How do energy stock prices continue to fall yet the price of crude oil per barrel continue to rise?

I don’t make the connection. If crude per barrel is at an all time high shouldn’t the oil companies be making more money because they will raise the price of gas per gallon even more.

One Response to “How do energy stock prices continue to fall yet the price of crude oil per barrel continue to rise?”

  1. Zeltar Says:

    Multiple factors are in play…
    1) The USD is worth less. Before Nixon, Gold was the US standard. Gold is still the only standard in which the value of currency can be measured. From 2000 to today, Gold has gone from $270 to $765 USD per ounce. This DOES NOT mean Gold went up. This means the dollar fell. The US dollar can puchase 35% of what it could in year 2000.
    2) If the dollar stayed constant with Gold, the actual crude price would be $31 a barrel (About a 50% increase from year 2000). The increase is crude prices, though not as severe as the USD makes it look, is caused by increased world demand and limited oil supplies. India, China, and Russia are increasing their need of energy.
    3) Limited supply, with increasing demand. When the Texas Railroad commission announced using 2 lines in the newspaper that it reached a production peak, it meant that the US was using more oil than the US could produce. This was the beginning of the oil crisis of 73. OPEC was then formed. Saudi Arabia stated the same thing just a few years ago. This means Saudi could no longer dictate the price of oil within the OPEC nations. The demand keeps increasing. Nation after nation peaks and thus can only pump out so much oil from the ground. As the supplies dwindle, the crude doesn’t come up so fast. It get’s harder to get it out, all while the flow of crude decreases (further reducing peak capacity).

    What does it mean to stock prices? Oil companies have to invest more money to get less crude. This hurts margins. This impacts the investor.