PropertyInvesting.net: property investment ideas, advice, insights, trends
Propertyinvesting.net: Property Investment ideas, advice, insights, trends

PropertyInvesting.net: Property Investment Special Reports

 Property News

old news articles...

161: Resources winners and losers - ranked list for property investors


09-23-2007

PropertyInvesting.net team

Rising Oil Prices:  We have made much of the theme of energy in 2007. In 2006, we advised that, if oil prices rose to over $80 per barrel, there would be a risk of property prices dropping as inflation takes hold and interest rates rise. Indeed, oil prices are now $83 per barrel as predicted mid year, and interest rates have risen - we believe oil prices will rise further to $125+ per barrel by end 2008 (see Special Report 151).

So what does this have to do with your property investment?  The answer is, a huge amount. There will be a massive transfer of wealth from oil importing nations to oil exporting nations. This transfer of wealth will be a real shock to the global economic scenery. Countries that lack oil, gas, coal, nuclear and other mineral wealth will suffer hugely by the added burden of energy prices. Developed countries that have high cost manufacturing, current account deficits and no resources will decline markedly. Meanwhile, countries with resources will prosper in ways unimaginable only a few years ago.

To put this into perspective, if oil prices rise to $300 per barrel by 2015, as we expect, then the USA will need $US 1 Trillion a year to fund oil imports alone. Meanwhile, Saudi Arabia and Russia would both have surpluses of around $800 Billion a year. In Norway, the country would have income of $60,000 per person per year from oil and gas exports alone.

What you are about to see is truly unique – it’s the first time a list has been compiled of the total value of oil, gas and coal (net surplus/deficit) per country.

What we did:

·         Oil – calculated the net exports / imports (consumption) of oil per country – then calculated the value by using $70 / bbl (average price for 2007)

·         Gas – calculated the net exports / imports of gas per country – then calculated the value by using an assumption of $50 / bbl (approximate average value of pipeline and LNG gas)

·         Coal – calculated the net export / import of coal per country – then calculated it’s value by using $73 / bbl in oil equivalent terms, which is equivalent to $10 / ton of coal (the average coal price of Wyoming coal in USA)

We then added up all the $US surpluses and deficits into a total (column 4 in the table below). We then calculated the average $US surplus or deficit per person in the country (column 3). We then ranked the countries sorted on the maximum $US surplus per person on top and maximum $US deficit on the bottom. This is the best reflection of the financial impact that oil, gas and coal prices have on individual wealth. There is also a fairly good correlation been oil, gas and coal prices – if one goes up, the others normally follow. So if oil prices rise as expected, we would expect these surpluses and deficits to rise accordingly - and become more excentuated.

So why is this so important?

The reasons are described in Special Reports 160, 159, 158 and 157. As oil prices rise, a massive transfer of wealth will pass from the countries in the bottom of the list to the countries in the top of the list. This means, property prices in the countries at the top of the list are likely to rise, Property prices in countries in the bottom of the list are likely to stagnate, particularly those developed western countries in the list. The high oil, gas and coal prices will act like a massive negative tax on the bottom countries, and act as a massive stimulus to the countries in the top of the list.

We advise investing in stable countries at the top of the list – it’s that simple. These countries will have a strong and strengthening currency, stable inflation rates, massive budget surpluses and rising house prices. They will be strong "Petrocurrencies" or "Resource Currencies". This will also help protect your investments. There interest rates in such countries could be lower also because of this. The obvious countries which are stable and developed with massive surplusses are:

 Other less stable countries worth considering are:

Both Azerbaijan and Kazakhstan have massively increasing oil and gas production which will mean they move up this league table over time.

We also think China and India will weather the oil price storm because of their massive populations, manufacturing and services wealth and surpluses.

Contrary to popular belief the USA does not fair too badly per person because it has so much coal, and half it’s gas and oil needs supplied indigenously. It also has by far the biggest world coal reserves – and more hydrocarbon energy than any other country in the world locked up in it’s coal reserves, which will last hundreds of years. If the USA can reduce its gasoline transport usage, it could fair okay in the longer term.

The same is also true of the UK – it has oil and gas to fuel half it’s needs and some coal, so is not as badly off as many countries.

