If Oil Falls (CVX)(COP)(XOM)

"The news events that used to drive the energy bull market just don’t get the mileage they once did," said energy analyst Peter Beutel of Cameron Hanover.

There is still an assumption among many who own oil stocks that terrorist activity in the oil fields of the Middle East, demand in China, or OPEC tightening will take oil prices back to $70.

But, new reserves that could not be tapped before because the technology was not available are coming online. China is making an active effort to reduce its dependence on foreign oil and seek alternative energy sources. OPEC’s last comment that it would reduce supply had little if any effect on prices.

The markets sometimes forget that oil is not an asset. It is a commodity. As prices rise, demand naturally slackens over time. As the Chinese say: "The wind does not blow all morning, the rain does not fall all day."

Stock prices of companies like Chevron, Conoco, and Exxon may well be in for a very tough year. Conoco’s stock price is up over 70% in the last two years. Exxon is up 55% and Chevron 45%.

It won’t last.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.