200: Re-iteration of property investing strategy as oil prices skyrocket
Today oil prices hit $141/bbl. The effects will be severe the longer high oil prices last - we believe this will be for many years. There are a number of stories, some of which you may or many not believe - that suggest oil price will rise further, upwards to $200/bbl. As our regular visitors will be aware, we predicted oil prices on 15th June 2007 to rise from the then $70/bbl to $125/bbl by end 2008. Indeed, the momentum on oil prices has made our predictions look rather cautious. We would encourage you to review of special reports outlined below, to get the best insights into the dynamics of this phenomena.
191: Oil Price Update and Real Estate
187: Real Estate and the commodities super-cycle
186: Oil price starts to skyrocket as predicted - how to profit
180: Oil prices continue to skyrocket
172: Make serious money - best investment sectors
169: Oil supply crunch begins… protect yourself
168: Alarm bells ringing – oil price shock now on the horizon
163: Making Serious Money as asset prices plateau – resources and property
161: Resources winners and losers - ranked list for property investors
160: Find out the winners and losers in the biggest oil boom in history - about to happen...
159: Massive oil boom - the winners and losers - be prepared
158: Supply and demand scenarios - oil boom and the property investors insights
157: Impact of "Peak Oil" for Property Investment
151: Oil price $125 / bbl and rising…how to take advantage in property
150: Peak Oil shortly due to be reach – unique insights for a property investor
148: Take advantage of the oil/gas/coal boom – key insights
Regretably, high oil prices will be here to stay we believe - for all oil importing nations. But it's not all bad news - since you can adjust your property portfolio to actually increase your investment return from this escalation in oil prices. The obvious safe places to invest for future years with high oil prices are:
- Norway - Oslo, Stavanger, Bergen
- Canada - Fort MacMurray, Edmonton, Calgary
- Australia - Perth
- UK - London, Aberdeen
- USA - Houston, Dallas-Fort Worth - Irving - Galveston
- Russia - St Petersburg, Moscow
- UAE - Dubai
- Qatar - Doha
- Kuwait - Kuwait City
- Brazil (in 5 years time)
High Risk (though potentially high reward)
- Angola (high risk, but 30% GDP increase year on year for the next 3 years)
- Saudi Arabia
There are many more examples outlined in our special reports. For much of the western world, we model that economies will only slowly deteriorate as more and more wealth is transferred from oil importing nations to oil exporting nations. It's only the beginning of this cycle. It will take massive investment in renewables and alternatives to stem this flow. Oil demand is higher than supply - so the only way to close this gap is by the oil prices rising. This acts as a massive multi-Trillion dollar annual tax on importing nations that will start stifling economic growth in all but the most efficient and low cost manufacturing and commercial centres. We predict China and India will be relatively unscathed because they use far less oil per capita, and their low cost wages and manufacturing/services will keep their momentum going. Countries which we believe will be negatively impacted the most are those with relatively weak services and weak manufacturing:
- All African countries that do not produce oil/gas or minerals
- All South American countries that do not produce oil/gas or minerals
Major commercial centres that capture oil/gas corporate profits and government oil revenues such as Moscow, London, St Petersburg, Gevena, Aberdeen, Oslo, Houston, Perth and Dubai will fair well as far as cities that do not have oil fields close-by are concerned.
We know our visitors are motivated and experienced at property investing. What we are doing here is highlighting some key risks and opportunities to help you maximise your returns looking at macro-economic trends. They may seem obvious - our modelling highlights these imbalances
Gone are the days of ultra-low cost air travel - our advice is to be very careful about investing in far flung holiday distinations that rely on very low cost air travel (e.g. Seychelles, West Indies, Maldives). Shorter haul flights will be less affected - places like Spain and Cyprus - also because EU taxes within the community will not rise too fast compared with inter-continental air taxes/surcharges. We believe these trends and insights are relevant to maximising property investing returns and protecting portfolios against the downside of rapidly escalating oil prices.
They are relevant for both residential (buy-to-let, holiday lets, city centre investments) and commercial (offices, retail). As an example, the building and real estate boom in Dubai would show no signs of ending as oil prices keep rising. The massive $160 billion per annum oil wealth per annum generated within the UAE tells a big story - look at the numbers (3 million bbls/day @ $140/bbl), and it's hard to see anything different.
As you are probably aware, there has been much media talk of speculation in the oil markets. However, whilst we believe there is a bit of froth in this market (possibly 25% premium), the higher oil prices have been driven by shortages of light sweet crude and the increasing demand whilst supply has lagged and shows continue lag into 2012. According to our analyses, this is set to continue - and oil prices will need to rise to around $200/bbl to create a significant dent in demand to bring supply and demand back into balance. Hence we maintain our bullish outlook for oil exporting nations, and bearish outlook for oil importing nations with regards to property investment. All the details can be found in our special report which you can read at your leisure - listed above.
Happy investing - and we hope you find these trends ands analysis help to help you maximise your returns.