What does $500 brl OIL mean??

Hi all,

Tucked away in a lot of different threads, especially those of doom and gloom, is runaway inflation and peak oil.

I've started this thread to get discussion going about what high oil prices might do to different investments and life in general.

At some point oil will get to $500 per barrel, let's just assume it's in 5 years (for arguments sake). How will this effect things (that leaves it open)???

One of the first thoughts I have, relates back to the Meatloaf song 2 out of 3 aint bad...

"You'll never drill for oil on a city street"

If the price is high enough, I'll bet that is wrong. Same goes for searching for oil. At some point National Parks, Great Barrier Reef, etc will be OK to drill for oil (in an environmentally friendly way of course).

At $500/brl ethanol becomes important (I'd suggest well before). To replace all of current crude use 88m brls/day world wide, we would need about a billion hectares of sugar cane (irrigated to maximise production).
This would only take an area of 3,200 x 3,200 sq km of the tropics, and need only 25 billion megalitres of fresh water, problem solved. :eek:

Maybe $500 oil means something else?? Comments.

bye
 
A nice can of worms you've opened up here Bill.

$500 oil is not really a meaningful statistic. Before then a number of technologies will become "economical", coal to liquids and shale oil spring to mind but there are always "buts". (And world order will collapse before then anyway.)

These technologies are very polluting and we must start diverting our available resources to developing them now if we are to have any chance of of replacing oil as it depletes. They are mutually exclusive and it won't happen. By the time we decide on some technology there will not be time or resources to phase it in.

Ethanol is a crime against humanity. :(

But TC and friends will need real diesel to grow our crops or we'll starve. So rationing will happen. Wanna bet the hoons will be the last to run out of petrol? :)
 
At $500 per barrell, my guess is that the value of most of the outer suburban properties will hit rock bottom, whilst the inner ring will see high rise apartments being the dominant form of residential property.

Incidentally, I'll invest heavily in the shares of companies that construct and operate subway systems. We'll have no choice but to ditch our cars and live closer to the CBD if oil reachs that price, and realise that oil should only be used for fertiliser, making of plastics, herbicide, agricultural activities, instead of being wasted to transport 1 human (in most trips) from A to B!
 
our import bill would be so huge that there would probably be a push to convert to LPG. obviously the cost of everything would go thru the roof and RBA will just whack us with interest rate rises, so inflation would go ballistic whilst the economy dies. outer suburbs would become crime infested wastelands. Launches then would truly become the reserve of the wealthy and there could be an easing in the demand for pens on this basis. ford, toyota, holden would probably close up shop and just becoem shop fronts for their parent companies, so the rust belt states would really be in the doldrums as manufacturing closing up punched a double whammy. local tourism would benefit from more domestic travel but grey nomads would dump their 4WDs and caravans... or at least just stay closer to home. don't invest in El Questro on that basis. more energu efficient homes will see replacement costs go up and drive affordability lower.
 
Hi all,

Before we get too stuck into the D+G end of the world, we need to remember that crude has quintupled in price in the last 4 years. Dec 08 light sweet crude was $25/brl in 04. It is now $124/brl.

Going from $125 to $500 is only a quadrupling in a longer time.

The scenario is a deceleration in the price gains.

Maybe demand for hybrid cars goes up?

$500/brl, given steady exchange rates, would put our price of petrol at around $5/litre at the bowser (assuming no reduction in the rates of tax on fuel).

When we were in England last year, we were paying the exchange rate adjusted price of $2.50/litre, yet the roads there were clogged with traffic.

At $5/litre, commuting may become more of a car pool, with perhaps 2 lanes on some freeways reserved for multiple occupied vehicles.
4 people per car, 30k each way, equals about 6 litres of petrol(and that is not a fuel efficient car), or $30 for the trip. On a daily basis this is only $7.50 each passenger, still cheap transport.
I think our roads will still get plenty of use.

Inflation is a given, that's what happened in the '70's, with massive oil shocks. However there is only room to raise interest rates so far without destroying the economy.
A possibility I think could happen is stagflation, in which case inflation may go higher than interest rates. This would be bad for newly retired BabyBoomers as their superannuation (cash assets) would fall in real value.

bye
 
Hi all,


Inflation is a given, that's what happened in the '70's, with massive oil shocks. However there is only room to raise interest rates so far without destroying the economy.
A possibility I think could happen is stagflation, in which case inflation may go higher than interest rates. This would be bad for newly retired BabyBoomers as their superannuation (cash assets) would fall in real value.

bye

Wasn't the Stagflation thing happening in the 70's?

