Oil what happened to $200 a barrel?
It’s interesting how everyone became self proclaimed experts when oil passed $100, pretty much everyone said “here we come $200 a barrel!”. The reason oil was even priced above $100 a barrel because everyone was so freakishly bullish on oil, the oil price was mainly driven by speculation. When you buy something the crowd likes you will have to pay above supply-demand price. When that happens there is little room for mistakes, the slightest hint of bad news will cause the price to tumble. Generally speaking, prices driven by an bullish crowd is rarely a good investment.
What has happened now? Oil below $50 a barrel, standing exactly at $49.62 as I write this. Take a coin and flip it, it has higher expected value than a crowd that lacks critical thinking.
Last note: I’m long term bullish on oil, but even I disagreed when the price was above $100.
Tags: bullish crowd bad choices, long term bullish on oil, oil $200 a barrel, oil below $50 a barrel, oil getting cheaper, oil price driven by speculation
November 30th, 2008 at 12:00 am
[...] Oil what happened to $200 a barrel? … buy something the crowd likes you will have to pay above supply-demand price. When that happens there is little room for mistakes, the slightest hint of bad news will cause the price to tumble. Generally speaking, prices driven by an bullish crowd is rarely a good investment. What has happened now … [...]