Posted on 01/27/2006 5:23:10 PM PST by 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.
(Excerpt) Read more at money.cnn.com ...
"CanWest Petroleum (cwpc) is about $4.45 per share right now as a leader in the infancy stages right now in the oil sands....probably not a bad play to get in right now before it shoots to about $50."
Good call if you think the maginal price can hold above $29 with all that supply.
I like XOM as a simple hedge.
Exactly.
"Its best to think of hydrogen as a battery"
Brilliant; for those of us that know what a battery is!
>>"A: CERA's "undulating plateau" will be characterized by
>>escalating prices (a dramatic rise in prices) "
>>Misinterpretation IMHO. They never said that.
Listen to the audio- Esser does and Esser spoke for CERA at the Congressional hearing- the precise point is 01:46:27 and it goes for about 2 minutes to 01:48:05 or so
just listen to the audio
And rather than having to wait for it to load just download this and fast foward http://media.globalpublicmedia.com/RM/2005/12/HouseEnergyCommitee.20051207.mp3
"This brings me back to your belief that there is 3 trillion barrels in still to be produced oil."
It's not a controversial statement to say that we have 3 trillion barrels of oil available. This is from the IEA. Actually, one of the resource charts I've seen shows *7 trillion* barrels,
including various unconventional. Warning this is a PDF:
http://www.iea.org/textbase/nptable/Oil%20cost%20curve,%20including%20technological%20progress,%20availability%20of%20oil%20resources%20as%20a%20function%20of%20economic%20price.pdf
What that chart shows is effectively 5.5 trillion recoverable barrels of oil at a price point of $70/barrel or less... oil shale, tar sands/bitumen, deepwater, artic, and then the conventional OPEC and nonOPEC resources. If you notice, the total conventional resources is about 3 trillion barrels.
See also:
http://www.iea.org/Textbase/npsum/oil_gasSUM.pdf
Key statement:
"Proven reserves amount to 2.2 trillion BOE."
Proven reserves are very cautious, sure to be exceeded estimates.
Its obvious that Russia and Canada will be the kingpins of oil by 2020. The mid-east has alot of issues, and it'd be best to drop them from the buyers market.
"Shell says they have in situ technology that can extract oil shale for about $30 a barrel. See: Promises, promises. When oil hit $40 a couple of years ago, I saw similar posts here. Then people said the same thing when it hit $50. And $60. "
Huh?!? The post I linked to was an article about 4 companies doing in-situ experimentation. Shell is moving towards commericalization by 2010.
Meanwhile, tar sands production in Canada is hitting new highs.
"These new "technologies" appear to be as Matt Simmons says, simply bigger straws to get the existing oil out."
Well that's a silly comment since shale oil and tar sands are quite different from conventional oil, economically and geologically. Apples v oranges. Yet the vast reserves make these very secure sources if they can be extracted economically. So far, tar sands are a "yes". Jury is out on oil shale, but your comment is misplaced. These things dont happen overnight.
Indeed. Seems like we've outsourced common sense right along with all the engineers we don't "need" anymore. This is what happens when the nation is led in the political arena by lawyers, and by financial types in the business arena.
Yeah, let's just make some laws and move some money around - and presto - we'll have all these shale oil and alternative energy infrastructures all in place in time for next Monday's Chicago commodity exchange opening. These MASSIVE infrastructural changes take a decade or two to get in place - all the while that "here and now" oil prices are the reality.
"This is the first thread where a few people actually understand economics. Refreshing."
Yeah it's frustrating isn't it? It's not like the oil business is rocket science. All you have to do is read the news.
Being able to think outside the box doesn't hurt either.
What a load of B.S.!
There are a ton of other energy sources that become economical far below even $100/bbl.
Good grief, that is cheap. I used to cut wood in high school, and sold juniper for 70 a cord and oak for 90. That was about 1980. Sounds like wood cutting is even worse a job now than it was then.
Are those full cords or face cords? (i.e. 4x4x8' versus 4x8x2'). I only sold full cords, so if you're buying face cords then maybe it's not so bad.
-ccm
How do they get to $262? Not $261 or $263? I'm not going to bother reading the article b/c they have to resort to BS tactics to make it look like the "guess" is something other than speculation.
"The peak output of the Burgan oil field will now be around 1.7 million barrels per day, and not the two million barrels per day forecast for the rest of the field's 30 to 40 years"
Hmmm. 30 to 40 years?!?
Also "The engineers determined that the higher rate of production was causing pressure drops, water intrusion, and other formation damage to the underground reservoirs. Thus, according to KOC, 1.7 million barrels per day is considered to be the optimum rate."
... so this is not about running out of oil, this is about making sure their golden goose keeps laying eggs, for another 40 years.
Proven reserves are always underestimates. The Saudi are wrong to estimate about 250 billion barrels ... it is certainly a lot MORE than that.
it CAN be done. not on a scale large enough at this time, but efficiency is increasing. Its a simple law.. you can never generate more energy that you input. But, if the source is free or dirt cheap (fission heat, wind power, solar, etc), it is extremely viable conversion.
"BTW, I am still wondering where is is that you believe that 3 trillion barrels of yet to be produced oil is hiding."
Posted a reply already ... Check the IEA publications.
Yep that is true. Super conducting wires would help a lot in splitting water. Right now gold and platinum is too expensive but some say carbon buckyballs or nanotubes could do it.
Per the USGS it looks like three billion barrels of liquids including:
already produced circa 500 billion!!!
NGL not yet discovered and reserve growth circa 250 billion.
Oil undiscovered oil 650 billion and
Oil reserve Growth 600
Sorry, nothing even vaguely conservative about these estimates or the very similar 3 billion barrel number you have been citing.
BTW, yes the Canadian tars sands, the Orinoco tar sands and some of the oil shales can / will be produced. However, the peak oilers who you are trying to debunk are for the most part drawing conclusions about oil not hydrocarbons that can be converted into oil.
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