Comments on: Is Oil really worth more than $130/barrel?

By: Thicken My Wallet » Blog Archive » Is the price of oil too low now?

Thicken My Wallet » Blog Archive » Is the price of oil too low now? — Thu, 04 Dec 2008 09:06:32 +0000

[...] May, I mused that the price of oil was too high. With the price of a barrel of oil just below $47 USD, is the price of oil now too low? The [...]

By: Thicken My Wallet » Blog Archive » The end of suburbia

Thicken My Wallet » Blog Archive » The end of suburbia — Fri, 06 Jun 2008 09:02:28 +0000

[...] Is Oil really worth more than $130/barrel? [...]

By: Potato

Potato — Tue, 03 Jun 2008 10:06:10 +0000

The speed of oil’s recent rise has me worried about bubbles, especially since factors like political instability in Nigeria seem to be playing large roles. Even just 3-5 years down the road though, I think the fundamentals will support the current price (or more). I think the high price of oil is finally sinking in to consumer behaviour, but it’s more a hump than a wall. People are still driving, even if they’re choosing to do so slower in more efficient cars slightly less often; it’ll take years to build out public transit and rail lines to make a real dent. I don’t think China or India will ever get to be as wasteful as the average Canadian/American, but they’re still not even at one tenth of our per-capita usage, so I think their growth rate there might continue for another year or three. Their total consumption has already passed 1/3 that of the US, so very roughly speaking, for every 6% increase in China’s consumption, the US has to give up 2%… The first 2% is easier to give up than the second 2% and so on, and the only real motivator we’ve seen for North Americans to cut down their usage has been high prices…

But to put my money where my mouth is, I own very little in the energy sector beyond IPL.UN (which is not really all that sensitive to the price of oil in either direction) and the TSX-Composite. The rapid explosion in prices has me too spooked, though I plan to buy some if/when there’s a pullback.

Coal transformation is, to my mind, a bit of a boondoggle. It’s grossly polluting and inefficient: better to just burn the coal in an electricity generating station and then run a fleet of electric cars or trains off of that. Unfortunately, it may come to pass because with oil prices as high as they are, it makes some kind of economic sense.

By: admin

admin — Thu, 29 May 2008 21:49:27 +0000

Thanks for the kind words. The cheque is in the mail!

By: Riscario Insider

Riscario Insider — Thu, 29 May 2008 04:22:23 +0000

The quality, range and frequency of your posts continues to amaze and enlighten.

Prices change behavior. Extrapolating the past does not predict the future. Life is more complicated.

If we spend more on fuel, we’ll cut back somewhere else. As prices increase, we’ll conserve more (as we should already have done). The same will happen throughout the world.

Forbes reports “… in oil-equivalent terms, U.S. lighting uses the equivalent of 50% of the energy used by all cars on American roads.” Think of the energy savings from LED lighting (albeit in coal consumption). (see http://www.forbes.com/2008/02/27/incandescent-led-cfl-pf-guru_in_mm_0227energy_inl.html)

The past does not predict the future. Humans become creative when the need arises.

By: moneygardener

moneygardener — Wed, 28 May 2008 01:05:24 +0000

Great post! Who knows…but your points are all valid. Nothing goes up forever, and high prices will bring down demand to a certain extent. China and India will slow at some point and traders will bail.