France, Italy, Spain, Luxembourg, Japan, Taiwan, S Korea, Belgium and Singapore fair the worst. However, Singapore has many oil refineries that deliver cash and use oil, Luxembourg has a very strong financial centre and Taiwan is growing fast and has a strong manufacturing sector. France also has much nuclear power. We believe therefore the countries that have nothing going for them except possibly political stability are:

Both Spain and Italy have declining populations, barely any oil, gas and coal, import electricity and are therefore very susceptible to rising oil prices – particularly Italy because its GDP growth is low anyway and balance of payments deficit is already high.

Rank Country $US per person per year Annual $US Billion Surplus/ Deficit
1 Brunei 21,551 8.6
2 Kuwait 21,148 63.4
3 Norway 17,469 87.3
4 UAE 14,358 71.8
5 Libya 9,220 46.1
6 Saudi Arabia 7,684 180.7
7 Oman 4,012 20.1
8 Australia 3,891 76.0
9 Azerbaijan 3,119 15.6
10 Kazakhstan 2,844 42.7
11 Venezuela 2,400 59.3
12 Qatar 2,269 36.5
13 Algeria 2,112 65.0
14 Canada 1,789 57.1
15 Iraq 1,731 41.6
16 Russian Fed. 1,685 244.2
17 Iran 1,020 66.3
18 Colombia 724 29.7
19 Turkmenistan 645 3.2
20 Ecuador 600 9.0
21 Malaysia 541 12.3
22 Nigeria 512 66.8
23 South Africa 476 19.5
24 Mexico 354 36.6
25 Indonesia 279 64.6
26 Vietnam 268 9.4
27 Trinidad & Tobago 209 2.5
28 Bolivia 206 2.5
29 Argentina 205 7.8
30 Denmark 146 2.0
31 Egypt 47 3.4
32 Myanmar -4 -0.2
33 Bangladesh -21 -2.4
34 Uzbekistan -58 -1.2
35 India -58 -60.5
36 Peru -65 -1.6
37 China -78 -101.7
38 Brazil -91 -16.4
39 Pakistan -93 -11.2
40 Tunisia -123 -2.5
41 Philippines -139 -11.2
42 Serbia -148 -3.3
43 Jordan -159 -3.2
44 Croatia -161 -2.4
45 Lithuania -170 -2.5
46 Iceland -179 -0.5
47 Slovenia -193 -2.5
48 Ukraine -193 -6.8
49 Belarus -202 -5.0
50 Romania -207 -5.2
51 Bulgaria -209 -5.2
52 Uruguay -216 -2.6
53 Thailand -226 -14.5
54 Chile -282 -9.9
55 Poland -309 -12.4
56 Hungary -325 -8.1
57 Slovakia -392 -5.9
58 Czech Republic -402 -6.0
59 Turkey -425 -34.0
60 United Kingdom -447 -26.8
61 Sweden -472 -9.4
62 New Zealand -475 -3.3
63 Austria -478 -11.9
64 Finland -480 -9.6
65 Greece -578 -12.7
66 Portugal -623 -12.5
67 Latvia -695 -2.1
68 Switzerland -735 -8.1
69 Ireland -1,007 -7.0
70 USA -1,261 -362.9
71 Netherlands -1,282 -21.8
72 France -1,322 -72.7
73 Italy -1,327 -76.9
74 Germany -1,327 -109.3
75 Spain -1,360 -58.5
76 Luxembourg -1,364 -2.0
77 Japan -1,497 -190.2
78 Taiwan -1,695 -50.8
79 South Korea -1,826 -87.6
80 Belgium -1,975 -29.6
81 Singapore -4,271 -25.6

High Oil Price Scenario - Staggering Numbers: We have also prepared a scenario where the oil price is $200 / bbl, gas is equivalent to $100 / bbl and Coal $116 / bbl - the resulting surplusses and deficits are staggering. Kuwaiti's would have an annual surplus of $60,422 per person with Norway $45,807 per person. As you can imagine, property prices would be highly likely to skyrocket. Deficits in most western countries would be running at $2,000 to $4,000 per person per annum - a very hefty tax burden indeed - probably enough to drive these economies into recession or stagnation. The problem is, India ad China will still be pulling on the remaining oil supplies - this is not likely to stop with 2.3 billion people buying cars. It's likely 500 million new cars will hit the streets in the next 10-15 years - being funded via excess manufacturing and services revenues from these two fast growing countries.

