIN! Oil has been going up at a rate that dwarfs everything else.
In context, a 20% decline is meaningless.
This shows the fallacy of trying to apply the STOCK market definition of a 'bull market' (down 20%) to a COMMODITY such as oil.
Those who truly understand finance aren't impressed when USA Today's "Senior Finance Editor" (what a joke!) or bleached blonde built beautiful Barbie Bimbo on the 24/7 cable "news" finance channel tries to sound knowledgeable by reading this kind of drivel which is written for her by a 25 year old 'journalism' major who is working his first job and trying to grab your attention.
Good post. Just linked to it on my site.
excellent perspective on oil prices. Thanks
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