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From CNN : Ready for $262/barrel oil?

Discussion in 'The Lounge' started by grimjaw, Jan 27, 2006.

  1. grimjaw

    grimjaw 1/2 ton status

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    Ready for $262/barrel oil?
    Two of the world's most successful investors say oil will be in short supply in the coming months.

    By Nelson Schwartz, FORTUNE senior writer
    January 27, 2006: 4:40 PM EST



    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.
    Hermitage's Bill Browder doesn't yet have the stature of George Soros. But his $4 billion Moscow-based Hermitage fund rose 81.5 percent last year and is up a whopping 1780 percent since its inception a decade ago. A veteran of Salomon Bros. and Boston Consulting Group, the 41-year old Browder has been especially successful because of his contrarian take; for example, he continued to invest in Russia when others fled following the Kremlin's assault on Yukos.

    Doomsdays 1 through 6

    To come up with some likely scenarios in the event of an international crisis, his team performed what's known as a regression analysis, extrapolating the numbers from past oil shocks and then using them to calculate what might happen when the supply from an oil-producing country was cut off in six different situations. The fall of the House of Saud seems the most far-fetched of the six possibilities, and it's the one that generates that $262 a barrel.
    More realistic -- and therefore more chilling -- would be the scenario where Iran declares an oil embargo a la OPEC in 1973, which Browder thinks could cause oil to double to $131 a barrel. Other outcomes include an embargo by Venezuelan strongman Hugo Chavez ($111 a barrel), civil war in Nigeria ($98 a barrel), unrest and violence in Algeria ($79 a barrel) and major attacks on infrastructure by the insurgency in Iraq ($88 a barrel).
    Regressions analysis may be mathematical but it's an art, not a science. And some of these scenarios are quite dubious, like Venezuela shutting the spigot. (For more on Chavez and Venezuela.)
    Energy chiefs at the World Economic Forum in Davos downplayed the likelihood of a serious oil shortage. In a statement Friday, Shell's CEO Jeroen Van der Veer declared, "There is no reason for pessimism." OPEC Acting Secretary General Mohammed Barkindo said "OPEC will step in at any time there is a shortage in the market." But then no one in the industry, including Van der Veer, foresaw an extended run of $65 oil -- or even $55 oil -- like we've been having.
    It's clear that there is very, very little wiggle room, and that most consumers, including those in the United States, have acceded so far to the new reality of $60 or even $70 oil. And as Soros points out, the White House has its hands full in Iraq and elsewhere.
    Although there are long-term answers like ethanol, what's needed is a crash conservation effort in the United States. This doesn't have to be command-and-control style. Moral suasion counts for a lot, and if the president suggested staying home with family every other Sunday or otherwise cutting back on unnecessary drives, he could please the family values crowd while also changing the psychology of the oil market by showing that the U.S. government is serious about easing any potential bottlenecks.
    Similarly, he could finally get the government to tighten fuel-efficiency standards and encourage both Detroit and drivers to end decades of steadily increasing gas consumption. These kinds of steps would create a little headroom until new supplies do become available or threats like Iran's current leadership or the Iraqi insurgency fade.
    It's been done it before. For all the cracks about Jimmy Carter in a cardigan and his malaise speech, America did reduce its use of oil following the price shocks of the 1970s, and laid the groundwork for low energy prices in the 1980s and 1990s. But it would require spending political capital, and offending traditional White House allies, and that's something this president doesn't seem to want to do.

    http://money.cnn.com/2006/01/27/news/international/pluggedin_fortune/index.htm?cnn=yes

    Time to find a good bicycle?
     
  2. 89GMCSuburban

    89GMCSuburban 1/2 ton status

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    It was helped by Soros...I wouldn't believe much of ANY of it.
     
  3. TSGB

    TSGB 1 ton status

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    :coughbull****cough:

    Well, I can predict Can Can will eat wang...

    OK, bad example...

    I can predict the world will be reduced to a smoking cinder tomorrow, but the guy on the corner already does that. I think they picked some crackhead's wild-ass prediction and threw it out there for a headline.
     
  4. TSGB

    TSGB 1 ton status

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    But wait! It's the president's fault that people go out on unnecessary drives on Sundays, because he doesn't say you shouldn't!!!




    Fack, did I just defend Bush? :yikes:
     
  5. Thunder

    Thunder 3/4 ton status

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    Ummmmm ......... Who needs a bicycle? I have been buying oil stocks lately
    A little tip ..........CWPC :wink1:
     
  6. Jishory

    Jishory 1/2 ton status

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    Tonight I pulled into a 76 station in Santa Monica and glanced over at the pump at the price and it said 3.50$ and looked around a little further and their were water fountains and plants and crap some some guy comes running outside trying to pump my gas for me, weird place. I think seeing that gas price everywhere again would suuuuuuck.
     
  7. darkshadow

    darkshadow 1 ton status

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    good, if we get shut off from the easts oil maybe we will finaly use the oil we have here for a change.

    bust out the drills
     
  8. GotLabs

    GotLabs 1/2 ton status GMOTM Winner

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    Great, more BS!:mad:
     
  9. 4by4bygod

    4by4bygod 1/2 ton status

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    This is the same conference that john kerry attended. ( he called long distance from here to ask his colleagues to fillibuster the alito vote - a call that was loudly ignored, btw)

    Anyway, liberals and leftists are ignorant when it comes to discussing economics, energy, and anything of real importance. they should leave these discussions to the adults.

    This is the same crowd that will use 3 dollar a gallon gas prices against bush as a political issue, then call for 5 dollars a gallon at the pump as a conservation measure when they're in power.

    as colonel klink used to say: "diiiiiiismissed"
     
  10. Inu-Hanyou1776

    Inu-Hanyou1776 1/2 ton status

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    Pure BS. Letting their imaginations run wild.
     
  11. jhellwig

    jhellwig 1/2 ton status

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    Either way you look at it it is all comming out of the rear end of a bull.


    Get ready for the next depresion.


    How many signs of the apocalypse are we up to?
     
  12. Can Can

    Can Can Pusher Man Staff Member Super Moderator

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    OOOOOOOOOH, nice one!!!!!! :woot: :thumb:
     
  13. TSGB

    TSGB 1 ton status

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    I ride a bicycle. Also known as driving a Ford. :doah:
     
  14. cbbr

    cbbr 1 ton status GMOTM Winner

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    Soros igores little things like the fact that if you asked $262 a barrel, no one except for maybe he and bill gates would buy any. pople just can't afford it so the market cannot let it get that high.
     
  15. mtn. burb

    mtn. burb 1/2 ton status

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    Tarsands in Fort McMurry Canada are an oil source for us. Could be 2 trillion barrels up there.

    So when do we nuke Mecca and get this Middle East insanity over with?

    Oh, and Iranians are Persian, not Arab.

    Hamas is going to form it's own military now, I read.

    Oil, turmoil, anything can happen.:crazy:


    I will tell you emphatically one commodity that will go through the roof is GOLD.

    The reserve currency for contrarians worldover.
     
  16. JK5

    JK5 1/2 ton status GMOTM Winner

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    Time to invest in Canada's oil sands...:wink1:
     

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