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Ft.com - Oil To Stay Above $70 For Next 5 Years?

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The oil contango gather steam.

http://news.ft.com/cms/s/dea80350-d3f7-11d...00779e2340.html

An article in the FT today indicates that futures contracts show oil prices even higher than they are now and suggests the market thinks prices may be above $70 a barrel for next 5 years.

Leaving aside the counterarguments about refining capacity and storage capacity/inventory/reserves, this is looking less and less like a short term "spike". Its a good thing oil has no impact on my cost of living or I'd ask Gordon to amend the CPI basket....Seriously, if oil stays high (new plateau?) it will be an issue for us all.

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The market thinks prices may be above $70 a barrel for next 5 years ... if oil stays high (new plateau?) it will be an issue for us all.

No one ever argues with me when I point out that this, almost single-handledly, will keep prices of the much-maligned city-centre new-build flats buoyant. Perhaps those pantomime villain developers were particularly prescient about this issue in planning and building them?

In the same way they've always run smaller, more fuel efficient (diesel) cars, several continental countries have a culture of city-centre apartment living — ie, as close as possible to work for economic reasons. Maybe we are seeing yet another "new paradigm" as the British traditional two-up, two-down in a soulless suburb is replaced by increasingly high-specification two-bed city centre flats in a move toward the continental model?

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No one ever argues with me when I point out that this, almost single-handledly, will keep prices of the much-maligned city-centre new-build flats buoyant. Perhaps those pantomime villain developers were particularly prescient about this issue in planning and building them?

In the same way they've always run smaller, more fuel efficient (diesel) cars, several continental countries have a culture of city-centre apartment living — ie, as close as possible to work for economic reasons. Maybe we are seeing yet another "new paradigm" as the British traditional two-up, two-down in a soulless suburb is replaced by increasingly high-specification two-bed city centre flats in a move toward the continental model?

I disagree. Suburbs will hold up well, at the expense of rural areas where people commute to major towns and cities. A suburb which is a ten or twenty minute bus or bike ride from a city centre will be more appealing than a flat for people who are forced to move.

I live in a town centre, but would always pick a Victorian terrace in preference to an 'executive flat' which is handily located between a petrol station and major road.

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No one ever argues with me when I point out that this, almost single-handledly, will keep prices of the much-maligned city-centre new-build flats buoyant. Perhaps those pantomime villain developers were particularly prescient about this issue in planning and building them?

In the same way they've always run smaller, more fuel efficient (diesel) cars, several continental countries have a culture of city-centre apartment living — ie, as close as possible to work for economic reasons. Maybe we are seeing yet another "new paradigm" as the British traditional two-up, two-down in a soulless suburb is replaced by increasingly high-specification two-bed city centre flats in a move toward the continental model?

Forgive me if I am wrong but the city centre appartments of friends that I visit on the continent are designed for familly living. They are not shoebox sized and covered in laminate with the kitchen in the living room designed for "luxury living".

Mnay continental coutries (such as Spain) also have a resteraunt based culture and city parks that are welcoming to families that complimentss this apartmnent living. Sadly lacking in the UK.

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Seriously, if oil stays high (new plateau?) it will be an issue for us all.

Take a look at: http://www.powerswitch.org.uk

Whilst there is room for a few ups and downs (in a recession), I think that there are lots of reasons to believe that, in general, the only way is up for the oil price, and, indeed most fuel prices,

Peter.

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Mnay continental coutries (such as Spain) also have a resteraunt based culture and city parks that are welcoming to families that complimentss this apartmnent living. Sadly lacking in the UK.

Whoah there, amigo — one step at a time!

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Whoah there, amigo — one step at a time!

Point is that city centre apartments will only ever suit single people or couples with no kids ...

Edited by Bemused

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Whilst we're crystal balling 5 years into the future we should look at what tesco have been doing. They're investing in renewables so they don't get as hit by the constant fuel rises.

Fuel is going to continue to rise so any economy to survive should invest in renewables....

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Devils advocate hat on here.

Given that oil supplies are at a 10 year high, and that the likely impact in the next 18mths of the past 24mths of high oil prices is likely to be sharp deceleration in economic growth.....and a reduction in demand for oil. I can quite easily see room for the oil price to 'collapse' back down to $40-45 a barrel, still high historically, but nothing like the current level.

Alot of the current price is to do with stock building ( US inventories are at a record high ) and a heavy dose of hedge fund speculation.

When everybody, including the Sunday papers agrees that something is a fact, and more over that a bull market is set to continue, they are usually wrong and the bull market is usually in it's final stage.

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No one ever argues with me when I point out that this, almost single-handledly, will keep prices of the much-maligned city-centre new-build flats buoyant. Perhaps those pantomime villain developers were particularly prescient about this issue in planning and building them?

In the same way they've always run smaller, more fuel efficient (diesel) cars, several continental countries have a culture of city-centre apartment living — ie, as close as possible to work for economic reasons. Maybe we are seeing yet another "new paradigm" as the British traditional two-up, two-down in a soulless suburb is replaced by increasingly high-specification two-bed city centre flats in a move toward the continental model?

Oil will always trend upwards because of the economics behind recovering it.

If you owned two oil fields totally equal except recovery in the first cost $10/barrel and the other cost $20/barrel.

Which one would you recover first?

Multiply this by the global oil market and you can see how prices will drift upwards. Before any bulls jump on the dynamic, it does not apply to houses, houses are not recovered, they also have a greater longivity than their occupants.

More expensive oil will tend to more expensive overheads in production, greater transport overheads, higher utilitiy bills and should filter through to product inflation on anything that will be produced in the future.

.

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Devils advocate hat on here.

Given that oil supplies are at a 10 year high, and that the likely impact in the next 18mths of the past 24mths of high oil prices is likely to be sharp deceleration in economic growth.....and a reduction in demand for oil. I can quite easily see room for the oil price to 'collapse' back down to $40-45 a barrel, still high historically, but nothing like the current level.

Alot of the current price is to do with stock building ( US inventories are at a record high ) and a heavy dose of hedge fund speculation.

When everybody, including the Sunday papers agrees that something is a fact, and more over that a bull market is set to continue, they are usually wrong and the bull market is usually in it's final stage.

I'll wear that hat as well, I think.

It wouldn't surprise me in the slightest if oil plunged to around $10 a barrel within the next 5 years. If, as I reckon, the world economy is heading into a severe recession what use will China have for oil? Zero. Thus they'll be consuming far less.

My prediction about a relatively short inflationary spike (leading to IR rises) inspired by commodities and the money supply followed by asset deflation, is going pretty much to plan.

Edited by shermanator

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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