Who needs a rate rise when Oil to hit US $60 by Xmas

[Peter 14.7]

Dammit. My prediction of a December rise in rates to cool spending may well be unnecessary if oil prices has anything to do with it.

I remember it bouncing around $35 not that long ago. As of this morning it was the reverse at $53.

What happened
Is this Thommo's recession after the Boom

Peter 147


Petrol price surge set to drain Christmas cheer
Nigel Wilson, Energy writerOctober 08, 2004

AUSTRALIANS will have less to spend on Christmas this year amid speculation world crude oil prices could hit $US60 a barrel if there are further disruptions in Iraq.

International petroleum business manager for Mitsubishi Corp in Tokyo, Anthony Nunan, who predicted this week's rise, said Hurricane Ivan in the US was the last straw.

"You can never rule out disruptions from Iraq, and if there's a real disruption, prices may go up to $US60."

Jack Haley, vehicle policy specialist with the the nation's largest motoring organisation, the NRMA, said yesterday the average motorist in Australia was now spending more than $100 a month filling vehicle petrol tanks.

"Cost will inevitably rise as the crude price flows through into petrol prices," Mr Haley said.

The average price of petrol across Sydney yesterday was $1.09. Yesterday in Asian trading, crude oil futures rose to a record $US52.17 a barrel after a US Energy Department report showed the country's supplies of crude oil rose less than expected last week.

"We can't say what the price will be in two months' time but we can say that as a rule of thumb for every $US1 a barrel increase in the price of crude, Australian petrol prices will rise about 1c a litre at the pump," Mr Haley said

 

[geoffw]

Is Parity Pricing still in effect? I thought that was a policy whereby Australian produced oil was charged the same as overseas oil, with the government receiving the difference. If so, a sneaky way to increase our taxes without trumpeting about it.

 

[Sunfish]

Is Parity Pricing still in effect? I thought that was a policy whereby Australian produced oil was charged the same as overseas oil, with the government receiving the difference. If so, a sneaky way to increase our taxes without trumpeting about it.

Aussie producers are allowed to sell to the highest bidders. Where is the Gov involved here?

 

[Sunfish]

"Is this Thommo's recession after the Boom"

As discussed in another thread no-one has a crystal ball. I just tried to give reasons for caution.

 

[Aceyducey]

Geoff,

Australia produces bugger all oil, around 400,000 barrels a day.

The state governments do take a nice fat cut on every barrel out of the ground....

But the total amount spent on by governments in supporting new exploration is about $5M per year - which is 30% of the cost of a single offshore well.

We do have a lot of gas however - we just have trouble getting it to anywhere that will pay well for it.

Cheers,

Aceyducey

 

[geoffw]

Aussie producers are allowed to sell to the highest bidders. Where is the Gov involved here?

OK, as far as I can gather it used to be the case. Now the government (according to this site) charges a flat 38c per lire, plus GST. (Acey would know more about all of this, and would be able to correct me).

Though the government won't be too unhappy about increased GST from increasing fuel prices.

 

[Peter 14.7]

Hi Thommo

Sorry to imply a sarcastic bent as this was not my intent in mentioning your very interesting post.

I agree we need both views of the half glass here.

From what I read this oil rise is unique as it is demand, not supply control, that is causing the rise. If so, ONLY a lowering of demand through efficiency or a large increase in supply from new finds can lower the price. Both will take time and the first one at best, will hold demand level.

We could be seeing the trigger to the end of this run of high economic growth.

Peter 147

 

[Aceyducey]

Peter,

I don't think the western world is really in the grip of a run of high economic growth....Australia is about the best performing OECD nation & is barely hitting 4%.

China, India & the Asian Tigers are all in varying stagings of seeing growth falling as they get closer to developed standards - you can't grow faster than the market forever because you become the market

Oil is an opportunity as well as a threat. Frankly I'm impressed at the speed at which governments & companies are now moving to resolve transitional issues as we move towards a post-oil world.

There's still lots of money to be made in oil for the next 30 years - and fortunes to be made in it's replacements.

Cheers,

Aceyducey

BTW: Geoff, charging taxes on post-refinery petrol is not the same as manipulating oil prices. Government takes a cut of the oil as it comes out of the ground, another cut when it gets refined & a third cut when it gets sold to consumers...so not 'double-dipping' but 'triple-dipping'.

 

[geoffw]

BTW: Geoff, charging taxes on post-refinery petrol is not the same as manipulating oil prices. Government takes a cut of the oil as it comes out of the ground, another cut when it gets refined & a third cut when it gets sold to consumers...so not 'double-dipping' but 'triple-dipping'.

