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 ...
Nice analysis by both of you.
It is amazing that even some on the right are falling for the doom and gloom predictions.
actually since food and energy are not included in fedgov's CPI i guess we are ok, there will be no inflation. (sarcasm)
Oil produced at breakeven will not be produced. The market price will have to be even higher than it is now before this source reaches a substantial market share.
Absolutely - and our opportunity to switch to nuclear has been squandered by the leftist kooks in this country for fear of "the China Syndrome" and other nonsense fears they conflate to enslave the masses. Curiously, the French have done quite well , with 70% nuclear power they will survive.
Sorry, but we are getting more rigs from other countries, including China. Colorado drilling is changing to Chinese rigs because they are more efficient and better. You are right in there are no American rigs available, and we are using parts to keep the ones we have working. Just another thing we can thank Democrats and other assorted leftists for.
"Look at current - let alone projected - of US consumption.
Then look at - even optimistic - estimates of US reserves.
Can't drill our way out of this one"
What are we trying to drill our way of? Easy to drill out of $262. Easy to drill to energey independence. You need to learn some math. All we need is the threat of marginal supplies and the price stabilizes or comes down and we dictate the actions of foriegn suppliers. These economies need our petro-dollars. All we need is de-regulation and we get the friction out of the market this would increase supply and lower prices and allow for an increase in demand at the same time.
If you want lower prices then fight to end friction. If you want conservation you need to raise prices, constrict supply or increase friction in the energy markets.
The real illogical position is to want alternate sources and low prices. It just doesn't compute.
grain alcohol seem feasable
If you don't mind putting more energy into making it than you will get out of it.
There are at least three new nuke plants just getting started in the past couple months. Amazing what reality does to enviro opposition.
"They may force us to watch hockey or something"
LOL.
That's a fair statement. There seems to be a belief that once we go to alternate sources the price will come down to what it used to be.
"What will it take to get up to 15 million barrels a day?"
Present plans are for 1 Million barrels per day in the next four years.
15 Million bpd would require much additional processing and transportation capcity which will come but not in the short term.
Peak oil has been reached in country after country - the phenomenon is well proven. Extending it to the world is merely realizing the obvious. It does not mean we've run out of oil, in fact at peak oil, we will have as much oil to be produced as we have consumed for the past 150 years. It means that in the face of increasing demand, we will not be able to increase supply sufficiently to meet the demand, and prices will rise exponentially. As of 2000, we only discovered 1 barrel for every 4 barrels we consumed - that's a fact.
It is unlikely that the world will ever run out of oil - it is just that the price of oil will go up so much that the average individual's standard of living will decline perspicuously.
Oil sands have been economic for quite some time. The problem they have today is finding equipment and people to handle all the projects trying to start.
Still, if you want to back that out, you still have about 2 trillion of conventional oil economically recoverable oil (meaning we are really 1/3 of the way through).
WSOG, a few points:
Going back to the concept of peak oil -- "peak" does not mean fully depleted. It means that the production rate has peaked. Depending on the reservoir, this peak can occur anywhere at from a few percent of ultimately recoverable oil to more than sixty percent of ultimately recoverable oil. If we are about "one third of the way through", the peak maybe only 15 years out as there is a general belief that demand is growing. In the sorts of remote and deep prospects the IEA is alluding to, the first significant production comes comes on stream perhaps 7 to 10 years after discovery for a variety of logistical not merely political reasons. This means that a lot of the undiscovered oil needs to be discovered almost immediately to avoid a supply disruption.
A lot of what remains of the already discovered oil is heavy oil. Of the four oil fields in the U.S. producing more than 100,000 barrels per day in 2000, two were discovered before 1910. There are still massive reserves in these fields [Midway-Sunset and Kern River] but they are probably not going to be produced at a rate much higher than 100,000 barrels to day because of the nature of the oil and the extensive infrastructure and energy expenditure that would be necessary. Cumulative production massive. Remaining reserves massive. Some potential for expansion but not impressive if you look at the reserve base. Venezuela in particular has a bunch of this stuff, but don't look for it to gush out of the ground on its own.
For in situ recovery, think of tar sands as heavy oil cubed. Big reserves. Big potential for increased production because of the green field state of development, but inherently a slow and energy intensive undertaking.
I also believe that you owe it to yourself to consider the accuracy of reported reserves. Western oil companies subject to SEC reporting standards are conservative, but not always actually on the low side of ultimate recovery.
OPEC's remaining "proven" reserves are another matter completely. They magically increased by 30 to 100 percent in the mid 1980 for political / quota reasons. Twenty years later most haven't budged.
I think I explained to you Matt Simmons rationale for the potential collapse in production in Ghawar. Notice I wrote "potential." That is the point. Simmons doesn't know. I don't know, and unless the IEA has a whole lot of inside information they don't know. That is the risk.
Finally, would love to know where on Earth the IEA thinks there are prospects structurally big enough, remote enough, and unexplored enough to hold several Saudi Arabias. Note that they already break out Arctic and ultra deep water as separate categories so they must be thinking of somewhere else. Maybe somewhere smack in the middle of Central Asia, but even the last big find, the Caspian, has not to date lived up to initial expectations ... and that was the biggest find since the North Sea 30 plus years ago.
Food and Energy costs are both included in calculating the CPI.
"grain alcohol seem feasable
If you don't mind putting more energy into making it than you will get out of it."
Sorry, what are you talking about? How can an energy source be "feasable" and take more to produce than it returns? Sounds like a midwest "farmer".
"grain alcohol seem feasable
That was from another post. I'm saying it is not feasible in other words.
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