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Thursday, January 31, 2008

Oil Takes It On the Chin

The surge in first-time unemployment claims and slowing personal spending are fueling recession fears. Add that to the rise in crude oil and gasoline inventories yesterday, and you can see why oil prices are skidding below $90. End result: Oil stocks are getting hammered.

On the other hand, have we really gotten to the point where we consider $80 to $90 oil "cheap"? Holy smokes!

I say that because many oil industry stocks are still priced as if oil is going back below $50.

I know it hurts, but let's hope they get cheaper in the short term. Long-term trends are still intact for most of them, and as I showed you yesterday, the slowing US economy doesn't have a lasting effect on oil prices.

By the way, here's a blast from the past: Fears of recession in August 2006. One of the things that worried economists then was that oil prices had surged ... above $70 per barrel! We know how that worked out.

Oh, and Shell's production is falling. Somebody has to pump more oil. Is that "somebody" OPEC? In a word, "NO!"

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