The Truth About Oil. It's Not What You Think It Is

Headlines proclaiming last year's 46% decline in the price of oil are designed to provoke fear while goosing readership and ratings. Professional commodity traders are having a ball and making tons of money as amateurs pay them big bucks to speculate on each day’s fluctuation.

The Wall Street Journal noted that crude was at its lowest level since 2008. That sounded familiar to their headline after the DJIA declined 316 points on December 12, 2014. Buyers that fateful afternoon are feeling richer today than the traders who panic-dumped shares that day.

Those who got long oil contracts, or oil-based equities, in late 2008 experienced similar results. From the final bottom, the price of WTI jumped more than 240% over the next couple of years.

The 10-year chart of WTI (West Texas Intermediate) shows the volatility, or relative stability of crude pricing, over the entire past decade. Based on the wild swings you might think that big changes in global supply and demand for crude were big contributors to the movements.

In fact, worldwide demand increased during nine of the previous ten years.

Read more at GuruFocus.

Disclosure: Long an assortment of oil-related ...

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Joe Economy 4 years ago Member's comment

Am curious to know, to what extent does the price of gasoline per gallon follow the price of oil. Is it a proportionate percent drop?