Striking Oil or Slipping on an Oil Slick?
By Michelle McKinnon, Financial Advisor
Today, I’d like to talk about oil prices. I’m sure a lot of investors out there can think back to January and February when the price of oil was all over the news. You couldn’t turn on Fox or CNN without hearing what the price was that morning and how much it had declined. In turn, the media was basically predicting the fall of society just because of low energy prices.
In January and February, plummeting oil prices caused a near-panic in the media
By a few months later, oil had rebounded significantly and continues to climb
Focusing on long-term goals over short-term fluctuations is a better way to invest
Well let’s take a closer look at that previous trend. By February, the price of oil had dropped from about $100 per barrel the year before to $27. That’s a precipitous decline. So all these people were of course screaming that we’ll never use oil again and it was a dead commodity. Well I’m not sure about everybody else, but I kept hailing taxis in New York City, and I think I took at least five flights during the first few months of the year. So realistically, people pretty much kept consuming oil at the same rate.
What’s happened since then? By the end of May, oil actually closed a little higher than $45 a barrel. That represented a climb of more than 40 percent in about three months. By the end of June, it had risen back to $50 a barrel. So the lesson is, maybe we should stop focusing so much on what people say in the media, and instead keep concentrating on our long-term goals.
Perhaps we should have listened to the fabulous and famous Warren Buffett a few months ago, when he actually invested significantly in Phillips 66, a multinational energy company based in Texas. So again, I know sometimes the short-term view can be scary when the markets are all over the news. But just hold tight, because in a few more months the clouds will probably clear and you’ll see blue skies again. That’s happening now with energy prices, oil prices, and emerging markets all on the rise, indicating that the previous turmoil is starting to settle down.
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