OT: How high will oil go?

[Fat Elvis]

Today it went past $54 a barrel. There is some talk that is might reach $60 or even $70 a barrell. How high do you think it will go, and how does that affect your life?

Just curious

Fat E

[Otter]

I've read (don't recall source but I think it was Forbes or another investment magazine) that if we have another brutally cold winter it could top out at $74 dollars a barrel.

I use natural gas to heat my home and that's projected to increase 15% this winter. Oil is traditionally 10-15 percent higher than the natural gas increase.

[Eleazar]

We've barely got enough refining capacity, so this was bound to happen eventually.

[Donger]

$56 a barrel.

[Soupnazi]

The consensus is finally starting to shift from a "speculative" market driven by hedge funds to the reality, which is that there's simply not enough supply given current market conditions and the global economic situation.

It will take a few things to lower it significantly. One would be a big expansion is world wide production capacity. Two would be a big slowdown of the Chinese economy (unlikely until they agree to revalue the Yuan). Three would be a huge expansion in oil production capacity in Russia.

How high isn't as important as how high, how fast. I was called crazy when I predicted $50/barrel a year ago. I'm 'fraid we're looking at at least $65/barrel in the near future and maybe a oil bubble that will mirror the tech bubble of 2000.

On the upside, my investment picks in this area have been kicking butt.

[KCTitus]

The consensus is finally starting to shift from a "speculative" market driven by hedge funds to the reality, which is that there's simply not enough supply given current market conditions and the global economic situation.

There's still a lot of speculation in the current price...

[Ghostof]

It affects my life in the way that my parents have started their oil wells again. The main tank holds around 160 barrels and the water seperator tank holds 60 barrels.

Back in the early 80's they only were getting 1/8 of the cash because of the investors involved, and back then barrels were cheap. But over the last 15 years my parents have managed to buy out all the investors, so now with oil up to $54 bucks..they are going to make a buttload!

Thats like $11k a month
or $132k a year..before taxes

Not bad...thats like a down payment on some of that property I linked yesterday!!

[Soupnazi]

There's still a lot of speculation in the current price...

You know, I'm not sure how to quantitate it though. There's always speculation in the commodities markets, it's called futures contracts. I can't say that it's driving the price now. What's coming into focus now is that US GDP is expanding at about 3.5-4%, and China is growing at 6-8%, and has now taken over as the 2nd leading consumer. Given the population dynamics of China, if the population consumes even 1/2 barrel/yr/person more then there's simply not enough to go around.

Speculation always drives a market to a certain degree. Speculation led to the tech boom in late 90's. There was a philosophy out there that if you bought it today, it would double again in 6 months. But we're not talking about the economy being dependent on pets.com, we're talking about the fuel of the global economy.

[Soupnazi]

It affects my life in the way that my parents have started their oil wells again. The main tank holds around 160 barrels and the water seperator tank holds 60 barrels.

Back in the early 80's they only were getting 1/8 of the cash because of the investors involved, and back then barrels were cheap. But over the last 15 years my parents have managed to buy out all the investors, so now with oil up to $54 bucks..they are going to make a buttload!

Thats like $11k a month
or $132k a year..before taxes

Not bad...thats like a down payment on some of that property I linked yesterday!!

You're gonna see a lot of old abandoned wells firing back up at $54/barrel.

[KCTitus]

You know, I'm not sure how to quantitate it though. There's always speculation in the commodities markets, it's called futures contracts.

Yeah, that's what I was referrring to...when we talk about the price per barrel, we're talking about futures contacts.

I can understand a legitimate shortage affecting the price immensely more than what we've seen, but since the price went over 30 @ bbl, most of the price increases have been based upon speculative fear of what might happen, not what is happening.

OPEC has now lost control of prices and with little to no spare capacity left only worsens the situation.

Fortunately, the truth about oil prices and refined gas prices have been exposed.

[Soupnazi]

OPEC has now lost control of prices and with little to no spare capacity left only worsens the situation.

Yep. And they can't credibly threaten to increase production to stem the tide of advancing prices. Everyone knows that they're near max production now.

[KCTitus]

Yep. And they can't credibly threaten to increase production to stem the tide of advancing prices. Everyone knows that they're near max production now.

I read that they have about 1.5M bpd in spare capacity.

[Fat Elvis]

It affects my life in the way that my parents have started their oil wells again. The main tank holds around 160 barrels and the water seperator tank holds 60 barrels.

Back in the early 80's they only were getting 1/8 of the cash because of the investors involved, and back then barrels were cheap. But over the last 15 years my parents have managed to buy out all the investors, so now with oil up to $54 bucks..they are going to make a buttload!

Thats like $11k a month
or $132k a year..before taxes

Not bad...thats like a down payment on some of that property I linked yesterday!!

Do you know how much it costs to start a well?

[Garcia Bronco]

We've had over ten years to prepare for this and we've done nothing in the way of getting away from oil use..

[KCTitus]

We've had over ten years to prepare for this and we've done nothing in the way of getting away from oil use..

Just 10?

[Soupnazi]

We've had over ten years to prepare for this and we've done nothing in the way of getting away from oil use..

Necessity...the mother of invention.

[Garcia Bronco]

Just 10?

I forgot about the oil crisis in the 70's. So yeah...even longer.

[KCTitus]

I forgot about the oil crisis in the 70's. So yeah...even longer.

Yeah, but I would argue that it wasnt an oil problem as much as it was a price control problem that Nixon/Carter had going.

[Soupnazi]

I forgot about the oil crisis in the 70's. So yeah...even longer.

A lot of that was Carter's bumbling, but the need for energy independence was certainly highlighted then.

[Ghostof]

"Do you know how much it costs to start a well?"


They have had two set up for as long as I can remember, when they shut down the oil wells a long time ago they kept all the tanks and equipment. It didnt take much for them to start them up again. It was under a grand to replace the belts and have some people come out to test the lines to the tanks.


PLus it all depends on who you know and who owes you a few favors.

[Braincase]

I bet there's a lot of speculation on hybrid cars right now...