What Sub-$50 Oil Means For You

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If you wanted help from the oil front, the help you have sought has come and may be a curse.  Forget oil close to $150.00 per barrel and forget whatever T. Boone Pickens tells you about the same old broken record argument over supply and demand.  Crude broke $50.00 temporarily this morning.

NYMEX has Crude (CL) at $50.30 but it looks like there was briefly asub-$50.00 print.  It looks like $49.90 was the low in January 2007.As far as Brent Sea crude, that is down around$48.40 per barrel.  This is starting to feel like an extreme on theother end of the de-leveraging sword after speculators ran oil up somuch.

It was just in June that oil was north of $140.00 per barrel.  The badside of this is the deflationary impact it can have when prices onshipping and finished goods start to come down after so many companiesinstilled price hikes for their goods and services. 

This is alsogetting to the point that new projects and many of the oil sandsprojects will run at very low profits or will be delayed.  The Fed and the markets fear inflation.  But combating deflation is a problem that only short sellers enjoy.  When assets lose value every day, that creates few rewards. 

This is probably no great fortune for housing prices in Texas, which isone of the few states where the housing market has held up well. 

And for all the great alternative energy projects, let’s just say that the "global warming" fear will drive new projects back to a mentality of "climate change" even with the greenest of the green.  Just look at any of the alternative energy stocks and their guidance and you’ll see that.

The old mantra may be true… Be careful what you wish for. You might get it.

Jon C. Ogg
November 20, 2008