Oil Prices Suffer Big (But Temporary) Drop

There are big headlines today about oil plunging to a 5-month low, losing more than $6 a barrel. Some news outlets are hyping an even bigger number, pointing to the $10 drop from the weekend high to an intraday low. Both these numbers lack an important element that is crucial to investing in this market: Perspective.

Sure, it's a 5-month low. But does anyone want to guess what the average price of oil was in 2007? About $65. Even if crude oil prices close out the year at today's level, they'll be 70% higher than last year. That's much better than if oil was still pushing $150 a barrel, but it's certainly not anything to throw a party about.

All of my four newsletters are still heavily invested in commodities because I'm confident that oil will bounce back. The dollar will weaken again, people will turn up their thermostats in the coming weeks to create a spike in demand, and crude oil will rebound.

Get Louis' final thoughts on the oil sell off and what to expect in the coming weeks. Read more.

by The Freshman |  09/04/08