Warning: If you are offended if someone points out complete idiotic behavior which you may or may not execute yourself you should not read any further.

I know you have heard it more than enough but let us take another look at it from another point of view.

The Oil Price and its steady increase

There is no doubt that you have seen and maybe even felt the rise in the price of oil and the hope that it will just come back down sooner or later is just as bad as if you hope that tomorrow when you wake up two plus two will equal six.

Yes, oil prices will move lower eventually but the low it will reach will be higher than the previous one while the rise that will follow will breach new record territory.

Oil prices hit an all-time high of $99.18 on January 3rd 2008 and than pulled back 12.29% or $12.19 to 86.99. Yes, the pull-back was less than 20% and there will be such a pull-back but not until the price of oil will breach $100 and more. You can expect a 20% drop in the price of oil after it settles above $109 per barrel.

One small but important fact the majority seems to ignore is the simple fact that the U.S. is not the single most important economic or even military power on this planet anymore and continues to loose ‘market-share’ on a daily base. Even a strong recession in the U.S., which Ben Bernanke tries to ensure with his pathetic moves and assistance from other sources with a serious of terrible economic decisions, will not cause a severe drop in the price of oil as demand will only feel a slight decrease which will be countered by a decrease in oil output in order to keep prices stable and in order to keep the upward movement in place.

Why?

Every nation that heavily relies on oil production understands that the era of fossil fuels is on the verge to be extinct and replaced by alternative sources of oil. Of course there will be gas stations 50 years from now but it will have less of a market share than it currently enjoys. Therefore the oil industry will try to milk the fossil fuel boom as much as possible with one eye on the alternative energy market.

Here is the idiotic behavior pointed out in the warning:

We all know individuals who will have all the facts as of why oil prices will continue to increase (and it is not a challenge to get that information yourself) and every time they drive by a gas station and see the increase at the pump they complain and explain why the price will continue to increase BUT if you ask them if this means that they invest in the oil sector or oil service sector even in oil itself the answer is…

NO!

Now, if you manage to score above 70 on an IQ test this should make no sense at all. I will lean very far out the window here but think that if you explain this to a chimpanzee than the chimpanzee will trade all of his bananas in order to profit from oil (Yes, I know…you did not like the example and chimpanzees have more than just bananas to trade in but this example was kept as simple as possible).

Why does the majority insist to fight the wave?

I let the individual answer this question for themselves but it may be hard to figure out and therefore try to answer the simplified version of the question which is…

Why do you insist to fight the wave?

If the majority of those who complain would use 25% of the energy they waste when they complain about the increase at the pump and energy bills in general and invest in the energy sector the profits they could earn would be far greater than the increase they have experienced over the past years.

Do not blame everyone and everything but look at your own behavior and take advantage of the opportunities given to you by global markets.

You need to know when to go with the flow and when to separate yourself from it.

Does this mean that you should close your eyes and just jump into the energy sector with both feet?

No, of course not but it is more simple than you may think it is.

You may want to read the corresponding post about equity markets… Don't get fooled by the Suckers Rally…

The only thing that I would want you to do after you read this post is think about what you do and question some of your recent moves.

Is the oil industry your enemy?

No, you are the source of the problems and not just when it comes to energy related issues but the same holds true when it comes to housing, debt and investments.

Great post. Really liked it.

How do you think the masses can be educated about the fundamentals of economics? The truth is that the vast majority of people, even educated people of a good living standard, really have no clue how finance works.

Trying not to go too off-topic, I was speaking to some friends in a pub the other day. Aged between 22-27, all with University degrees. Not one person understood anything about the sub-prime crisis, or even what the money markets really were. They were amazed when I explained (even with my own sub-par knowledge) that banks actually invested in the market. They assumed banks just lent money and received interest, and it was as simple as that!

Going back on topic, how do you teach people what the global market is, and how it works? Do you think economics should be introduced into the curriculum, as a GCSE? Or perhaps Maths should be focused more on real world examples and its application in real world financial situations, not just personal or business examples, but larger economic ones?

current price is exceeding $120

Interesting read!

ha ha

That's weird, doesn't really make sense :S