Oil Prices: The Perils of Bottom Feeding
Channel catfish (Ictalurus punctatus) An omnivore, the channel catfish has whiskers filled with taste buds that help it find food in dark, muddy waters.
Photographer: Guravich Dan/Getty Images
Over the past six months, oil prices have plunged more than 50 percent to below $50 a barrel, their lowest level since before the recession ended in 2009. That’s slashed gasoline prices, triggered thousands of layoffs in the oil patch—and spurred a flurry of bargain hunting among investors who see this as a rare opportunity to buy before prices begin their inevitable way back up. “There is a lot of bottom fishing going on right now,” says Dan Dicker, a former oil trader and president of MercBloc, a wealth management firm in New York. “Everybody in the industry realizes that prices aren’t going to stay this low forever. The question isn’t whether they’ll rise, but when.”
For those betting on a quick rebound, the most direct way to profit would be to buy some physical crude, store it, then sell it at a higher price down the road. Unless you’re a big energy-trading company that can afford to lease an oil tanker for a few months, though, that’s not really a practical move.