Oil's Rise Running on Fumes
This column was originally published on RealMoney on Aug. 15 at 8:53 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
A few short months ago, the main topic of conversation, no matter where you went, no matter what newspaper you read, no matter who you chatted with, was real estate. Everyone had a story about some house or condo that had doubled or tripled in price in a short period of time.
I know it wasn't that long ago that my inbox was filled with folks pointing me to websites like condoflip.com or telling me stories about their neighbor's house that just sold for millions. But have you noticed in recent weeks that that has changed drastically?
And maybe it's more like the past week or 10 days. In the past week or so, the topic du jour has switched from the price of homes and real estate to the price of gas. Last week when I was filling up, the lady at the next pump got out of her car and immediately started telling me how she noticed the price go up 15 cents a gallon from one day to the next.Then on Friday afternoon, my hairdresser, who was talking condo prices last month, was discussing the price of oil with me. (I consider the hairdresser the equivalent of a taxi driver.) In addition to that, I return home to see that someone has sent me an email with a Web site that tells you where to find the lowest-priced gasoline in your area. What happened to condoflip.com? But the icing on the cake came Saturday morning, when the local newspaper had this headline on its front page: "GASP!" There was a photo of a gas pump and the price we are now paying. I also noticed that for months on end, when oil was still trading lower than $60, we would hear such comments as, "When you take inflation into account, oil would have to get back to the mid-$80 range to make it the equivalent of the 1981 high price." Two weeks ago I noticed the same commentary, but the range was narrowing as folks were saying $80-$85. But on Friday I see they are now being much more specific by telling us the exact number ($84.79, according to the report I saw on TV). Now I also know this is all anecdotal, but it also tells me that folks are no longer so interested in what the house down the street sold for as they become more concerned with paying over $2.50 for a gallon of gas. In addition to all of this, the oil stocks barely budged on the upside Friday, despite oil's relentless rise. The oil-service stocks closed mostly lower on the day. Back in July I had calculated a target price on oil in the $61-$64 range. But because that calculation was on a futures contract that has since expired, I have had to go back and recalculate the target price. A rough estimate is now $68-$70 per barrel. (If I take the high of the pattern
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