Where is Oil going?

General Mineral Rights Discussion
1

On March 4, 2011, I prepared a graph and some visual representations of my take on future oil prices and its potential political ramifications.

I have not updated this prediction since then, but with recent NATO action against Libya, if I ran the calculus on the implied volitility of oil futures, I would guarantee that the price of oil in December will have a HIGH probablity of being around $110.00 per bbl.

Right now, spot gasoline is trading at about $2.50 per $100 bbl of oil. Therefore on that model, which is not perfect by any means, each dollar per bbl contributes about $0.025 to the cost of gasoline. Therefore for a $10.00 increase in oil, you could expect a $0.25 increase in the price of gasoline.

Of course, you have to add on federal and state taxes, highway taxes, etc. to get to what you pay at the pump. Driving seasons and patterns and the amount of refinery profit and marketing/retailing profit and cost add up to the pump price.

This is very simplistic, but close enough.

2

Buddy: Very interesting chart. Your discussion of the political consequences, as it relates to the WPT, and repeal of the depletion allowance if the price goes to the high end, is a concern to all mineral and royalty owners. Thanks.

3

North Africa Middle East

I feel as if oil prices are going to pick up a tailwind effect through at least August or September - unless there are boots on the ground in Libya, which could easily draw the more conservative (read radical) states (Iran) to introduce "something" to the mix, like an action against Israel, which pulls Palestine and perhaps Jordan into the mix.

When the correction comes, it will be dramatic - 1/3 to 40% -- maybe more.

Corrections generally can be counted on to be about 20%. Not now. Not this year.