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Charlie Maxwell to Barron's: $300 Oil is Inevitable

by: Kirk Lindstrom September 07, 2008 | about stocks: OIH / OIL / USO / XLE    
Kirk Lindstrom

Kirk Lindstrom

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According to a Monday, September 8 Barron's article titled "What $300-a-Barrel Oil Will Mean for You", Charles (Charlie) Maxwell, Senior Energy Analyst at Weeden & Co., thinks $300 oil is "inevitable."

With three or four new Saudi oil fields coming on line soon, Charlie thinks supply and demand are roughly in balance for the next two years. Charlie predicts oil prices between $75 and $115 for awhile. After that, he sees prices soaring again.

Chart courtesy of stockcharts.com

Other key comments from the Barrons interview:

Natural Gas:

  • "Its supply should last another 40 or 50 years before it runs into the same problems of peaking that we have in oil. "
  • "Natural gas has a very low carbon footprint, meaning it's a cleaner type of energy, and it has wonderful petrochemical adaptability. "

On Hubbert's Peak:

  • "(He) said that we would reach the limit of domestic production of oil in the continental United States in the early 1970s.... and he was correct."
  • "He thought the American public would never be stupid enough to fall for the concept of foreigners continuing to give us all the oil that we wanted."

More on $300 oil:

  • "We will see $300 a barrel -- or roughly $250 in today's dollars -- because oil supply will be so short. "
  • "That ($300 oil) will be in 2015."
  • "But even earlier, around 2010, more than 50% of the non-OPEC world will have peaked in its production of oil so the dependence on OPEC will become extreme. That will give OPEC a chance, I'm afraid, to lift prices rather more quickly on us than they are doing today."

More oil price charts here.

Disclosure: none

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This article has 11 comments:

  •  
    Sep 07 02:20 PM
    If doomsayer comments are meant for people and government to act up on our energy policy, great. On the other hand, it could be only for people to draw attention to themselves, specially those with a big ego. Who is going to hold this prediction accountable in the next few years? I can say it too: oil will be at $1,200 in 2022. Whatever. My point: senseless, if it's just to draw media attention.
    Reply
  •  
    Sep 07 10:04 PM
    Or it could be an analyst's honest assessment of where the price of oil will be in a few years - this is his job, after all, and there are serious questions about the ability of future oil supply to meet demand.

    What seems senseless to me are those analysts who employ magical thinking to assert that an increase in price will seemingly magically create more oil in the ground (light, sweet, of course) to drive the price down. Or to assert that 'human ingenuity' will miraculously be capable of wholesale massive fossil fuel replacement at the precise moment when we're on the way from being an affluent nation to 3rd world status due to decades of extreme fraud in the financial and political systems.

    If human ingenuity could produce miracles on schedule, where's the battery technology that would enable feasible electric cars? Decades, and a huge dollar prize, have not facilitated success in this one technical area, and we'd need dozens of similar breakthroughs to replace oil.
    Reply
  •  
    Sep 07 10:34 PM
    I believe Charlie sees his responsibility as a larger one than simply to help investors. I think he sees a crisis coming and is issuing a warning so that people in power might pay attention and act somehow to mitigate it. Interestingly (to me) his numbers are completely in accord with my recent analysis: www.energyinvestmentst.../
    Reply
  •  
    Sep 08 07:55 AM
    I do believe Charlie is long oil and got burned big time with the drop.
    Reply
  •  
    Sep 08 10:31 AM
    Well, it's an easy call to predict a peak in oil if demand exceeds supply. The obvious answer to this is to develop alternernative fuel for transportation (electric or CNG) and reduce the use of oil for heating (replace it with solar, elecltric, or natural gas).

    We saw demand fall as oil approached $150, helped by reduced transportation of all sorts. It will take price pressure to make significant changes in our habits, and the sooner the better. It's unrealistic politically, but the US needs to put a higher tax on fuel and punish "gas guzzlers" with an annual excise tax of say, $2000).

    Reply
  •  
    Sep 08 11:05 AM
    "It's unrealistic politically, but the US needs to put a higher tax on fuel and punish "gas guzzlers" with an annual excise tax of say, $2000). "

    Not fair. Some people have gas guzzlers they seldom drive but keep around to haul stuff. I have a V8 van to haul my light weight windsurfing gear to the SF Bay. 11 miles round trip most of the time. I drive it maybe 2,000 miles a year since I sometimes drive to sailing sites further away.

    By your logic, why not tax homes that use heating oil? Some of us already use NG to heat our homes.

    Much better to tax the gasoline and heating oil directly and let market forces work. Use the tax dollars to fund alternative energy and I'd go along.
    Reply
  •  
    Sep 08 11:40 AM
    I agree with the $300 oil. Oil production will soon decline, at least by 2011, and as soon as it does, we will see huge oil price increases. Peaking of natural gas will come sooner than 40 to 50 years. And since natural gas production is dependent on oil, Peak Oil spells problems for natural gas production. See my report www.peakoilassociates.... for an explanation of how dependent all energies are on oil. Cliff Wirth, Peak Oil Associates International
    Reply
  •  
    Sep 08 01:09 PM
    The big picture is simple. Oil is finite. The easy oil is disappearing fast. The USA just does not have signifcant giant oil fields left to counteract depletion. It really does not matter whether 300$ oil is next year, in 5, 10, or 15: Getting this country off of oil is a far more massive project than 99% of the country understands or the media and politicans will reveal. It is so massive that some type of coordinated government policy is necessary for multiple reasons: Saving the planet from a climate disaster, Saving us from increasing trade deficits as oil skyrockets in price, Saving us from being a polictical hostage to the unfriendly countries that DO have oil, and ensuring that WE are the country that creates the new energy innovations that will be sold to the rest of the world. People need to understand the urgency of this transition... we need both the low tech and high tech responses now.
    Reply
  •  
    Sep 08 02:49 PM
    $300 oil is quoted as $250 in current dollars - - isn't it a little optimistic to assume that in the next 7 years, inflation will be kept to 20%? Assume some fall in the dollar over the period, and a little more price inflation, $300 is just not that hard to believe.

    The WSJ recently reported that world oil exports declined in 2006 and 2007. It that trend continues, $300 may be cheap, air travel will be severely reduced and poor folks everywhere will be in a world of hurt.
    Reply
  •  
    Sep 08 04:40 PM
    $300/barrel will be cheap if you can get it next decade. If we continue to fiddle, Uncle Sam will end up nationalizing domestic oil for defense and industrial use. Oil simply will be come to valuable to be joyriding with.
    Reply
  •  
    Sep 11 08:28 AM
    Agreed.

    If there really is such a thing as peak oil, the commodity wil be nationalized and rationed, like in WW2. All airlines will go bust, airports will only be used for freight and military. Same with roads. Each person will be allowed a gallon a week (something like that).

    Price will go through the roof at first to fund deep oil wells. But once there's a shortage it's rationing time.

    I think that's the real reason for the next bubble in green energy. It's to try and make a smoother transition. No government in their right mind would want individuals to be energy independent, taking good corporate free money away from utilities. It can only be because the end game is coming.

    The same I believe for the internet and housing bubble before that. Put people in their own house, give them a chance to tele-commute (internet) and make them much less dependent on oil before the shit hits the fan.
    Reply
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