You could make a successful investment by borrowing at reasonable int rate and letting inflation do all the heavy lifting ??:)
 
Hi all,

Before we get too stuck into the D+G end of the world, we need to remember that crude has quintupled in price in the last 4 years. Dec 08 light sweet crude was $25/brl in 04. It is now $124/brl.

Sorry Bill, I just can't put a smily-face on peak oil.

During the time oil quadrupled it's availability went from pleantiful to (probably) a deficit. What will it take to quadruple it again?
 
Maybe $500 oil means something else?? Comments.

Depends of course which side of the market equation you sit on.

All of the commentary seems to be from the consumption or buying side of things, as most of the media outlets are from first world countries who are typically nett importers. She's all doom and gloom and frantically trying to find ways of getting the price down for some reason ?? Of course, the vast bulk of the population is also a consumer with no benefit seen in higher prices, so they have a jolly good bleat as well. And boy are they good at bleating, practice makes perfect apparently.

If you are from the production or selling side of the equation then she's happy days of course. You don't hear much about this, cos the countries are usually third or second world.....not so much clout you see.....and when I mean clout I mean political clout from big grey things floating out in the water and little black things that zip through the sky.


What does $ 500 / bbl mean to me.....it means absloute bliss. It means huge pay rises, retention bonus', and the relative cost of living coming way down, as we have experienced within our family over the past 4 or 5 years. Life and the trivial consumables we pay for have never been cheaper.

Bring the price up to $ 3 per litre I reckon, the sooner the better.
 
If the price is high enough, I'll bet that is wrong. Same goes for searching for oil. At some point National Parks, Great Barrier Reef, etc will be OK to drill for oil (in an environmentally friendly way of course).

already happening - my uncle is currently working out how to get the oil out from under the caspian sea ...
 
You can convert natural gas or coal seam methane to diesel. Australia has extraordinary quantities of natural gas and coal seam methane.

We would do just fine.
 
At some point oil will get to $500 per barrel, let's just assume it's in 5 years (for arguments sake). How will this effect things (that leaves it open)???

bye

Great idea for a thread Bill.


What about $500 oil ramifications for property prices?

Obviously, Inner city, close to CBD, close to public transport, walk to shops, cycle to work properties will do well.

Obviously, outer suburbs, with no public transport properties will do not so well.


What about big regional towns? I think they could do well depite little public transport. Tamworth for example has only 4 sets of traffic lights. You can drive right across town in 10 minutes and most people would only have a few minutes drive to work. House blocks are generally big and most people could put in a vege patch and a fruit tree or two to save on the higher food prices.

The small towns, maybe not so good as people often drive to a big regional town for work.


Tourist and coastal towns? Could suffer if people travel less, but conversely these places often have nice climates, so power bills will be less. Prices for power must surely skyrocket with $500 oil.


If oil was $500 a barrel due to high demand and continuing strong global growth. You would assume the resource boom was still strong and mining towns would continue to do well.
If oil was $500 a barrel due to it simply running out, the world economy might be almost stuffed, in which case mining towns would be a disaster.

See ya's.
 
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At $500/brl ethanol becomes important (I'd suggest well before). To replace all of current crude use 88m brls/day world wide, we would need about a billion hectares of sugar cane (irrigated to maximise production).
This would only take an area of 3,200 x 3,200 sq km of the tropics, and need only 25 billion megalitres of fresh water, problem solved. :eek:

I think ethanol is finished.

It's going to be the scapegoat of the food crisis. Governments are not going to let a few percent of the population who are farmers, make mega profits from the 97% of the consumer population.

Ethanol is stupid anyway, as much as it's done a lot of good for my back pocket, however grain was always going to follow oil prices up, and ethanol is only profitable now thanks to subsidies anyway.

The huge profits from ethanol of 3 years ago was a one off. It was caused by oil prices taking off, and grain prices having a delayed take off. For a very short period of time ethanol was a licence to print money, but once grain assumed it's rightfull value, the bonanza was over. Check out current biofuel stocks on the ASX and overseas markets? They have been a disaster.



And, I think biofuels, while they will get the blame for the food crisis, they really are not the cause. The real cause is simply platueing production growth of agriculture, combined with accelerating demand growth.

Farm production growth is platueing simply because there is not much left to do to get the next big production increase. It's just like the Mens swimming 1500 metre world record times. 100 years ago, the new record holder would take minutes off the old time. Today it's just seconds.

http://en.wikipedia.org/wiki/World_record_progression_1500_metres_freestyle

1924.....Boy Charlton.....20 minutes.
1956.....Murray Rose......18 minutes.
1960.....John Conrads.....17 minutes.
1973.....Steven Holland...15.30 min.
1991.....Kieren Perkins.....14.48 min.
2001.....Grant Hacket......14.34 min.

