This months issue of The Economist has a special report on crud oil prices. I have been reading it veraciously in the past few hours in the plane to Tokyo.
Back in 1998 crude oil prices declined to near all time low of $10 per barrel. Since then the crude price has gone up steadily and in 2005 it has been sustained at $40+ level. IDC released a report just recently saying that this summer or in the near future it could easily reach $100 per barrel.
I believe oil price will have a profound impact on the global economy. I have tried to learn more about this subject and I will try to summarize my learning into an article soon.
The Oil and Gas index is the best performing index funds this year. I bought some about a month ago near its 52 weeks high. It is somewhat risky but I am pretty confident that we have not yet seen the worst of high oil prices. Any disruption in the oil supply from Iraq or Saudi Arabia will likely be followed by a sharp increase in the oil price. Since the oil production is already at its highest level it can’t absorb any anomaly in either production or consumption. I am still not sure how long I want to hold on to this index fund; I am thinking at least until end of summer.