6.24.2005

$100 a Barrel?

Econo-Girl has certain beliefs about how we are all floating through the space-time continuum, bumping into each other. We experience life on many levels, simultaneously and mostly unseen. There are deep parts of ourselves that know exactly what the big picture is, and every once in a while, we get a sneak peek at it. That's why meditation is important. It gets you in touch with that part of yourself and is good for listening to The Great Spirit.

So, too, does Econo-Girl get in touch with the big economic picture. There are certain forces at work that are big waves on the shorelines of finance. We need to be in touch with them and to acknowlege their power.

The biggest is oil.

Econo-Girl is about to get a chunk of cash and she is going to bet on oil and gold.

For the oily analysis, please read on:

India, China, Indonesia, South Africa are all looking at huge growth in the near future. Econo-Girl is not the only one who is saying this, it is popular wisdom which she agrees with for once. Their demand for oil and fuel is going to double and then double again in the next ten years.

The problem is oil takes about one million years to make, and no one was aniticipating the surge in demand back then. So the demand side of the equation is going to be off the charts while the supply remains the same. Also - getting the oil out of the ground faster isn't a real option because those rigs take a lot of time to make: 10 years. Not to mention that new sources of oil are not obvious on the horizon.

Some economists believe in the efficiency of the free market (Econo-Girl doesn't). Those are the ones that claim people will find other means of producing electricity and running their machines. And doing so will reduce overall demand for oil.

Let's say they are correct. Are we going to completely retool our factories and cars to accomodate other fuel sources? Isn't that expensive and wouldn't that lead to a recession and unemployment because of all the money business has to spend to kick its oil habit? Not much left for hiring and R&D.

And even if all that happened, growth in demand would come from third world nations that desire a place at the big table, not the little one in the kitchen That demand would be more than the little bit the U.S. would give up. Sure, we'd use less oil. But they would ask for much more than we were replacing and overall, the demand for oil would still skyrocket.

Yes - oil will go to $100 a barrel. Not this year, but it will get there in the next seven years.

Econo-Girl is going to try and convince her spouse, Leisure Lad, to install solar panels in the roof. Wish her luck. She already has a pellet stove which burns wood by-product much more efficiently than a fireplace. Secretly, she has been preparing for the fall of civilization. Shhh. Don't tell.

5 comments:

The Lazy Iguana said...

Solar panels are very expensive, and to really get any use out of them you need an array - not just one plnel.

But, if you can swing it, go with the 100 watt panels. Put as many of them as you can on the roof - facing SOUTH so they will get as much sun exposure as possible.

And you will also need a battery bank to store the extra power. And then add some 12 volt wiring to the house. And get 12v appliances, or at least lights.

Then you need voltage regulators (good 12v panels are really 18 or 19 volts in full sun, so that you can still get 12v when the sun is low or there are clouds). You also need charge controlers so you do not overcharge your batteries.

jevanking™ said...

First of all, I love your site. I am going to link to it if that is okay with you.

Second, I disagree a bit with your analysis. I think Europe is a great example of what the general population does when gasoline is expensive. When I lived there, I hardly EVER rode in a car. I think that the market in general will demand either more efficient automobiles or that we will start to see major government spending on infrastructure to construct public transportation. This could actually be a very good thing in keeping our economy strong, but I'd like to know if you think that is feasable?

Econo-Girl said...

Good comment. Yes, I think it is feasible, keeping in mind that the geographic expanse here in the States is much larger than in Europe. So the costs associated with creating that kind of infrastructure will be much larger. But, hey, it will mean jobs to build the railroads, drive the buses, etc!

In terms of moving materials around that are used in the commercial realm, a lot really depends on trucking. Like Home Depot or Safeway. From that perspective, those companies that sell to consumers will have to pay more to get the goods to the stores. And then the consumers will pay more for the goods. Then the cost of living will go up.

jevanking™ said...

That's a very good point. I didn't even consider distribution of materials in my thought process--this is a finance guy vs. an econo girl. We tend to jump to conclusions. I think the most feasable option here is finding a different energy source and quickly.

The Lazy Iguana said...

I have given this a good deal of thought, and I have come to a rather distressing conclusion.

There is none.

I tend to side with Econo-Girl here. I am also secretly preparing for the hangover when this party is over.