I will predict the world record in 100 years time will be less than 20 seconds faster than Grant Hackets time.

See ya's.
 
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Great idea for a thread Bill.




Obviously, Inner city, close to CBD, close to public transport, walk to shops, cycle to work properties will do well.

Obviously, outer suburbs, with no public transport properties will do not so well.




See ya's.

Thats a big statement based on using todays technology to predict tomorrows lifestyle.

For instance this car is scheduled for release in 2010 with Aussie release in about 2012.

http://gm-volt.com/about/

If you read down, it is actually cheaper to run (fuel wise) than petrol at today's petrol price. Combine this with renewable energy and it is still cheaper than petrol and solves alot a CO2 issues as well. If people do switch to thsi type of car for their daily commute, I do think that they will try to work close to home which fits with the "cities within cities" concept that Melbourne and other large cities are going for.

I think there will be a bigger issue where there is no easy alternative for oil. Eg plastics and manufacturing. There will be a bigger push toward renewable materials where possible but so much o the world is now "plastic".
 
I think there will be a bigger issue where there is no easy alternative for oil. Eg plastics and manufacturing. There will be a bigger push toward renewable materials where possible but so much o the world is now "plastic".

Yep, but just remember that a lot of the new degradable and renewable plastic coming out is made from grain. Grain made from oil.

I have some very large plastic components on my John Deere harvester that are made from corn.

See ya's.
 
For instance this car is scheduled for release in 2010 with Aussie release in about 2012.

Notice how there isn't a price listed for the Volt yet?
The Tesla Roadster is nearly US$200k and is a tiny light weight thing. I can only imagine how much a big "family" car will cost. I have a feeling the Volt will only be a token vehicle for GM which they will be prepared to lose money on but will only sell tiny volumes of on purpose.

Maybe investing in the battery companies or Nickel or whatever they use is the go.

Uranium is my bet for a good investment. How else will we be able to charge our supercars than with Nuclear generated power?
 
Notice how there isn't a price listed for the Volt yet?
The Tesla Roadster is nearly US$200k and is a tiny light weight thing. I can only imagine how much a big "family" car will cost. ?

I think that is a dodgy comparison. The Tesla is a high end sportscar. They aren't valued on size or by the kilo. Just like a Commodore is heavier but cheaper than a Audi TT.

Once demand is created there will be electric family cars available at prices comparable to todays family cars. But this only helps if the electricity supply is not from fuel oil burning. Even coal just replaces one pollutant for another.

A city running electric cars will need Nuclear Power Stations and to date this is something Australians have been loathe to consider.

So in effect - Electric cars in Australia should be viewed as coal burning cars
 
Great Debate.

I previously posted “Will we hit $100 a barrel?” 2 years back and many scoffed at me. That thread was revived over X mas the same scoffers said “yeah, $100 will not hold”. Now if it was only $100 again and not $125!!!

However I don’t see $500 because:

Once oil hits $XXX other technologies become competitive. Competition from solar, hydrogen, etc..

Oil Companies are everywhere drilling at the moment and more finds will be made. Mostly small but still some. When Oil was $25US in 2004 big companies like Santos where letting leases go.

Technology is allowing old wells to be renovated and the remaining reserves drained. Water injection, gas injection, coal gas to liquid, etc..

As the saying goes

“The stone age did not end because they run out of stones”

What is very likely and arguably already here is WAR due to lack of Oil.

That’s scary. Peter 14.7
 
.

A city running electric cars will need Nuclear Power Stations and to date this is something Australians have been loathe to consider.

So in effect - Electric cars in Australia should be viewed as coal burning cars

Yep, I agree.

Base load power is needed to make hydrogen work as a fuel. It's needed to power electric vehicles. It's needed for water desalination. The only option is nuclear power, and hope like hell that the much better and cleaner and safer nuclear fusion comes along and replaces it.

See ya's.
 
If oil got to $500brl, an often overlooked concept is whether the government would regulate and take control of the oil industry. Much to the same extent as we’re seeing now with countries such as India domestically controlling grain, to facilitate their future needs.

Most of Australia’s oil already comes from Australia, but gets sold on the Singapore oil exchange at international prices. Even though this may seem highly unlikely, the ramifications on the economy when oil reaches the $500brl may outweigh the consequences of making it government owned. Oil to an economy is the equivalent of water to a person, and if you look how oil has risen over the last half decade and play the percentage game, $500brl is certainly not impossible.
 
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