Second Analyst In 2 Weeks Predicts $200 Oil. Translation: We’re All Clueless.

Today a Goldman Sachs analyst wrote that oil could hit $200 a barrel within the next two years. This follows recent comments by a CIBC World Markets analyst who predicted $200 oil by 2012.

I don’t agree. I think we’re near the top.

So how do I know that we’re near the top? I don’t. I could be dead wrong. I’m not an oil trader. I do not work in the oil & gas industry. I could very well be eating my words in a couple of years, although I doubt it.

I am making my prediction based on observation and logic. Bubbles often look like run away trains that will never stop, but they do. They always do. Oil could hit $140, $160 or even $180 before hit turns around. I have the odd feeling that this $200 number is being tossed around just to make interesting headlines. Thanks for the subject matter.

Now, with crude currently trading at record levels just under $122, you might think I’m nuts, or worse, a contrarian. Neither is true. I’m simply being realistic. I promise this is not just from my arse.

Here’s why:

Price fluctuations almost always involve a catalyst. This is a very important concept. There is always a reason beyond the classic “more buyers than sellers” to explain why prices increase. You must ask yourself why more buyers are currently present. What brought them to the table?

The answer: A catalyst.

Now some people believe that they can model how far a price movement will go before the catalyst effect fails and some material price correction occurs. I do not. I believe the only thing that stops a catalyst is…. another catalyst. This is why prices can get silly. This is why bubbles occur. If there is no catalyst (reason) for people to stop buying, they won’t. Even if the price gets stupidly high or low.

Has there been a catalyst to move oil prices lower? No. Do I foresee one coming? No. Am I a hypocrite for writing that oil prices are not going to hit $200 even though there is no catalyst to stop them? Yes.

Wait!? Yes?! Huh?!

This is the point where logic and theory meet gambling and intuition. So here’s my stand, I say no $200 oil in two years. Oh, and I apologize for promising that I wasn’t just talking out of my arse, because I was. Don’t forget, I’m a hypocrite

Seriously though, that stuff about catalysts is great. Think about it and ignore all the silliness that surrounds it.  I just wanted to show how analysts are all a bunch of double speaking buffoons.

Hope you enjoyed it. (please don’t hate me for it)