What cuts do they get all up? And if the price goes up another 10c per litre- if the oil comes from Australian sources, who gets that 10c?

I know governemnts like taxes on fuel (and on cigarettes & alcohol)- because they're commodities where people tend not to reduce their expenditure with price rises (as long as the price rises are not too drastic in one go).

 

[Aceyducey]

Geoff,

If the price of PETROL goes up 10c that 10c goes to the refinery & government.

Most oil producer have their sale price totally or partially hedged - they don't get any benefit from changes in petrol or oil prices from hedged sales - I know producers who have US$35 or lower locked in for the next few months....no downside risk but they miss out on the upside Analysts still value oil in the ground at US$30 or less - a rethink in the future of oil prices could easily see the value of all producing oilers with solid reserves increase by 60% if oil prices remain over US$50 (a nice thought for those of us significantly in oil)

The refineries also have their supply for the next 6 months hedged...but they sell at whatever the market will bear. Hence an increase in pump prices = increased profits to them.

Oil may be US$52 today - also relevant is what the futures market reckons it will be worth in two years...today September 06 oil contracts are selling for US$41.62. That's lower than the price today, but is still the highest I have ever seen futures contracts for oil that far out....anything over US$35 is very good for people in oil (and anything under $US25 would be bad).

For oil futures prices, take a look at the California Department of Food & Agriculture – Crude Oil Futures (http://cdfa.aghost.net/index.cfm?show=62&subtype=crude%20oil)


Cheers,

Aceyducey

PS: For anyone who read some of my earlier posts & looked into Stuart Petroleum, they've delayed Arwon drilling for two weeks to make sure the drilling equipment is in absolute tip-top condition. They are worried about a blowout (too much oil coming out & damaging/wrecking the drill rig, the traditional 'gusher') & are taking the time to ensure that absolutely nothing goes wrong.

This level of caution means Stuart is ready for Arwon to be full to the brim of oil - est. 3M barrels - or US$150M gross value on today's open market - around US$100M net...Stuart holds an 88% interest (so could be worth US$88).

This is more than the current market cap of the company of AU$60M, which is fully underpinned by existing assets already (Worrior #1 & #2, Acrasia #1-#3). Good for the company's share price? You be the judge.

Now they don't take that kind of precaution with just any well

BTW: This ain't financial advice - it's just to make people aware that there are investment alternatives to property. There are lots of good options out there right now!

 

[Sunfish]

It's 5am and oil up another US68c o/nite. Au & Ag up nicely too and the US$ dollar down.

 

[Peter 14.7]

Oil prices tumble as supply fears recede

Note that tumble if perhaps a too strong word when the drop is only 2.7%.

FYI Peter 147

Oil prices tumble as supply fears recede
Nov 10 11:55

World oil prices slumped to six-week lows overnight, tumbling below $US48 briefly in New York as fears of a winter supply crunch during the northern winter subsided, analysts said.

New York's main contract, light sweet crude for delivery in December, dropped by as much as $US1.34, or 2.7 per cent, to $US47.75 a barrel in early deals. It later recovered somewhat to $US48.20, down US89¢ from Monday's close.

In London, Brent North Sea crude for December delivery slumped by $US1.17 to $US44.75 a barrel in late afternoon trading, having earlier dropped to as low as $US44.10.

"Oil is down because the expectations are that inventories are rising and the US is finally recovering from the outages caused by Hurricane Ivan in mid-September," said Deutsche Bank analyst Adam Sieminski.

"OPEC's production is very high and global demand is probably slowing down because we had $US50 oil and it scared everybody to death."

The US contract has fallen by as much as 14 per cent from an October 25 record summit of $US55.67 as US crude oil inventories recover and sky-high prices put the brakes on global demand.

"We still haven't seen that much cold weather, and there has been significant inventory building in crude," US-based Wachovia analyst Jason Schenker said, adding: "The supply disruption premium is diminishing."

The fact that the US presidential elections had passed without a terrorist attack also soothed market nerves, Mr Schenker said.

Traders were optimistic that the latest snapshot of US inventories due on Wednesday from the Department of Energy would show fresh rises after an increase of 10 million barrels in crude stocks over the previous two weeks.

"Early expectations of stocks figures are likely to be bearish with builds across the board," said Robert Laughlin, director of trading at energy brokerage firm GNI-Man Financial. "I think the trend [for prices] is definitely down."

Markets appeared to ignore events in Iraq, where thousands of US and Iraqi troops poured into Fallujah in an all-out offensive to retake the Sunni Muslim city from rebels and restore order ahead of elections promised in January.

