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Page added on January 10, 2015
T Boone Pickens sees $100 oil
Legendary business magnate and oil tycoon T Boone Pickens believes oil will return to $100 in 12 to 18 months due to a recovery in demand for the commodity. Pickens was speaking to the Fox Business Network Thursday, just after oil dropped to a 5 ½ year low of $48.98.
The BP Capital Management’s Chairman has put his money where his mouth his, increasing the energy stocks in his Hedge Fund’s portfolio to 97.8% according to a Guru Focus report. BP Capital Management has added three energy firms Western Refining, Inc.(NYSE:WNR), WPX Energy Inc (NYSE:WPX) and Gastar Exploration Inc (NYSEMKT:GST) to its portfolio.
Demand-supply disequilibrium to be corrected by the oil price slump
Just last month, in a fiery appearance on CNBC, Pickens attributed the current decline in oil prices to a primarily slump in demand rather than an increase in supply. He said that low prices will fix the existing demand-supply problem and return the market to equilibrium.
According to Pickens, 75 of the 1500 rigs running on oil have been dropped in the three weeks leading up to the interview. He expects another 500 rigs to drop in a year. This is in line with a trend consistent with previous plummets in the global oil prices, including during past recessions in the United States.
There is further sign of a quick drop in U.S. oil production, with Continental Resources, a major supplier, announcing a reduction in its capital budget and decreased drilling in 2015. There are many other oil companies cutting spending and future exploration and production budgets.
Is OPEC testing U.S. oil producers, ponders Pickens
Pickens did not rule out the possibility of the Organization of the Petroleum Exporting Countries (OPEC) purposely increasing supply and reducing price to “test the U.S. producer.” He noted that OPEC no longer acts like a cartel but instead, it functions like a “trade association” that is led and controlled by Saudi Arabia.
However, earlier in December, in another interview with CNBC, Pickens said OPEC was not trying to teach U.S. shale oil producers a lesson. He said, “OPEC likes to be liked, just like we like to be liked and they will make the cut.”
When questioned about why OPEC would want U.S. oil producers out of the market, Pickens estimated that the price of crude oil would be between $150 to $170 in case there was no U.S. production.
Russia and OPEC likely to reduce supply in the long run
Pickens said Russia would feel the brunt of the plummet in oil prices, speaking to CNBC’s Jim Cramer. Describing Russia as a “poor country”, he argued that Russia only has one asset that sustains its GDP – oil and gas. “They can feel a 10 cent drop,” he concluded. The other Russian asset vodka, Pickens joked, was consumed domestically and could not sustain the Russian economy.
He shared a similar sentiment for OPEC, which he believes will have to eventually cut supply. Pickens said that although Saudi Arabia has the necessary cash reserves to keep oil at $70 for the next ten years, the other members of OPEC would not be able to maintain such a price.
I was not wrong about Peak Oil: Pickens said
Pickens stood by comments he made in 2005 regarding peak oil, denying that he was wrong in claiming that conventional oil production was close to peaking. In a heated exchange on CNBC, he said that shale oil and American industry were what saved the world from an almost imminent decline in oil production. There was no way to know how big the shale boom would be, Pickens argued in defense of his earlier comments.
7 Comments on "T Boone Pickens sees $100 oil"
Mike999 on Sat, 10th Jan 2015 10:57 am
Buy your hybrid now, while it’s on SALE.
shortonoil on Sat, 10th Jan 2015 11:12 am
The last time there was $100 oil the world was producing 1.5mb/d more than the economy could absorb. If oil prices go back up to $100, production will increase, and there will be more oil than the economy can use. So who exactly does T. Boone expect to be buying all of this $100 oil.
All of these pundits have failed to ask the very simple question, “how much can the consumer afford to pay for oil”. This is an essential consideration that any company from McDonald’s to Sperry Rand must, and do ask about their products. Somehow, no one in the oil industry seems to think that it is pertinent to them. They have sold themselves on the Fairy Tale of oil; it is a magical substance with infinite value!
