Saturday, February 22, 2014

Good Oil Supply/Demand Presentation

Kopits presentation [pdf], among other things, mentions the two schools of thought on oil price forecasts.

Futures Curve: The NYMEX futures curve sees oil prices falling below $90 / barrel by 2020. Underlying this is the implicit assumption that oil will somehow become cheaper or easier to find and produce, in contrast to the experience of the last decade.

'Operators’ Forecast': Absent a convincing oil price model, a number of oil companies are using a 'best guess' approach, which assumes that oil prices will remain around or above $100 / barrel on a Brent basis. This is not scientific, but many, if not most, oil company executives think this seems plausible and sufficiently conservative for investment decisions.
Here's a gem of a chart in the presentation:

Baby boomers are buying all the cars! It's just like the airplanes.


whydibuy said...

Actually that chart makes perfect sense.
After the housing crash, it became clear that Americans didn't have any real love of home ownership or that BS about the "American dream" of home ownership but they did keep their zeal for cars and wandering the roads. This chart just confirms what is already evident

Nathan said...

Great post.

You'll like this Businessweek article from last year. Some highlights from the article

Last year, Dave Rodham bought two Ford (F) Mustangs—a red one because it looked cool and a white one with a big V-8 engine because it sounded cool. They were his 50th and 51st car purchases. “I have to have a new car every year and a half to two years,” explains the 63-year-old, of Virginia Beach, Va., who says he pays cash. “After I retired 10 years ago, I didn’t have anything else to do, so I went out and bought new cars.”

The study also suggests that the billions the auto industry spends to woo the elusive Generation Y might generate a higher return on investment if they were aimed at their parents. “You shouldn’t be chasing the younger people, you should be looking at the older people,” says Michael Sivak, author of the study. “Baby boomers are trying to extend their youth as long as they can, both in terms of taking care of their bodies and in their expenditures.”

AllanF said...

Wow, that chart hits pretty close to home. I bought my first new car in 2008, when I turned 35. :)

I'd be interested in their projections for 2017 though. I have no intention of ever buying another one. One and done, as they say.

CP said...

Nathan, I remember that exact article. Classic baby boomer. I actually thought I posted it on the blog but I guess I didn't.

CP said...

It's a very sick country where the 75+ bucket is more likely to buy a car than the prime worker 30yo bucket.

AllanF said...

Hahaha. I can agree with Mr. Rodham too. From about 22 to 30 I bought a new-to-me car at least once a year. It was fun.

Though, here's where he and I part ways. Mine were all 10-15 years old. They did keep me busy -- keeping them running, but that was part of the fun too.

Anonymous said...

Only on Credit Bubble Stocks or Stagflationary Mark are 35 year olds buying their last car.

AllanF said...

Oh wait, I thought that chart was new cars.

Well, I don't plan to buy any used ones either. Cars are a midwest game/hobby. Now that I'm in the PNW it makes more sense to ride bikes. So I collect those instead.

Cars are more fun to repair, but bikes are more fun to operate.

John said...

Horatio Alger, phone home!!

I think all of you commenters are missing the point here.In all but a few metropolitan areas of the U.S. if you don't have a car, you cannot work. Indeed you cannot even look for a job.

The most important economic divide in American society is not the one tenth of one percent, those who's parents can afford Ivy League tuition, but rather those who have parents or grandparents who can buy them a car, and thus can look for and accept a job.

The key to successful investing is the ability to recognize and bet upon new trends already firmly in motion before the great herd of asset gatherers recognizes the trend as an investment theme.

What you see in the auto purchase statistics is the gradual impoverishment of American youth. And don't be misled by anecdotal stories of wealthy, self absorbed boomers engaging in conspicuous consumption.

The average boomer has very little savings and the vast majority of them are looking to the value of their homes to fund their retirements. Large suburban homes - the Toll Brothers developments in particular - are going to under-perform every other asset. And auto purchases and automobile ownership will fall dramatically, as the nation reverts to one car family arrangements.

Perhaps the smartest investment you could make is to buy up all the properties in the thousands of abandoned towns throughout the flyover areas of rural America for $100 per building. Immobile labor will flock there for the opportunity to do rehab work on their own living units and to live within walking distance of food supplies and other basic necessities, as labor returns to working marginal land.

In the meantime HOG and WGO are screaming shorts, as are RGR and SWHC, much as I admire the hardware they manufacture.

AllanF said...

What you see in the auto purchase statistics is the gradual impoverishment of American youth. And don't be misled by anecdotal stories of wealthy, self absorbed boomers engaging in conspicuous consumption.

I can't speak for the others, except to note that CP himself commented what a sick country is indicated by that chart, but your point hasn't been lost to me, nor have I been distracted by the ridiculous drivel coming out of the MSM. However, short of going Ukrainian, which I don't recommend, gallows humor has to suffice.

Stagflationary Mark said...

It is definitely an ugly chart and does seem like a sign of the times.

I'm 49. I'm driving a 96 Camry with less than 100k miles on it. I may have one more car purchase left in me. Maybe.

I wonder if this same airplane (previous post) and car pattern applies to sailboats as well.

Back in 1999 (give or take a year), I put my name on a 2 year waiting list at a local marina. I intended to sell my house and live on a small sailboat. For a variety of reasons (new girlfriend, more pets, economy tanking), I changed my mind.

It will be interesting to see where this economy goes from here. I find it hard to believe that the typical college grad saddled with student debt is giving much thought to sailboats. Just a thought.

Stagflationary Mark said...

Apr 19th, 2013

Domestic sailboat production was up 10% in 2012 vs. 2011, the first uptick in 12 years.

Oh, yeah. That's looking super healthy and totally sustainable. Just gotta keep that stock market going up by leaps and bounds! What could possibly go wrong? *sarcasm*

CP said...

Yes, sailboats should be exactly the same as planes. We just have much better data on who pilots are.