Photo Credit: CajunCN9637
Your clients talk about oil and gas prices a lot more often these days. Financial advisors across the United States say that clients continue to believe that oil, natural gas, coal, and refined petroleum products (like unleaded gas) are inexpensive relative to the perceived potential global demand for energy. Oil isn't inexpensive relative to historic levels--most recently--about $110/barrel in April 2011--remains less than $126/barrel levels in 2008. Oil rose to a high price of $108/barrel by the end of the 1970s decade.
Financial advisors point to coal as a potential investment opportunity. Coal rose to peak levels in 2008. In 2011, the price of coal trades between 2005 to 2006 levels. Comparatively, natural gas prices average of about $4 per thousand cubic ft. Peak prices of more than $12.50 in 2008 provide upside potential for natural gas, according to financial advisors at the world's largest broker-dealers. The crude oil-to-natural gas ratio (historically between 12 to 15) indicates the potential for natural gas price appreciation.
Unleaded gas prices (May 2011 contracts) show strong price appreciation from 2010. According to financial advisors, unleaded gasoline's 2008 high price of $4.40 per gallon (on a wholesale contract basis) predicts future price appreciation. Compared to historical levels of $3.80 in 1979, the price potential on an inflation-adjusted basis could mean dramatic increases in 2011 and beyond.
As always, take a position about oil and gas prices. There's no right on wrong answer today. Only the future knows for sure!