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- Sep 19, 2004
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With the advent of high oil prices, which have a primary effect on transportation and home heating cost, and a secondary effect on a lot of other things....
It is expected that oil prices will remain high from here out. They might dip a bit, but they may also go up more. This is because the worlds demand for oil has now reached its capactiy to produce oil. While some more oil production will be brought on line; it is not expected to offset the already decreasing production in the Middle East (oil wells have reached and passed their maximum production and oil production is now going down as the oil resevors are being drained - and the next 10 years is expected to see a significant decrease in production capability) and the increase in world demand from China and India and other parts of the world. I.e.; we are now production limited - and demand now determins price... The oil industry speculation is that prices will range from $50 - $100 per barrel (currently arround $70, $100 barrel about $4.00 gal gasoline in the US).
What is your guess as to how long term America and the world will change?
My speculation is as follows:
1) America will start buying smaller vehicles that get better gas mileage. In 10 years the US will reduce oil consumption by about 3 million barrols of oil a day (assuming the light vehicle average is 30 MPG). The us currently uses about 20 million barrals of oil a day, ,of which 9 million barrels is soley for light vehilcle gasoline -- i.e I estimate that we will cut that by a third.
2) The global market place will again change: Many jobs have been and continue to be exported from the US to other countries becasue "it''s cheeper..." In regards to manufactured goods - that is going to start shifting back again as the transportaion cost have changed significantly (long distance transportation is now at least 4 times as expensive as only 5 years ago just due to fuel prices). Smaller high value items may still be imported (i.e. electronics / computers are a good example) ==> but shipping of large lower value ($/Lb) items will now not nearly be as cost effective (prime example: lower to mid market Automobiles).
3) In the case of Automobiles: While more will be manufactured in the US; they won''t be manufactured by the big three auto companies. Other companies can set up and run production plants a lot cheaper because of the reduced wages and benifits that they have compared to the existing UAW contracts at the big 3 (these other companies pay good wages; but they are not paying an experience worker $70 per hour in wages and benifits for simple assembly thy jobs).
4) Natural gas prices are linked to oil prices: people are going to find major home renovation and insulation (tear down the interior walls and fully insulate properly) to more practicle than just blowing in insulation into existing older houses. They may start add stud hight as well (to change from a 4" wall to a 6" wall).
5) No major price increases in gems due to fuel inflation. Very high value per weight. Shipping charges has no real effects.
So what do all you think will change?
Perry
It is expected that oil prices will remain high from here out. They might dip a bit, but they may also go up more. This is because the worlds demand for oil has now reached its capactiy to produce oil. While some more oil production will be brought on line; it is not expected to offset the already decreasing production in the Middle East (oil wells have reached and passed their maximum production and oil production is now going down as the oil resevors are being drained - and the next 10 years is expected to see a significant decrease in production capability) and the increase in world demand from China and India and other parts of the world. I.e.; we are now production limited - and demand now determins price... The oil industry speculation is that prices will range from $50 - $100 per barrel (currently arround $70, $100 barrel about $4.00 gal gasoline in the US).
What is your guess as to how long term America and the world will change?
My speculation is as follows:
1) America will start buying smaller vehicles that get better gas mileage. In 10 years the US will reduce oil consumption by about 3 million barrols of oil a day (assuming the light vehicle average is 30 MPG). The us currently uses about 20 million barrals of oil a day, ,of which 9 million barrels is soley for light vehilcle gasoline -- i.e I estimate that we will cut that by a third.
2) The global market place will again change: Many jobs have been and continue to be exported from the US to other countries becasue "it''s cheeper..." In regards to manufactured goods - that is going to start shifting back again as the transportaion cost have changed significantly (long distance transportation is now at least 4 times as expensive as only 5 years ago just due to fuel prices). Smaller high value items may still be imported (i.e. electronics / computers are a good example) ==> but shipping of large lower value ($/Lb) items will now not nearly be as cost effective (prime example: lower to mid market Automobiles).
3) In the case of Automobiles: While more will be manufactured in the US; they won''t be manufactured by the big three auto companies. Other companies can set up and run production plants a lot cheaper because of the reduced wages and benifits that they have compared to the existing UAW contracts at the big 3 (these other companies pay good wages; but they are not paying an experience worker $70 per hour in wages and benifits for simple assembly thy jobs).
4) Natural gas prices are linked to oil prices: people are going to find major home renovation and insulation (tear down the interior walls and fully insulate properly) to more practicle than just blowing in insulation into existing older houses. They may start add stud hight as well (to change from a 4" wall to a 6" wall).
5) No major price increases in gems due to fuel inflation. Very high value per weight. Shipping charges has no real effects.
So what do all you think will change?
Perry