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Looking at my predictions since 2002, it has become evident from this share’s behaviour that I did not fully understand the share price capacity concept.
Charts from http://bigcharts.marketwatch.com/
- 18/05/02. Not much can be said about this share. On a shorter time scale, not much more can be seen. The share is in chaos following a steep increase in 1997 and 1998. An increase to US$50 is possible over a 12 month period.
- 31/12/03. The condition of chaos persists, but the share price appears to be entering a more stable rate of increase. This share could flatten at $40 for 2004. Basically, the share is not curently very predictable.
- 22/5/2004. The $45 should be a current ceiling and a decline is again likely, with $40 still the likely 2004 value.
- 14/7/2005. Well, how high is the sky!? Having not caught this ride, I would not now invest, as the share price is showing signs of chaos again. The rocketing oil price to $60 a barrel can have played a role here. A decrease is highly likely.
- 04/06/2006. The chaotic pattern persists. Iran's and the USA's response to each other will play a role here. In a peaceful world this share price would drop, but Bush and Rice talk and things heat up.
XOM 5 year
XOM 10 year
- 04/08 Well, I have badly predicted the oil price impact over the last few years. Here, I have put this share price onto a shorter 5 year and 10 year time frame to see what the bigger picture is missing. From 2004 we see a consistent increase at a rate that does not push the share price to the edge of chaos. This is due to a shifting share price capacity. Oil production is not being depleted and is not decreasing. In 2005, the rate of increase causes the share price to go chaotic. This is repeated in 2006 and again in 2007, with increasing chaos as we enter 2008. It appears that $85 is a new stable share price for Exxon, with the assumption that there will be no further destabilizing factors that affect the supply or availability of oil.
- This Exxon share price is linked to the current oil price. For example, were a new technology to replace the need for oil, the share price capacity would be lowered and the price collapse to a new level based on demand, or even cause the closure (death) of the company. As this is not likely to happen in the short term, around $85 to $90 is likely the new stable share price for Exxon for 2008. By the end of 2008, $95 is possible.
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What needs to be investigated here, is both why this share has increased so rapidly and what could cause it to suddenly decrease. Exxon's own website probably sums it up:
"Meeting the increasing demand for energy poses many challenges: efficiency, developing new supplies and safeguarding the environment. Technology will play a critical role in meeting these challenges."
"Even with significant improvements in energy efficiency, the world’s total energy demand is expected to be approximately 40 percent higher by 2030 than it was in 2005."
See: http://www.exxonmobil.com/corporate/energy_outlook.aspx
The global energy demand is increasing at a consistent rate (see chart below). If the supply could well exceed this rate, then the prices could decline. However the oil producing countries are not increasing supply for a number of reasons.
As is apparent from the chart to the left the oil demand has exceed supply since before 2000. Unless this can be corrected in some way, oil will become an increasingly costly resource. This difference is pushing the share price capacity upwards due to a demand higher than supply.
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