It is Obvious

Chris Rick has got altogether too much to say

The slippery slope

Posted by chrisrick13 on December 19, 2015

It is obvious: there is enough oil in the ground

I calculated the cost of the oil in a litre of petrol earlier this year.  Just the oil cost.  Ignore tax, refining, transportation, profit (sic).  At 120p for a litre with the cost at $120 a barrel for every $2 decrease in price 1p should be taken off the petrol price…at least.  That is because some of the tax and perhaps the profit (sic again) ought to be relative to the price.  At $40 a barrel 40p comes off the price.  What are you paying for petrol?

One of my mantras is that you should invest in yourself.  The observation is that if you keep yourself healthy and maintain skills that you can sell you can live well all your life.  This is much better than trying to acquire an excess of income over expenditure during your life and then live off it.  Spend while you can enjoy it and keep on earning (and spending).  I have discovered that I can earn £25,000 a year quite easily and not for huge amounts of effort.  The fund required to provide that is huge.  Better to just keep earning.  For those of you on a defined benefit pension: do not look too smug.  Most are underfunded.  I’ll quote The Who at you: Hope I die before I get old.

But many people do acquire some ‘wealth’.  I put it in quotes because it is mostly ones and zeroes in a computer somewhere.  We need to do something with it to maintain its value.  Do not even think of increasing it!  At close to zero inflation, if you use the government’s preferred measure, and close to zero return on relatively safe investments there is not much to be lost letting your cash fester in low interest account.

What might I do if I wanted to get ahead of the game?  You might consider oil.  There is certainly a way down to go.  In general, economies are not doing very much.  You can look at the Baltic Dry Index.  This is very low.  It represents the cost of moving stuff around the world in ships.  Nobody is doing it.  Nobody is making much…or consuming it.

Balance this against a limited supply.  The market is being manipulated by vested interests that are putting the oil price low so that (soon) they will get very good prices for their oil.  Prices that will more than make up for the short period of low prices.  This will be caused by a much more limited supply.

This market will follow that supply demand cycle until we get to the point where there is a general realisation that there is just not enough oil.  $120 oil is close.  $240 oil will not be far behind it.

Even if you think $60 oil is only the realistic top price for some time to come then filling your boots with $30 oil has a certain attraction.  Get some of that future oil.  Easy to do.

It is obvious: there is enough oil in the ground to properly screw this planet.

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