Oil Stocks May Have Outrun Oil Prices

It's too simplistic to value oil company stocks on the price of crude alone. But if oil prices are one marker, oil shares are probably rising too high.

Chevron's (CVX) stock is trading at $107. It was only $100 when crude moved above $120 in mid-2008. ConocoPhillips (COP) trades at $81, not far below its 2008 peak of $94. Conoco shares are rising so quickly that they could easily reach their all-time high in a few weeks. Even the world's largest oil company ExxonMobil (XOM) recently hit $88, near its 2008 top of $95.

There are a number of differences between these companies. Some have larger refining operations, which can face margin pressures when the cost of oil is up sharply. Some have put more money into exploration and have increased oil reserves. Others have bought tracts of oil-producing land or deep-sea deposits. Still others have formed alliances with foreign governments to increase reserves.

Despite all of the differences among them, each company has a stock chart that rose in 2008, reached new highs, dropped as the price of crude retreated in 2009 and 2010, and is now on the march up once again -- very possibly to new highs.

That pattern is what makes investments in these stocks risky. Crude prices have been driven up to a large extent by trouble in the Middle East and demand in the developing world. The political war in Libya could end soon. The Saudis may be able to give enough money to their citizens to avert a revolt there.

The developing world has troubles of its own. Inflation in China has caused the government to tighten monetary policy to combat inflation. The central government has moved down growth targets. Austerity programs in Europe and the Japan earthquake could hurt demand for Chinese goods. Its tremendous GDP engine could slow.

It's easy to say the price of crude will move relentlessly higher and with it oil company share prices, but it's hardly a sure thing.

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jjcmdude

Go to Transgas.com (coal to gas)and ask your reps why they are not pushing this program big time, this is our way to oil independance.

March 31 2011 at 8:53 AM Report abuse +1 rate up rate down Reply
maloontransllc

This is a Bubble just like the housing was a few years ago. These scum bags on wall street are going to steal billions from the American people once again. They fill our minds with peak oil and shortages and in the end you will lose.It is a dead end street and someone needs to step in and stop the stealing.
If you dont believe this then ask the millions of people that lost ther entire retirements to the housing bubble. They are simply inflating these stocks to make you jump aboard and waste your money so they can make there big comissions. The only way to stop this is to pull out now and save yourselfs....

March 29 2011 at 3:23 PM Report abuse +4 rate up rate down Reply
Tom Harryman

I would not put a dime in Oil stocks directly. Some mutual fund portfolios contain oil stocks but I can't control their investments. If I had a say I would not allow any mutual fund, that I owned shares in, to invest in Big Oil. My wish for the greedy oil companies IS that some day each of the major stock holders and top executives be forced to drink a barrel of their crude. GREED IS WHAT IS DRIVING OIL PRICES AND THE OIL COMPANIES ARE SETTING NEW EARNINGS AND PROFIT RECORDS AGAIN AND AGAIM. DOES ANYONE SUSPECT THAT MAYBE THE SPECULATORS ARE CONNECTED TO BIG OIL? DUH?

March 29 2011 at 11:55 AM Report abuse +4 rate up rate down Reply
Gumby

You have to remember that since 20% of Americans control 80% of the wealth , it means that they dont care how much gasoline costs or will cost in the future. It really doesnt matter to them.. Obviously, the higher it cost the better for them since they will have all the oil to themselves .... So what can you do to ensure that you can continue to afford gasoline, hmm?, dont ask me!!

March 29 2011 at 9:26 AM Report abuse +2 rate up rate down Reply
1 reply to Gumby's comment
gizmo4257

it amazes me that people begrudge other people the rewards of their hard work. Most people with money finished high school, went on to college, didn't over spend and got into some sort of career and made good investments.They also made sacrifices and put in a lot of hard work, not to mention all the hours they put in. Those that complain about them are like little kids that didn't do all their homework but wanted the teacher to give them an A anyway....the exception to this is of course your athletes and actors etc.....who could be as dumb as dirt but make millions of dollars a year...How come nobody complains about them.....you keep shelling out the big money for tickets to go watch them...you keep putting the channels on TV that glorify bad behavior.....why is that?

March 29 2011 at 11:53 AM Report abuse +1 rate up rate down Reply
Jim

"There's an almost an instantaneously favorable gut response from people when you explain that they can revoke a company's charter, distribute their assets and put them out of business," says attorney Robert Benson, who petitioned California's attorney general Good Hunting

March 28 2011 at 8:37 PM Report abuse rate up rate down Reply
Darrell & Donna

Park the gas burning junk and stay home and collect your government checks and play poker all day;;no shortage of oil;;

March 28 2011 at 7:20 PM Report abuse +1 rate up rate down Reply
bam2microa

www.stopoilspeculationnow.com

March 28 2011 at 2:56 PM Report abuse rate up rate down Reply
inasctg56

Fact Check: Q: Did Obama loan $2 billion to Brazils oil company to benefit China and George Soros? A: The president had nothing to do with the loan, which the Export-Import Bank approved for Brazil to buy U.S.-made equipment and services. Yet it was alright for Bush/gop to give no bid halliburton contracts or to pass legislation in 2004 exempting halliburton from clean water acts when they are polluting waters and wells in PA from natural gas infraction.

March 28 2011 at 1:01 PM Report abuse +4 rate up rate down Reply
2 replies to inasctg56's comment
scott7841

And who garauntees the EX-IM Bank loans.........the U.S. government.
Who was it that had the "HEAVY CONTRIBUTOR" GE that made 5 billion dollars and didnt pay any federal tax because it is held in an offshore bank?.....oh yeah, Obama.

March 28 2011 at 5:02 PM Report abuse -1 rate up rate down Reply
gizmo4257

how naive of you to think obama had nothing to do with it

March 29 2011 at 11:55 AM Report abuse -1 rate up rate down Reply
inasctg56

Permits have been issued in the gulf and it's the gop who wouldn't show up for meetings for an energy bill.

March 28 2011 at 1:00 PM Report abuse +1 rate up rate down Reply
l07hye

Carpooling, public transportation,walking, riding bicycles.

March 28 2011 at 12:55 PM Report abuse +3 rate up rate down Reply
1 reply to l07hye's comment
inasctg56

The gop wouldn't even show up at meetings for an energy bill. And it is the dems who have a new electric grid coming in.

March 28 2011 at 1:03 PM Report abuse +2 rate up rate down Reply