Oil, an alternative theory on Iran

InvalidID · #1 02/22/12, 12:08 AM

I set out to find an alternative to oil as an investment running up to the Iran war. What I found was a way the Chinese and Iranians could smack the US economy in a bad way. I hope someone in DC is covering our weak spots.

I've been talking to a lot of friends about the up coming war with Iran and how to play it. Most folks seem to agree that oil is the way to win. Go long oil and wait for the bombs to drop, the straight to close, speculators to run amok, and the military machine to start gulping down fuel. This is a possible play and it seems to make good sense, but I hesitate to buy into anything EVERYONE is already sure of. Somehow running with the herd never works out for me. With that in mind I've been looking for an alternative scenario.

First thing we need to ask ourselves is why would oil prices go up? Iran's oil isn't getting to the US or Europe right now, so we won't be affected by that. Why would we stop buying Iranian oil in advance of a war with Iran? Seems like it might have been to give our industries (mostly Europe's) time to ween themselves from it. Assuming Iranian oil isn't reaching western shores today but is still getting to someone we can also assume it would have limited impact on the price of oil. Unless we destroy the oil fields, which I doubt we would. I also doubt the Chinese would stand for it.

http://iidsideas.blogspot.com/2012/0...y-on-iran.html

Darren · #2 02/22/12, 08:37 AM

People have always made money in oil. The contrarian move would be to research businesses that would benefit from cheap oil.

InvalidID · #3 02/22/12, 09:22 AM

I disagree. I believe the contrarian move would be to bet on Solar World. LOL If they get this import tariff they've been lobbying for they'll be the only solar bet in the US. But that's a different article, and mostly just a joke.

In the scenario I painted in that article oil prices would fall, but it would sting the US more than help. China would be the big winner in that one, and I think a person would want to figure out how to play off of that.

Bearfootfarm · #4 02/22/12, 11:57 AM

Quote:

I believe the contrarian move would be to bet on Solar World.

Didn't most of the solar companies BO "bet" on go bankrupt?

InvalidID · #5 02/22/12, 12:01 PM

Quote:

Originally Posted by Bearfootfarm

Didn't most of the solar companies BO "bet" on go bankrupt?

Yep, which is why this one is asking for tariffs on Chinese made solar panels. If they get their tariffs they'll be the only current major US manufacturer of solar panels AND they'll be cheaper than Chinese made panels.

A good bet their stock price increases when they are the monopoly right?

unregistered168043 · #6 02/22/12, 12:24 PM

I think you are over -thinking it. Oil's going up. Period.

InvalidID · #7 02/22/12, 12:26 PM

Quote:

Originally Posted by Darntootin

I think you are over -thinking it. Oil's going up. Period.

You should read the whole thing. There is a good reason for oil to go down, if the Chinese and Persians worked together in an effort to kill the dollar. I will add though, it was just a what if scenario.

unregistered168043 · #8 02/22/12, 12:43 PM

I read it but it strikes me as a mutually dependent string of assumptions and predictions. For instance, I'm not convinced that lower oil price results in lower dollar value. Higher dollar value goes hand in hand with lower oil price, usually. There are alot of values and opportunities for growth with lower oil prices. More growth means more demand for things, including dollars. I also would not bank on an oil discount for China. I think each phase that you have described may or may not happen and may or may not swing in another direction entirely or have a completely different result.

I think the bottom line is that the speculators are going to take this opportunity to spike the price of crude. We've seen the price move independent of supply/demand many times in the past.

InvalidID · #9 02/22/12, 12:55 PM

Quote:

Originally Posted by Darntootin

I read it but it strikes me as a mutually dependent string of assumptions and predictions. For instance, I'm not convinced that lower oil price results in lower dollar value. Higher dollar value goes hand in hand with lower oil price, usually. There are alot of values and opportunities for growth with lower oil prices. More growth means more demand for things, including dollars. I also would not bank on an oil discount for China. I think each phase that you have described may or may not happen and may or may not swing in another direction entirely or have a completely different result.

I think the bottom line is that the speculators are going to take this opportunity to spike the price of crude. We've seen the price move independent of supply/demand many times in the past.

Largely I agree. Things could, and likely will, be very chaotic. But that doesn't preclude Iran and China from working together to take out the 'Great Satan' or whatever we are these days.

As for the dollar and oil, I'm pretty convinced myself. I do firmly believe in dollar hegemony and I do firmly believe that the US government is only able to run the deficits it has because of it. If this is an economic war (I'm 95% sure it is) we're fighting this is something we need to defend.

My opinion, if we thought for a minute Iran was willing to sell oil for a discount to China (or any nation willing to buy oil in something other than dollars) we'd be bombing them before the deal was sealed.

Tobster · #10 02/22/12, 01:14 PM

If I felt as though events would soon unfold in Iran which would rattle the markets, first thing I would do is convert equities to cash and wait. There is no need to speculate on what changes we may see in oil or the US dollar. I would simply watch to see what happens and then act. I have no illusions about buying at the bottom or selling at the top, I merely wish to take a portion somewhere in the middle. If it is solar or pipelines or anything else it does not matter, there will be plenty of time to act and profit once it is clear where the money is going.

I do agree with Darntootin, oil is going up. But, who knows for sure? I am well aware anything is possible. Personally, energy is the one sector I always have holdings. They tend to go higher and pay good dividends.

InvalidID · #11 02/22/12, 01:36 PM

Quote:

Originally Posted by Tobster

If I felt as though events would soon unfold in Iran which would rattle the markets, first thing I would do is convert equities to cash and wait. There is no need to speculate on what changes we may see in oil or the US dollar. I would simply watch to see what happens and then act. I have no illusions about buying at the bottom or selling at the top, I merely wish to take a portion somewhere in the middle. If it is solar or pipelines or anything else it does not matter, there will be plenty of time to act and profit once it is clear where the money is going.

I do agree with Darntootin, oil is going up. But, who knows for sure? I am well aware anything is possible. Personally, energy is the one sector I always have holdings. They tend to go higher and pay good dividends.

The dividends are what I like for anything I'm holding long term. I have started looking at oil pipeline companies and drilling companies again, though I'm iffy on getting involved with them just yet. I do believe that any disruptions from Iran will bring about new exploration, but with the current administration I'm leery of putting my money on that.

I too am sure oil is going up in the short term. My problem is I don't think it is staying there. A spike in oil will cripple the US economy right now and cut demand too hard. That trade is going to be too hard to keep up with for me to feel good about it.

Iran is opening it's oil bourse on 3/20 this year. They'll be trading their oil on an open market, without US traders (read speculators), with limited competition, for non dollars. With China and India being their biggest customers I really can see them bidding the price of Iranian oil down simply due to lack of volume in that market.

There are three ways that can play out excluding US intervention.

1. China and maybe India get discounted oil from Iran. While this is most likely to lower the price of oil for everyone, it won't be as much a discount for the world as it is for China. This is bad for the dollar and China gets an energy edge on us. While oil is lower for others, it rises or remains flat in the US. Interest rates have to rise to cover the lack of TBill buyers, crapping all over the fake recovery we have going in the US.

2. China and India and a few other players bid Iranian oil up to current market price. This creates a lower demand for the dollar and increases the price of oil for US customers. Interest rates have to rise to cover the lack of TBill buyers, crapping all over the fake recovery we have going in the US.

3. There is very little interest in the oil bourse and not much happens because of it. Though, if the interest in Iraq and Libya's oil schemes is any indication this is unlikely to happen.

With US intervention anything is possible. Anything from the above still happens to WWIII.