Saturday, June 07, 2008

Is the Oil Bubble Bursting?


Richard Rainwater

In another completely shameless act I've purloined the entire item here from Neatorama.
I know, I know, oil prices are stratospheric (new high today of $136 per barrel as I write this) and it’s hard to see how it will go back down with increased worldwide demand and finite supply, but just read what Richard Rainwater has to say about the oil bubble about to burst.
Who’s Richard Rainwater and why you should listen to him? It’s all explained in this article about Justin Fox for TIME magazine:

Eleven years ago, after doing a lot of studying and a lot of thinking, Richard Rainwater convinced himself that the long decline in oil prices that had begun in the early 1980s was about to end. As a billionaire who had made his name and fortune steering the Texas oil riches of Fort Worth’s Bass family into lucrative nonenergy investments like Disney stock, Rainwater had the wherewithal to act on his conviction. So he plunked down about $300 million of his own money on energy-company stocks and oil and gas futures.

For a while it looked like a boneheaded move. At the end of 1998, the price of oil fell below $10 per bbl. Regular gas sold for 90¢ a gal. While Internet billionaires were being minted to the right and left of him, Rainwater was getting poorer by the day.

You can guess the rest of the story. The dotcoms imploded; the price of oil climbed, climbed and climbed some more–and Rainwater’s energy bet came to look like one of the better investment calls of our time. It has netted him about $2 billion, vaulting him from the mid-200s on Forbes magazine’s 1999 list of the 400 richest Americans to No. 91 last summer (with $3.5 billion overall).

So guess what Rainwater did a few weeks ago, right after oil prices topped $129 per bbl. for the first time? "I sold my Chevron," he says. "I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything."

WARNING: I'm not a financial consultant or adviser. Otherwise I'd probably have some money. You make your own decisions.

Note: Headline links to source.

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