I forget which old Greek said it: Give me a long enough lever and I can tilt the planet. Of course, a no matter how long the lever it needs a fulcrum point to do its thing. Let’s skip the physical mechanics of levers and fulcrums and see how economists/market sharks view the concept. From:
http://www.investopedia.com/terms/f/fulcrumpoint.asp“Definition of 'Fulcrum Point' - The turning point in which a security or the economy in general makes a major change in direction. A fulcrum point can be very profitable for investors who are able to identify that a sharp price move is about to take place. For example, after the U.S. equity markets plunged in late 2008, they recovered sharply in early 2009.
It is very difficult to predict or identify a fulcrum point contemporaneously, but the promise of very high returns keeps many investors looking for them. Unfortunately, these movements are so rare that few succeed in both predicting that a movement should occur and in timing the movement correctly. Often, what may seem initially to be a major sharp reversal may instead turn out to be just a minor movement before the major trend resumes.”
With that model in mind one might say we hit the PO fulcrum point in 2004. Or at least the first FP. From 2003 to 2005 oil increased almost 80% from $28/bbl to $50/bbl. But then from mid-2006 to 2008 it jumped about 50% from $62/bbl to $91/bbl. And despite a good dip in ’09 ("...may instead turn out to be just a minor movement before the major trend resumes") based on the yearly average we’ve are flat at around $86/bbl. Oil has been running up lately. Have to wait to see how that holds for the year.
But bottom line: from an investment standpoint: we’ve already passed the oil price fulcrum point between 2005 and 2008. A small fulcrum reversal in late ’08 but that didn’t last long. Thus we’ve actually been in a somewhat balanced state for the last 3 or 4 years. From an investment stand point which way would one might expect the next big tilt: up or down? We’ve seen what a significant upward movement in price did to the global economy and demand destruction. But in the US there were other contributing factors to the down turn beyond the rise in oil prices. Maybe a downward tilt if more economic woes grow in the develop economies. OTOH some economies, such as China, appear to be handling the higher oil costs well enough sustain current prices.
I think many probably felt as I did at first: we are at a fulcrum point today. But that would be true only if we are about to swing wide in one direction or the other. Looking at the last 10 years or so we have seen THE fulcrum point about 6 or 7 years ago. I don't think we're seeing another one develop yet. I suppose one could call a fulcrum point that doesn't swing in either direction a plateau. So maybe fulcrum point and plateau are polar opposites. We can all have our own opinions on which way a tilt is coming if, in fact, there will be one soon…no guarantees there. OTOH I would be more impressed with anyone’s opinion if they backed it up with a few $million bet in the long term oil futures market that mirrors their expectations. Remember that if you bet the futures high or low you lose either way if there's no movement.
Well, do you feel lucky, punk? Do you? Go ahead…make my day. LOL.
