Stephen Leeb Ph.D., author of The Oil Factor & The Coming Economic Collapse, is an investment adviser and renowned economist with an interestingly different outlook on the market. Aside from his poignant books and his investment management firm, he also offers a financial newsletter called The Complete Investor and a free weekly market forecast.
To sum up his general analysis, Leeb feels that all signs point to the inevitable rise of outrageous oil prices in the very near future. If this assessment is true, it will wreak havoc on both the US & Global economies. He believes that if our society can quickly awaken to the present reality, we might just have enough time to turn things around and brace ourselves for the drastic changes ahead. One suggestion Leeb makes, is serious investment in creating an alternative fuel infrastructure. While the details are too much to discuss here, all of Leeb's materials are an interesting read for the financially-minded individual.
So what does Leeb have to say about the falling gas prices we're seeing on every corner? Well, read the excerpt below from the 9/6/06 weekly market forecast....
Last issue, we noted that oil could fall to the mid-$60s or so.
That appears likely. Indeed, it would not surprise us to see oil
trading in the low 60s before it takes off again. We wish oil prices
were retreating due to positive changes in the worldwide political
climate. Investors generally are inclined to believe that is the case.
But it is not.
Rather, various technical considerations are affecting oil
prices. Perhaps most important consideration is that we are approaching
the shoulder season, the time of year between the driving and heating
seasons, when demand for oil falls sharply. In addition, commodity
traders had become overly bullish on oil. So with no one left to buy,
the sellers are temporarily in charge.
On top of that (and most
fortunately), the hurricane season has not wrought as much damage as
expected. So because of these considerations, oil has some short-term
room on the downside. However, we believe the market has gone astray in
thinking the decline in oil means the world has suddenly become a safe
place and that energy supplies are now plentiful.
The U.S. is
still woefully dependent on the Middle East for oil. Judging by Iran's
defiance of American demands, our situation is precarious. In fact,
every country capable of raising oil production from Saudi Arabia to
Venezuela to Nigeria to Russia remains politically volatile,
economically undeveloped, and in many cases a breeding ground for
anti-American extremists.
Whats more, even though virtually every oil producing country
has been producing all the high-quality oil they can (whatever excess
capacity remains is sour oil that cannot be readily refined into usable
products), critical worldwide inventory measures, such as
days-to-cover, are far from all-time highs. So where will the world
economy get the additional oil it needs to grow? Answer: it won't.
Images and text courtesy of The Complete Investor and Leeb Capital Management
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