Tuesday, October 16, 2007

High Oil Prices Are Bearish, Right?

Not so fast.

Take a look at the following chart:

Actually, high oil prices can be very bullish. Note that global stock indexes have been rising in sync with higher oil prices. This probably means that the rising price of oil is a function of the global economic boom, where oil demands are outstripping oil supplies. So all the gloom and doom scare talk is wrong.

It’s a completely different story than the 1970s. Back then, oil supplies were cut off, while heavy-handed government regulatory controls interfered with the free flow of oil. So it’s time to think again about high oil. High oil can be quite bullish.