In Egypt, authorities reopened the Suez Canal, which had been forced to shut for the first time in 30 years after a tanker got stuck cross-wise on Sunday.

Analysts were divided on whether markets might retest their highs during the northern winter.

"I think on a fundamentals basis we've seen the peaks but I wouldn't completely relax because the potential for problems in Iraq or other events of that nature are still very much a factor in the market place," said Mr Sieminski.

However, analysts at Barclays Capital said that despite current weakness, "fundamentals are still pointing to the potential for fresh highs in oil prices to be set, over the next few months particularly should this winter be colder than normal in key northern hemisphere consuming regions".

 

[Aceyducey]

Ooh - oil at 6 week lows!

Winter is coming in the north....watch the weather reports for oil price movements & factor in events in Iraq, terrorist activities & stuff happening in oil producers & you'll have as much idea of oil movements as the market.

Cheers,

Aceyducey

 

[Steve Navra]

Ooh - oil at 6 week lows!

I remember it bouncing around $35 not that long ago.

This weeks low is yester-weeks high!!

Regards,

Steve

 

[Peter 14.7]

This weeks low is yester-weeks high!!

Regards,

Steve

Hi All

I agree that the lows we see are only temp and fundamentals mean higher prices in the long term unless something huge can be found. Aleast 5 year of prices over $1.

But how about a comment on the amazing fact everyone, while unhappy, seems to be accepting that the price is over $1 and even $1.10 and that's life

Remember all the hoo hah a few years back when it first broke $1. So much the Gov stopped increasing the levy or some such thing in response. It saved 2-3c. Prices are now 20c higher.

Why do you think the fuel price is now a non-issue?

Are we all wealthier?
More comfortable?
Is the fear of terrorisim taking our eyes away?
Are we driving less?
Do we feel helpless?

What do your think?

Peter 147

 

[Sunfish]

Hi All

I agree that the lows we see are only temp and fundamentals mean higher prices in the long term unless something huge can be found. Aleast 5 year of prices over $1.

But how about a comment on the amazing fact everyone, while unhappy, seems to be accepting that the price is over $1 and even $1.10 and that's life

Remember all the hoo hah a few years back when it first broke $1. So much the Gov stopped increasing the levy or some such thing in response. It saved 2-3c. Prices are now 20c higher.

Why do you think the fuel price is now a non-issue?

Are we all wealthier?
More comfortable?
Is the fear of terrorisim taking our eyes away?
Are we driving less?
Do we feel helpless?

What do your think?

Peter 147

None of the above!!! We are in a comfort zone, confident that our dear leader will deliver. I use a 4c voucher when I buy, claim back the GST and reduce my taxable i/c by the remainder. My CC gives me time to pay and I get FF points. Who me worry?

T

 

[Jas]

The media's not driving it. They where before, but its old news now.

Jas

 

[Steve Navra]

Why do you think the fuel price is now a non-issue?

Are we all wealthier?
More comfortable?
Is the fear of terrorisim taking our eyes away?
Are we driving less?
Do we feel helpless?

Hi Peter,

Perhaps it is more about low interest rates:
Each 1% of interest rate cost on the average mortgage = $1,900 per year.

At 20c increase per litre:
$1,900/ 0.20c = 9,500 L !!

At 10 L per 100km = 95,000km
Which for most of us is 5 to 10 years of driving.

So as long as interest rates stay low, I guess we don't much notice too bad an effect on the back pocket.

Regards,

Steve

 

[D.T.]

Hi Steve,

At 10 L per 100km = 95,000km

I respect you and your investment strategies don't get me wrong, I just never pictured you as a Daihatsu Charade kinda guy

(Not that theres anything wrong with that)

 

[Peter 14.7]

Hi All

thanks for the replies.

Hi dtraeger2k,

Quote:
At 10 L per 100km = 95,000km

I respect you and your investment strategies don't get me wrong, I just never pictured you as a Daihatsu Charade kinda guy

Actually most modern small/medium cars will do 10l pretty easily. Even my Alfa with 110kw 2 litre does that. perhaps in Perth you need large cars to stop the Roos?

Hi Steve

Your analysis sums it up. Overall it aint that bad it is simply that people notice it every time they fillup that it feels that bad.

Hi Jas

Ahh... you also are right re the power of the media.

HI Thommo

You raise a good point. I you have a Company Car or car allowance what me worry? Our car after allowance and 90% use ( honest she really does) costs around $2000 out of our pocket p.a.

Regards, Peter 147