Ready for $262/barrel oil?

yahoo ^ | 1-27-06

[LouAvul]

DAVOS, Switzerland (FORTUNE) - Be afraid. Be very afraid.

That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.

The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.

"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.

Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.

[Sunnyflorida]

"However, the country that produces things is going to have a big advantage over the one that only consumes them"

Tripe.

[mkjessup]

Before the United States allows oil to hit $262 a barrel, you will see total mobilization and a combined U.S./NATO occupation army moving into the Middle East for keeps.

Do you think the Chinese are going to sit on their hands during that?

I think that the ChiComs are going to measure the risks of confronting the United States in the Middle East/Southwest Asia compared with the risks of suddenly finding a nuclear armed Taiwan bristling with Tomahawk cruise missiles targeting the mainland.

Don't think that it can't happen. It's called brinksmanship.

[TheBrotherhood]

>If peak oil is fact, we shouldn't drill or use domestic oil. Instead we should use up everyone else's resources, and save ours for the tough times.

If we did that the oil seller countries would be swimming in dollars and buy our country's assets.

[WOSG]

"$262 a barrel for oil is a lot cheaper than a nuclear holocaust." "I agree."


26 billion barrels of oil per year (global use) x $262 /barrel (if sustained for one year)
= 6,250 billion dollars for oil in a single year.

it's a stiff price! (Actually it is hardly sustainable ... we are talking global depression rather than that price, it is absurd at current production levels. Demand would crater, and we'd bicycle to work and/or see our economy, stock market etc. crash.)

[zarf]

LOL! You wanna see how fast Americans can switch to an alternative energy supply?

[fallujah-nuker]

Why not use nuclear reactor heat to cook them instead of hydrocarbon fuels?

Thinking outside the box. Nuclear energy can be used for far more than generating electricity. It can be a very good source of process heat.

[WOSG]

Annex Alberta!

[Sunnyflorida]

Good stuff Mr Whale. Would you be a Thomas Sowell man?

[R W Reactionairy]

"LOL! You wanna see how fast Americans can switch to an alternative energy supply?

Years? Several years.

[WOSG]

"This right after the news of a huge oil find in Canada, bigger than that of Saudi Arabia......."

Can you share the source??

[NYorkerInHouston]

He's probably referring to the tar sands.

[R W Reactionairy]

"Annex Alberta!"

Swell. Now you want to invade the part of Canada that is most friendly to the U.S.

BTW, I am still wondering where is is that you believe that 3 trillion barrels of yet to be produced oil is hiding.

[WOSG]

"A: CERA's "undulating plateau" will be characterized by escalating prices (a dramatic rise in prices) "

Misinterpretation IMHO. They never said that.
Most oil price projections long-term are BELOW current levels, well below. And for good reason, because we are at a near unique price peak. It could well be a price bubble.

"B: CERA has little confidence in their estimates beyond 10 years due to the nature of projects "

The point begin that they were being deliberately *conservative* in only projecting production levels based on planned projects not on estimates of finds that are yet to be found

OTOH, we have always found new supplies in the past, so the fact that they are not willing to project something in their conservative estimates doesnt mean it wont happen.

[fallujah-nuker]

Time for many new nuke plants here in the US with hydrogen splitting plants next to them.

Here is an article on the subject. I think that hydrogen itself will make a poor transport fuel due to its energy density (half the BTU's by volume as gasoline) and need for cryogenic storage, but will make a valuable feedstock. The reactors that generate heat this high could also be used to provide the process heat for other types of synthetic fuel production.

[Paul_Denton]

Yeah my point exactly. Instead of natural gas to extract oil from shale (but boiling it out) but using the heat from a nuclear reactor.

[Sunnyflorida]

"In terms of extraction, Oils Sands Heavy oil is break even at cdn $29 per barrel in the pipe."

Sounds about right. The threat that a huge new source coming on line is why it has not happened in large quantities yet. If all that oil came on line north of $29 It would likely be the marginal supply that would drive the commodity to where it was a year ago. Opec aren't dummies. I'm sure they are operating on the marginal edge. Katrina produced great data. One of the best darn eco-labs ever. It drove my spouse crazy. I watched local prices like I usually do my trading tech stocks.

But you know that. This is the first thread where a few people actually understand economics. Refreshing.

[WOSG]

So why didnt oil production peak in 1998 like the peak oiler Campbell said it would?

[Paul_Denton]

True. But if the only other option is a nuclear holocaust (which would also spell doom for the economy in addition to millions dead) then there is no real alternative.

[Sunnyflorida]

Whenever you read a Rueters story you have to say, "Interesting. I wonder if its true."

[R W Reactionairy]

"So why didnt oil production peak in 1998 like the peak oiler Campbell said it would?"

Did CERA's 2004 projections to 2005 pan out?