Record boom, record bust
The WSJ comments on oil prices, which are now in the mid-$50s and down 60% from just a few months ago:
Light, sweet crude for December delivery fell $3.08, or 4.9%, at $59.33 a barrel on the New York Mercantile Exchange, its lowest settle since March 2007. Oil is down 59% from its $145 peak in July…Oil may have further to fall this week: Traders cite a slew of options to sell crude at $55 or $50 a barrel as having likely exacerbated the move below $60 and point to more downside. Options grant the right to buy or sell oil if futures hit a certain price. A move toward those levels would bring the price of oil near its lowest point in 3½ years. Oil has fallen even as production has tightened…
If you look at past boom and bust cycles over a variety of commodities and numerous business cycles, the upward part of the cycles averaged 18 months to 2 years or so. The price increases during that period were about 50%. This boom cycle lasted much longer (2-3x in many cases) and had far higher peak prices. It’s a bit hard to imagine a scenario in which the current downtrend comes to an end — but weren’t people saying precisely the same thing in the other direction back in July?
UPDATE — Of course oil has fared better some other gambling stocks, such as the the Las Vegas Sands, which has gone from $123 to $5 in the last year.