So, we did some calculations that came up with:
http://www.thehillsgroup.org/depletion2_022.htm
When oil goes back up to $100 someone is going to have to find a place to put 1.5mb/d. Maybe, Mr. Boone will offer to store it in his basement?
http://www.thehillsgroup.org/
rockman on Sat, 10th Jan 2015 11:29 am
At least T-boy recognizes the roll of price induced demand destruction in the decline. As far as his optimism for lower prices to produce a rapid economic rebound only time will tell. Perhaps he’s not aware of the response of the global economy when the average yearly price in 2008 of $98/bbl fell to $58/bbl in 2009 and the world consumed 400 million bbls of pil LESS in ’09 then in ’08.
dashster on Sat, 10th Jan 2015 8:43 pm
I am glad to see he has come back to his senses. I watched him talk about Peak Oil on the CNBC morning show, and then one day he came on and apologized to the host about being wrong about Peak Oil. The host (Joe Kiernan) then said that “all Malthusian predictions are always wrong”.
Speculawyer on Sat, 10th Jan 2015 10:57 pm
“Buy your hybrid now, while it’s on SALE.”
This is great advice. Obama expressed the same sentiment.
“At least T-boy recognizes the roll of price induced demand destruction in the decline.”
Right now he is recognizing price induced supply destruction.
GregT on Sun, 11th Jan 2015 12:30 am
“Is a Hybrid Car Worth the Extra Money?”
If you’re searching for a new or used vehicle, you may have checked out a hybrid car. You also may have noticed that hybrids tend to be more expensive than their gas-powered counterparts. So are they worth the extra money? We examine a few scenarios to see if they are.
Scenario 1: City Driving
A 2014 Toyota Prius starts around $25,000. A reasonably equipped 2014 Toyota Corolla with similar features will run closer to $20,000. So can the Prius make up the $5,000 difference with its lower fuel costs?
If you drive almost entirely in the city, you can expect 51 miles per gallon from the Prius. In the Corolla, that number falls to 28 mpg with the base model or 30 mpg with the economy-minded Corolla LE Eco. With today’s average gas price of around $3.52 per gallon, making up the $5,000 difference will take a while. In fact, plan on driving more than 90,000 miles before the Prius becomes cheaper than the Corolla.
The problem is the initial cost. In the first 10,000 miles, the Prius saves drivers only around $525 — nowhere near enough to account for the $5,000 savings from choosing the Corolla.
Scenario 2: Highway Driving
Now imagine the same cars for someone who spends a lot of time on the highway. The Prius returns around 48 mpg hwy, while the Corolla reaches as high as 42 mpg. In that case, the Prius gains back only around $105 per 10,000 miles — meaning it would take drivers well over 400,000 miles to earn back the extra $5,000 spent on the Prius.
What About an EV?
Things get a little more even when we’re talking about purely electric cars. A Nissan Leaf starts just under $30,000 with shipping, while a similarly equipped Nissan Sentra is more like $24,000. While the $6,000 difference is greater than the gap between the Prius and the Corolla, the Leaf requires no fuel and costs almost nothing to run.
As a result, driving 10,000 miles per year in the Sentra costs $1,100 in fuel — compared to nothing in the Leaf. That means the difference would take less than 60,000 miles to make up. And if you take advantage of the Leaf’s $7,500 federal tax credit, the EV becomes less expensive even more quickly.
The Lesson
Most hybrid drivers have many reasons for buying a hybrid car. Some want to benefit the environment, and they’re willing to spend a little extra to make that happen. Others don’t mind paying more up-front if it means their annual fuel costs are lower. But for shoppers interested in saving the most money, a hybrid may not be the way to go. Instead, we recommend an electric car — or just an inexpensive gas-powered model with great fuel economy.
http://www.autotrader.com/research/article/car-tips/215304/is-a-hybrid-car-worth-the-extra-money.jsp
VinceT on Sun, 11th Jan 2015 8:21 am
@gregt
How can the leaf cost nothing to operate? Did you forget the cost to plug it in. I don’t know if owners of the leaf gets a reduced electricity rates but commercial rates are around 12 cents a kwh. So either way the cost to operate is not nothing.
But yeah ecomically, you don’t save much buying a hybrid especially with gas prices going below the $2 mark (versus your $3.52 calculation there).