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 ...
china only needs oil to manufacture items - that they sell to the west. if our economies stop, china goes down the tubes even faster.
It's misleading to put a $ sign on how much it costs to get oil of the sands since the $ price is dependent on the price of oil, as other posters have stated.
A better way is to look at the ratio of energy in to energy out. For conventional oil, it is 30. For the oil sands it is 1.5.
new rigs can't be built?
Yes, but let's not drill in the US.
Ready for WWIII ?
To which China would reply: deny our enemies credit and they cannot do anything.
If the world goes to war over this, it will be a terrible situation for all involved.
Yeah but you have to have the equipment to recover it and right now there is no equipment available.
I'll agree that to some extent, it is a Mexican standoff.
However, the country that produces things is going to have a big advantage over the one that only consumes them.
At that price, we'll burn liberals for fuel.
They could take their old fossil oil and put it where the sun don't shine...
Yah but that takes a lot of investment capital, like building new refineries. with the hope of alternative energy around the cornrer, investment groups are hesitent to invest that money.
Definitely some merit in that since nuclear to electic takes 10k BTUs of heat for 1 KWh of electricity (or 2/3 of the energy is wasted). But IIRC, someone said here once that the problem is getting that heat underground or distributing it underground in an area that lacks water.
Oh, so thats what happened! Lets get Jimmy back on TV to lecture the American people and solve this thing once and for all!
The ecnomies will no longer matter when the oil runs low anyway and we will have to face China sooner or later over Taiwan, the Spratleys and North Korea. Better to do so from a position of strength than let them develop the military power projection capability (military mobility) to challenge us in a non-pacific theater (such as the middle east).
"Time to drill - ANWAR, California, Gulf Coast, National Parks, etc."
Time for many new nuke plants here in the US with hydrogen splitting plants next to them.
Screw the Arabs and Islamic fanatics. This is the greatest country in world, we don't need their @&$#@%#ing oil.
Get real. Did environmentalists also cause the North Sea to peak? How about Kuwait? Mexico?
these fields replenish themselves over time. due to oil flowing into the voids from higher strata by gravity. This is kinda slow so the field appears to be peaked
Slow as in "not in our lifetimes". Russia is the only country I'm aware of that peaked, declined, then increased production. And that was for political reasons, not geological ones. Abiotic oil is nonsense.
If we were running out of oil, those profits would be squeezed instead by humongous production costs
Profits are only 9% of sales of the the big oil companies. They are being squeezed to some extent.
If you think drill bits are the issue in drilling and stretch reovery, well I don't think I have enough time to explain what the issues are. US production peaked because of economics. Back then there was just too much cheap, easily retrieved oil available to make it foolish to chase less than optimal sourcces in the US. That has changed in recent months, but not as much as it could. If prices hold above $50 for a sustained period, and demand holds up, then other sources/methods will be applied. I can assure you that drilling in the US and Canada has ramped up, more than doubled I'd guess, in the last 12 months.
Also, alot of Chinese demand was driven by weak electrical power generation capacity. Factories were buying up refineed oil products to keep things going. China has increased power output from coal by about 25% this year, increasing reliability and taking alot of oil demand off the table. Higher gas prices choked off demand for cars in most of China. Higher prices don't just effect US action, but are global. This is a fungible commodity. It will spike more frequently than in the past, but continued high prices will both retard global demand and increase the viability of alternatives.
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