Oil, volatile in more ways than one (as in fire and price). If only I could go back in time 4 years or so and buy oil when the price was in the low 20$'s/barrel. Now the price is hovering just above 50$/barrel. But will it continue to climb? If Alaska's park is opened for drilling, the price will inevitably fall. Depending on Iraq's stability over the next year or so, the price could rise or fall. The US currently is holding it's oil reserves plan, but if they start it back up, the sky's the limit. All these things, and many other things will affect the price. Feel free to list other things you believe will affect the price, and how it will be affected.
China is "stealing" our cheap oil. A lot of the oil that would be shipped to America for a low price is being bought by China for a higher price to meet their increasing demand. America has the cheapest gas in the world and has for decades. Now the price is going up and America doesn't like that. I think hybrids will affect the price of oil as well. If you assume every car on the road is a hybrid and gets twice the mileage, oil prices will most likely double. Once everyone has a hybrid, the gas savings is eliminated.
I would also like to point out how oil works. One barrel of oil is 31.5 gallons. 31.5 gallons of crude oil can be refined into about 19.5 gallons of gasoline, 9 gallons of fuel oil, 4 gallons of jet fuel, and 11 gallons of other products including lubricants, kerosene, asphalt, and petrochemical feedstocks to make plastics.
2003 imports:
The oil peak is expected to happen in 2012. This is when half of the world's oil will be pumped already, leaving only half left. This sounds harmless, but it will be an "economic Hiroshima". Exit Mundi has an excellent scenario which describes the oil peak in simplest terms: http://www.exitmundi.nl/oilcrash.htm
Great post LemonButt, nice to see someone excited about commodities; that being said:
I hardly think you can say China buying oil for more than the US will offer is stealing, but none the less your right, China’s major economic adjustment is certainly driving the price of oil up. I don't know if I completely agree with you on the hybrid issue. I think any slack given by hybrids will continue to be picked up by industry. So, the price may continue to climb, but it wont be the direct result of hybrids, if anything they will slow down the climb. Some things I forgot to mention earlier are: the 10$ terror premium (because of middle east instability), and the apparently imminent invasion of Iran, when will it happen?, I don't know, but I'm sure it will, and when it does we could see another rise similar to that caused by the war in Iraq.
When it comes to gas prices and fuel economy, America is great. I drive a 1993 Toyota Corolla which gets 30+ miles per gallon. The only reason I have been able to fill my tank for $20, is because of economies of scale. Now my car is considered to be very fuel efficient, even though it is 12 years old. Not to long ago, everyone and their mother just had to have an SUV. Personally, I think it's a waste since they emit more pollutants, are more dangerous to drive due to the fact they are build on ladder frames instead of unibody construction, plus they can tip easier. However, I have been reaping the benefits of the SUV craze for years now, which is out of my control. Gas consumption has been on the rise because there are people out there who are willing to buy these huge gas guzzlers that get 15 miles per gallon instead of 30 miles per gallon like my car. The fact that it will take a person twice the amount of gas to go the same distance as me is part of the reason why gas prices have stayed so low for so long. The more of any product you buy, the cheaper it will be. Instead of the United States buying 2 gallons of gas to take my car and another 60 miles, we are buying 3 gallons of gas to go the same distance. If you consider my car a hybrid compared to the SUV which would be a standard car, I am getting the better deal here. If everyone were to drive a 1993 Toyota Corolla and get 30 miles per gallon, the quantity of gasoline demanded would drop considerably. When you buy smaller quantities of any product, the price for an individual unit will be higher (i.e. a gallon of gas). The price of gasoline may not double, but it will go up considerably. This is of course assuming that everyone will have a hybrid before our oil consumption is larger than our oil production capabilities.
For your scenario to work, in my opinion, you would be assuming that the only use of gasoline is for transportation vehicles, this is not the case. I don't see us agreeing on this anytime soon, however we do agree on the fact that the price of oil has hardly any room to fall, and that’s the important thing... it's going up, how it gets there is irrelevant. If oil, did start to fall in the least, which it wont, countries would snap it up so fast that the price would just right back up to where it is now. I see this as a sound, high return investment.
Oil tankers. It takes time for the price of oil to seep into the stock price due to rates being set in advance. TOPT, FRO, and MCX are a few examples. I am a big fan of MCX, personally.
I was going to suggest some large oil companies like XOM, BP, TOT or RD, but like lemon says, it takes time, if you want to have more immediate effects buy crude oil commodities. Others are companies that use less oil than competitors, like transit systems LI, or tech companies developing fuel alternatives like ECD also benefit from high oil prices.
Lemon, I like that map. If private(Cheney) & Bush spent 10% of the IRAQ war funds (about 30 billion dollars) on a hydrogen infrastructure, we wouldn't have to worry so much about oil prices. Oh well.
BTW, I used that binary line in college. It has resurfaced! My collegues thought I was the biggest dork.
Well I`m sold on investors paradise! But you have opened a WHOLE can of transmission oil by starting this thread as the subject is so dynamic I dont know where to begin! Slow I guess. Politics is very much an integral part of this conversation but history is where to begin. The middle east is the craddle of civilization as we all know and if there were no dead dino there it would be nicer than switzerland! It was known by abduls ancesters that the black lakes of burning viscous fluid had value as the cavemen in quest for fire cherished the embers & knew there value. This conversation could branch off into religion and how the koran was authored by a christian think tank but we shall save that for later.. Iraq has less to do with iraq than it does with gasing up for the coming war with china, ditto for walmart - less to do with deals for yanks and more to do with china ... well OIL really. China demand has flipped the whole OIL dynamic as anticipated (planned) and now the show is just getting started. I am very tired but hope to continue this conversation later - 1st OIL homework assignment; Watch the movie - `Three Days of The Condor` with Robert Redford & Faye Dunaway from 1975 ...
So what do you think is going to happen to the crude market over the next while oilisgold? Give some bold predictions about the next few years. I'll make mine.
Chronoligicaly - Iraq will finally stabilize, prices will go down below $50 - China will unlock it's currency, prices will go down close to $45 - The US, in efforts to maintain anouther "cold war"esqe market will set its eyes on Iran or anouther middle east country, not only hurting exports from the country, but also bringing back the 10$ fear premium - Something bad will happen in Isreal, the middle east will get mad, and there will be anouther war, which not only uses oil for it's machines, but will also have a devistating effect on the middle east oil feilds, and probally increase the fear premium
One thing that is not a prediction is that the Middle East, Isreasl, and the USA form a ticking time bomb, ready to blow oil prices sky high.
A $120 super spike could occur if we have a terrorist attack that causes `supply` disruptions, no attacks and eventually back down to $25. As the fed increases interest rates to squeeze and slowly deflate the housing bubble oil has to come down to compensate. Big OIL is still cooking it books at $28-$30 barrels, those pigs are swimming in cash filled olympic sized pools$$$$
It's not the oil companies that set oil prices, it's OPEC, but yes companies are getting rich. And also it's not how much something costs that determines how much the price, it's supply and demand. We have a limited supply of oil, and a seemingly endless demand. A terrorist attack would have to hapen in the middle of saudi arabi, and westeryn canada at the same time, not to mention a major catoshphy in Russia for oil prices to hit 120$ in the near future. But none the less, there is no way cude oil will ever hit 25$ ever again. No way. Guys give me some backup on this one.
BTW I'm still waiting on some bold predictions on the price of oil above
Also, everyong do the pirce of oil poll please, lets have some opinions
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