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Oil Prices Continue to Rise

Written by Miranda Marquit

Monday, 17 September 2007

Will the fact that oil prices continue to rise actually hurt Big Oil?
We've already seen $80-a-barrel oil prices (it's getting close to that again today), and according to MarketWatch, dramatic increases in oil prices continue to be a fixture of the future:

Goldman Sachs has upped its oil price outlook to $85 a barrel by the end of 2007 and to $95 a barrel for 2008, according to a note published Sunday. Analysts forecast a high risk of a near-term spike in the price of oil over $90 a barrel.

But does that mean Big Oil will be losing in value? Not necessarily. Even though the Amex Oil Index (XOI) is down, Big Oil companies represented on it are up. Exxon (XOM), Marathon Oil (MRO) and Chevron (CVX) are all on the rise this morning. So, while company profits may suffer (but let's get real, even some profit drop still means high profits for Big Oil) from higher oil prices, investors still think there is plenty of room for growth.

In fact, the steady demand for oil is probably what is keeping Big Oil stocks looking attractive to investors. Even though the ability of Big Oil to keep up with demand in future decades may be in doubt, the continued demand for oil in the here and now is underlined by last week's announcement by OPEC that it will increase oil production by an additional 500,000 barrels per day beginning in November. This isn't likely to affect oil prices too much, since the increase is coming just in time for increased oil demand over the winter.

Disclosure: I do not invest in any of the companies listed above.

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Miranda Marquit
		About the author:
		Miranda is journalistically trained freelance writer who enjoys working out of her home nestled in the beautiful Cache Valley in Utah.
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