Coffin Spiral- Title of an interesting article in the new Forbes out today. Warns of coming inflation noting high energy prices and advises getting out of longer term bonds and into blue chips.
What I found especially interesting were comments that high energy prices generally stick around for a long time. Back in 73-74, during the oil embargo, oil prices peaked but only fell 7% in '75 and stayed in that higher range for 5 years.
Then again in 1979-80 when oil prices hit a high of $98 ( inflation adjusted to today's dollars) prices had only fallen 12% a year later.
Today prices are demand induced as it has exceeded supplies and high prices are likely to last even longer. The author also noted that USA refinery capacity has dropped 10% since the 80s while consumption has increased 33%. The last large USA refinery was built 3 decades ago. With all the red tape, and "NIMBY"itis in the USA, it will likely be years before we see any new refinery capacity.
While energy prices took a tumble today which is a good thing as prices are so high they are straining the economy ( OG stocks also took a tumble which is not a good thing for my portfolio though), I don't believe the era of high energy prices is coming to an end here. In fact, when the cold weather hits or even the threat of cold weather hits in the next few weeks, I believe OG stocks will vault right back into favored status with investors and traders.
