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Friday, February 25, 2011

On oil

According to Deutsche Bank, a $10 increase in oil prices translates into roughly a 25 cent increase in retail gasoline prices.

That is about how much oil went up this week.

Is the sky falling? The following chart showing the S&P500 (GSPC), Brazilian Bovespa (BVSP) and oil returns (USO) certainly suggests so. We shoulc be buying oil!

However, if we take a longer view, perhaps a 5-year view, the picture looks much different...

Even after the financial crisis, Brazil and the S&P 500 overperformed oil.

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