Yamada: Oil Could Pass $450 in a Decade

MoneyNews email | June 2, 2008 | MoneyNews

[Tolerance Sucks Rocks]

You think Goldman Sachs was reaching when it said oil could spike to $200? Try Louise Yamada on for size.

The former Citigroup analyst sees oil going to $450 inside a decade.

Based upon fundamental demand and technical market factors, Yamada says much higher oil just makes sense.

“If the present rhymes with history, oil prices might be expected to advance significantly ($253 to even above $453) over the decade ahead,” she wrote in a report to clients.

Yamada is managing director of Louise Yamada Technical Research Advisors, a firm she founded in October 2005. Prior to that, she spent more than two decades at Smith Barney, where she was the top-ranked market technician for four years.

Population of “six billion…and rising to nine billion, with greater and growing energy demands (electricity for technology, air conditioning, etc.) than ever before,” leads her to believe demand will continue to outweigh supply in the oil market.

Current output of oil worldwide is expected to rise to 116 million barrels per day (bpd) by 2030 from 86 million bpd, according to the International Energy Agency.

This represents an average increase of 1.3 percent a year, just below the average increase in demand of 1.4 percent per year. Although Yamada relied on historical price charts to derive her price targets, the fundamentals support significantly higher prices.

Yamada has been right on long-term market calls before.

Her clients profited when she correctly predicted the 1999-2000 declines in tech stocks, the new bull market in gold which has lifted the metal past $1,000 an ounce, and the extended low interest rate trading range in bonds.

From a technical perspective, she relies on historical trading patterns and calculates a gain of more than 1,000 percent from the 2004 breakout point of $40 a barrel. This provides “an outstanding (and astounding) target of $452.92 per barrel!” she warns.

Besides the imbalance in supply and demand, the dollar is also contributing to higher oil prices, in Yamada’s opinion.

“One might also need to factor in our technical observation of the structurally declining U.S. dollar, which over the long run, may contribute to, and even exaggerate, these seemingly astonishing triple-digit targets,” she wrote.

Yamada is bullish not only on oil, but also on oil stocks. As a group, she points out these stocks have room to double based upon factors such as their relative weighting in broad market indexes.

She highlighted Chevron, Anadarko Petroleum, and Halliburton in recent comments.

Consistent with this analysis, she also likes agricultural commodities and food stocks, thinking inflation will increase and higher prices will lead to greater profits for producers and processors. In particular, smaller stocks are more likely to outperform, she writes.

[Tolerance Sucks Rocks]

PING!

[dennisw]

Louise Yamada is very intelligent and interesting. I pay attention when I see her on TV or find her on the internet. She has a long history on Wall Street

[quantim]

With the help of the U.S. Senate it might not take that long.

[Eric in the Ozarks]

Mr. Yamada needs to go back and read Michael Porter's books; "Competitive Strategy" and "Competitive Advantage."
Replacement products will take over long before we get past $200 crude.

[Pearls Before Swine]

Assuming the price isn’t just because of dollar hyperinflation, but really a nearly fourfold increase, this seems unrealistic. No one could heat their homes, or travel. At this price, alternatives, including coal (solid, liquid, and gasified), tar sands, oil shale, as well as solar would become much cheaper than oil. There would be lots of major dislocations as these were ramped up, but oil would no longer be the primary energy source.

[BunnySlippers]

Link please. And a big laugh.

[ken21]

fear mongering.

they can’t predict the weather accurately tomorrow.

who knows what will happen in a decade?

[ikka]

At $450 per barrel we will take over Saudi Arabia right after we crush Iran.

[Attention Surplus Disorder]

LY absolutely and ferociously nailed the decline in the banks from last October. I wouldn’t dismiss her call out of hand. She is very, very sharp.

[crghill]

I like your comments. I see common sense still resides in the Ozarks! This kind of sensationalism is just bunk!

[ChildOfThe60s]

Self serving.

[hosepipe]

True Americans have way too much money..
Proof: They vote in taxes ON THEMSELVES like drunken sailors..

Nightmare scenario: BIG OIL figuring this all out.,.
OOOOPs.. too late.. I think they just did.. damn

[Tolerance Sucks Rocks]

I looked on the moneynews site, but I couldn’t find a link to the story. This item is apparently sent only to subscribers to their email alerts.

The skeptics are probably right. At 450/barrel, if it gets that high, oil would strictly be a wealth investment. No one would actually buy it for use.

[mjp]

Study reveals huge U.S. oil-shale field

By Jennifer Talhelm

WASHINGTON — The United States has an oil reserve at least three times that of Saudi Arabia locked in oil-shale deposits beneath federal land in Colorado, Utah and Wyoming, according to a study released yesterday.

But the researchers at the RAND think tank caution the federal government to go carefully, balancing the environmental and economic impacts with development pressure to prevent an oil-shale bust later.

"We've got more oil in this very compact area than the entire Middle East," said James Bartis, RAND senior policy researcher and the report's lead author. He added, "If we go faster, there's a good chance we're going to end up at a dead end."

For years, the industry and the government considered oil shale — a rock that produces petroleum when heated — too expensive to be a feasible source of oil.

However, oil prices, which spiked above $70 a barrel this week, combined with advances in technology could soon make it possible to tap the estimated 500 billion to 1.1 trillion recoverable barrels, the report found.

The study, sponsored in part by the U.S. Department of Energy, comes about a month after the president signed a new energy policy dramatically reversing the nation's approach to oil shale and opening the door within a few years to companies that want to tap deposits on public lands. The report also says oil-shale mining, above-ground processing and disposing of spent shale cause significant adverse environmental impacts. Shell Oil is working on a process that would heat the oil shale in place, which could have less effect on the environment.

[Tolerance Sucks Rocks]

Too bad Congress has sealed off oil shale.

Also bumping for later reading.

[thackney]

Yamada: Oil Could Pass $450 In a Decade
http://moneynews.newsmax.com/streettalk/yamada_calls_high_oil/2008/05/29/99877.html
Thursday, May 29, 2008 12:28 PM

[garyhope]

Pure bravo sierra. There’s plenty of oil in the world. It’s not even worth what we’re being forced or manipulated into paying now.

[SaxxonWoods]

If my quick calculations are correct, $450 a barrel would mean gasoline at about $11.50 a gallon in the USA.

By the way, what’s up with all this “run your car on water” stuff that’s all over the net?

[7mmMag@LeftCoast]

$200, $450 or back to $10, who the hell knows what the future holds. But all the reserves in the world won't mean squat if there is no capacity to refine as much as oil as being demanded.

Though the U.S. oil consumption has remained pretty much level for the last two decades, the price will continue to go up as long as China and India keep increasing their demand and refining capacity remains flat. It is just simple economics.

I garuantee you socialists, maxists, democrats, etc. are praying for $450 a barrel oil and the economic upheavel/collapse that they hope it will bring. So much the better to enforce a new one party government with state owned energy, transportation, pharma, etc. So don't count on a Democrat politiburo, I mean congress or Secretary Gen.... er uh, I mean President to do damn thing to help stem the crisis.