Hate Big Oil's Profits? Hate Homebuilders' Too

Ultimately, the mismatch between too much new supply and too little demand leads to the next bust. We saw that in technology in 2000, we saw it with energy in 1998, and you can be sure we're going to ultimately see it in both housing and energy. The only question is when.

Considering that supply is still constrained (with OPEC unable or unwilling to provide marginal new oil, and new sources not yet tapped) and that the public has not yet become enamored with energy stocks and that companies' price/earnings multiples are still low, one can only guess that the balance of supply and demand is not yet on the six-month horizon.

So while there will inevitably be ebbs and flows in the price of oil, it's likely to remain at least locked in the current range between $45 and $65 a barrel, with occasional excursions higher in the face of disruptions such as additional Gulf Coast hurricanes, West African labor disputes, Venezuelan fiscal instability and Saudi Arabian political instability.

Oil for iPods

To console themselves, energy users in the West should note that there is at least one very interesting offset to higher prices right in their homes (besides the rising value of their properties).

The real culprit for higher prices in the past few years, after all, has been the explosion of demand from China and India. And these two countries have only become hogs of energy and industrial metals such as copper, zinc and nickel in the wake of a huge ramp in the output of their factories, which are churning out iPods, tennis balls, cell phones, toys and bookcases for sale in American and European discount stores.

In short, in a remarkable twist of globalization and economics, the incredibly low prices we are paying for consumer goods made in Asia are in large part responsible for the high prices we're paying for petroleum pumped from the Middle East. You really can't have one without the other.

So don't curse the oil companies for making hay while the sun shines, any more than you would curse your neighbor for selling his house for top dollar. They're just capitalist animals playing predictable roles in a cyclical game with an outcome we all depend on. If anything, blame your teenager.

And since you can't beat the oil companies, you might as well join them. It's not too late to consider an investment in the best-of-breed international energy conglomerates, which include BP, France's Total and Eni(E Quote) of Italy.