150 : "Peak Oil" shortly due to be reached - unique insights for a property investor
Weve supplied some insights into aspects of the oil and energy business that can be used to give property investors the best insights into:
· How to hedge in case of a big hike in oil prices
· What areas to avoid and which areas to gravitate to in case oil prices rise
· Boom town areas
Weve now gone one step further. We have done an analysis of the hystorical production of all oil producing countries. We then went through every country and have predicted the actual maximum reasonable production rate they can achieve from mid 2007 until 2012 - using our expert knowledge. We then overlay the EIA official global oil demand forecast issued in July 2007. What we came up with was a surprising and one could describe as disturbing imbalance - starting this year. The gap between supply and demand widens from early 2007 onwards. Global oil production peaks at 83 million bbls/day in 2010 to 2012 and stays more of less flat for a 3-5 year period. Meanwhile, demand is forecast to rise by the EIA by an additional 1.37 million bbls/day from 2006 up until 2010, and then an additional 1.32 million bbls/day after 2010 up until 2015 - using current GDP projections and economic forecasts. China and India will drive the oil demand growth. Demand in the Middle East, other Asian countries and Africa also grow fast.
Obviously this imbalance implies oil prices will shoot up probably to $100/bbl and then $125/bbl which would then start to constrain demand - but we believe it will require oil prices well over $100/bbl to have a material impact on demand. Transport fuels (diesel) is a key driver - and there is no reasonable alternative to the combustion engine at present.
Those "Doubting Thomases" will say that the oil price has dropped from $78/bbl end July to $71/bbl on 10th August 2007 what we say is this is a temporary speculative selling by hedge funds reducing there positions before the biggest oil price hike you will ever see starts in September 2007 lasting years.
The "Doubting Thomases" will also say
These higher oil prices will lead to:
· Increase food prices for transportation. Also, land shortages cause by the transfer of crops from food to corn & sugar for ethanol production (e.g. US mid-west and Brazil)
· Lower global GDP growth rates of ca. 0.5 to 1.0% (high oil prices act like a tax a drag on economic activity)
· Booming oil towns around the world where huge wealth will be created (see our special reports)
· Higher stock market valuation for oil companies and oil services companies - lower stock market valuations for energy intensive businesses (e.g. heavy manufacturing)
· Increases in interest rates and therefore reduction in asset prices of property
As previously advised, the best way for a property investor to hedge against high oil prices or take advantage of this - is to invest in the booming oil towns and cities - areas exposed to the oil and energy businesses - examples include:
Our chart above and analysis is truly unique we have the back-up data for every country to support our predictions - we intend to update this annually, or if other important new data comes in. Some of the key countries production forecasts we have are outlined in the table below, for your review:
|Oil Production Forecast - some key countries|
|Thousand barrels daily||2005||2006||2007||2008||2009||2010||2011||2012|
|United Arab Emirates||2751||2969||3177||3399||3637||3819||3876||3876|
Now you should have a better insight into how to hedge against the next "oil price shock" - and do not be surprized to see it develop in the next months or year. And if you expect to find the above chart or data anywhere else - we think you'll be disappointed. It's taken years of analysis to get this in the correct state to present to you. We do not have a crystal ball - but we have a good track record for economic predictions, socio-economics and house prices - do not be surprized if oil prices are well over $100/bbl next year and beyond. The only thing likely to stop this rise is a recession in Europe and the USA - something possible, but we consider unlikely despite the stock market turbulence of 10th August and sub-prime problems in the USA.
We hope you have found these insights, guidance and supporting analysis and predictions helpful for your property investing strategy.
If you have any comments on the analysis, predictions or insights, please contact us on firstname.lastname@example.org, or write something our Weblog.