Clearing up Oil Boom & Bust Speculation

Clearing up Oil Boom & Bust Speculation

Expert Mickey Cargile compares the boom/bust of the 80's to current day
Midland -- One of the biggest differences between this boom and the boom of the 80's is the technological advances and discoveries that have taken place since. But neither of those things will prevent a bust. Still, if the price of oil was to drop and things started to slow down, we wouldn't necessarliy see what we did back in the mid-1980's.

According to financial expert Mickey Cargile, back in the 80's there were two very different things going on.

"Banks did not have as strong of lending practices as they do today," said Cargile, managing partner of Cargile Investment Management. "Banks are very prudent today in lending money. They're looking not only for recovery of their money, but a secondary source of repayment."
He said this puts banks in a more secure position, and it also helps keep speculation down.
Cargile said the second difference between today and back then is that, "In the 80's, we didn't know at the time, but our government and the Saudi's were conspiring to keep the price of oil low in order to drive the Soviet Union out of existence. They were successful, but it was very destructive out here in our economy."
According to Cargile, that's not happening today and it won't happen again simply because the Saudi's don't have enough oil to flood the market like they did back then.
Although there are a number of differences, the chances of a crash do still exist today and even having top notch technology couldn't prevent it from happening under certain circumstances.

"Even the technology is driven by the price of oil. So, if the price falls it doesn't matter what the technology is, drilling will slow down. We just have to expect that because we're in a commodities-based economy," said Cargile.
But in order to have another "bottom of the barrel" bust, he said we would have to see the worldwide economy completely stop, and he doesn't see that happening anytime soon.

Cargile adds no one knows exactly how long this boom will last, but things are certainly looking up. He says the protests in Libya are forcing the price of oil to stay up due to the fact that they're producing 25 percent of the amount of oil they used to. He also says, overall, we have much more demand across the globe than we did in previous booms simply because of the expanding worldwide economy.
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