 

Rank Country $US per person per year Total $US Billion Surplus/Deficit
1 Kuwait 60,422 181.3
2 Brunei 55,201 22.1
3 Norway 45,607 227.8
4 UAE 40,703 203.5
5 Libya 26,045 130.2
6 Saudi Arabia 21,954 516.2
7 Oman 10,871 54.4
8 Azerbaijan 8,913 44.6
9 Venezuela 6,494 163.5
10 Kazakhstan 6,148 102.6
11 Qatar 6,013 96.8
12 Algeria 5,476 168.4
13 Iraq 4,947 118.7
14 Canada 4,410 139.3
15 Russian Fed. 4,187 624.0
16 Iran 2,922 189.9
17 Ecuador 1,714 25.7
18 Malaysia 1,595 32.8
19 Turkmenistan 1,458 7.3
20 Nigeria 1,436 187.4
21 Mexico 1,099 111.5
22 Denmark 913 9.8
23 Vietnam 766 26.8
24 Argentina 583 21.7
25 Colombia 573 44.9
26 Bolivia 349 4.2
27 Trinidad & Tobago 272 3.3
28 Indonesia 147 83.1
29 Egypt 138 10.0
30 Bangladesh -55 -6.5
31 Myanmar -74 -3.0
32 Uzbekistan -82 -2.2
33 India -126 -145.1
34 Peru -130 -3.7
35 Brazil -155 -33.6
36 China -238 -304.0
37 Pakistan -240 -29.9
38 Philippines -275 -25.4
39 Tunisia -334 -6.7
40 Serbia -395 -8.7
41 United Kingdom -398 -41.2
42 Bulgaria -398 -11.4
43 Lithuania -413 -6.3
44 Jordan -428 -8.6
45 Croatia -439 -6.6
46 Iceland -462 -1.4
47 Romania -505 -12.8
48 Slovenia -529 -6.9
49 South Africa -534 5.3
50 Belarus -569 -14.3
51 Slovakia -614 -11.3
52 Uruguay -615 -7.4
53 Chile -631 -23.7
54 Ukraine -669 -22.2
55 Hungary -758 -19.4
56 Turkey -800 -72.6
57 Thailand -830 -48.1
58 Finland -913 -21.0
59 Australia -935 62.7
60 Austria -1,085 -28.7
61 Poland -1,137 -40.9
62 Sweden -1,163 -24.4
63 Czech Republic -1,408 -18.8
64 Portugal -1,446 -30.9
65 New Zealand -1,648 -10.8
66 Greece -1,652 -36.0
67 Latvia -1,828 -5.5
68 Switzerland -2,005 -22.1
69 Ireland -2,339 -17.4
70 Japan -2,858 -426.3
71 Germany -2,943 -259.5
72 Italy -2,962 -180.9
73 Taiwan -2,966 -107.7
74 France -3,168 -181.2
75 Spain -3,226 -145.2
76 Netherlands -3,458 -62.8
77 South Korea -3,517 -197.2
78 Luxembourg -3,619 -5.4
79 USA -3,660 -1038.1
80 Belgium -4,684 -73.5
81 Singapore -11,897 -71.4

 

Super Energy Cities:  Much of this new wealth will reside in the Middle East, Russia and some parts of Africa - plus Norway, Canada and Australia. The trick is to guess where this money well end up being invested and where property prices will rise because of this. We believe the following cities will prosper because of the next big oil/gas/coal boom:

It's taken a huge effort to get these numbers and analysis to you - they create the insight we wanted to show you. The shape of things to come.

We hope you have found this Special Report insightful and it prepares you for the coming oil shock. If you have any comments on the analysis, predictions or insights, please contact us on enquiries@propertyinvesting.net, or write something our Weblog. If you want to know more about this subject, please also email us.

 

 

back to top

Site Map | Privacy Policy | Terms & Conditions | Contact Us | ©2004, 2005 PropertyInvesting.net