There’s nothing really new or exciting in the headlines this morning, so I thought I’d talk a little about oil.

I’m not really a big fan of technical analysis. Personally I think it’s ridiculous to believe that past prices have any indication on the future. However, sometimes charts are handy to make a point. So here we go. Are current oil prices justified, or are they silly?

Markets prices tend to become silly when things get too heated or too cool. Technical analysts will call this a Top & Bottom and will try to time when it happens in order to maximize profits. I’ve never seen concrete scientific evidence that this works, but the overall idea of silly prices is valid.

Crude oil is now trading at record prices of about $115 USD/bbl. Is this justified? Have the costs of producing this product doubled in the past two years? Has world demand doubled?

I don’t think so.

The big catch with silly prices is that they are no longer functioning in a logical sense. The price of oil could double again before the hoarde of masses begin to realize that things have gotten silly. When they do, the reversal will be quick and hard. Beware of Silly Prices.