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Barrons calling $150/barrel oil in Spring 2011

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LearLove

Well-known member
Joined
Nov 27, 2001
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Barrons calling $150/barrel oil in Spring 2012

Guess we will see. Another b-school d-bag trying to pump and dump or reality?

By Brian Nelson, CFA
In "Get Ready for $150 Oil," Barron's predicts an oil shock will occur in spring 2012, with the black commodity reaching a record average monthly price of $150 per barrel, with spikes to $165 and $170 along the way. If this prognostication proves correct, airlines are in for a world of hurt. Before we get started on just how painful this shock could be, we invite airline stock speculators to take a read of our industry primer on the airline industry.
Jet fuel prices generally represent the largest component of an airline's cost structure, and we estimate that for every $1 increase in the price of crude oil, it costs the global airline industry about $1.5 to $1.7 billion more. And while airlines have been layering on additional fees (checked baggage, etc.), we still believe that even with such measures (coupled with some fare hikes from the low-cost group under this scenario), airlines would at best recoup about 75% to 85% of the higher cost of jet fuel. That means, for every $1 sustainable increase in the price of black gold, we can probably expect the global airline industry to lose an additional $240 million to $400 million. Click here to read our views on the 2012 hedge positions of the major network carriers, which have direct implications on their exposure to rising crude.
The IATA estimates that airlines would earn about $4 billion under a scenario where the average price of crude oil is $110 per barrel. By extension, and based on our analysis, if crude oil rose to a sustainable price of $150 per barrel (as Barron's suggests), the global airline industry could lose as much as $12 billion in 2012, and that assumes demand is not choked off due to the residual impact of lower consumer discretionary spending caused by a higher gas bill to fill up the tank--let alone the negative impact higher ticket prices would have on passenger demand (airlines would have to hike fares to recapture 75% to 85% of their higher fuel costs).
In our analysis of the fleet ages of the major carriers, we outline which airlines [out of US Airways (LCC), United Continental (UAL), AMR Corp. (AMR), and Delta (DAL)] are flying the most fuel-inefficient planes (and
therefore would be most impacted by this predicted rise). That said, however, a sustainable increase to $150 per barrel would likely send the entire group back toward their 52-week lows, in our opinion. At this time, we are currently evaluating long-term put options on the Guggenheum Airline ETF (FAA) as an addition to our Best Ideas List.
 
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This would do wonders for what's left of the economy.....
 
Unfortunately, this is a very likely reality. And this doesn't even include what could happen if/when the dollar is dumped as the reserve currency. FScary thing is the b-school dbags have been pretty accurate in most of their predictions.

Take solace in a couple facts though - there's no getting around age 65 - there will be a lot of retirements. 2012-2017 may still see a lot of hiring, but my guess is it will be mostly to replace those retiring. So I don't see a lot of furloughs in the future. BUt if oil does spike during the times when many airlines' contracts become amenable, then you might have to dig in for a long drawn out struggle again.
 
That price would kill demand, it would be 2008 all over again. That will kill production and make a drastic reduction in money flow to OPEC nations, which they can not stand. It may hit there again, but it will not stay there. Put it in the same category as TMMT's 5.00/gal gas by June 2011. My predeiction, which is very accurate, is that gas will hit $5.00/gal on Thursday. This guess is accurate to within 6 six days of the actual event
 
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It has implications far beyond the airlines.

Unfortunately, much of our infrastructure was built on cheap oil after WWII. Suburban sprawl and interstate trucking are just two examples of inefficiencies enabled by cheap oil. At $150. we're not competitive, and at $200., we're broke.

Meanwhile, the emerging economies of China, India, Brazil, etc are being built today, with $130. oil already part of the equation, with the ability to absorb $200. oil in the margins.

I'm not saying all is "gloom and doom", but it is a pretty harsh reality that we need to consider. Inflation, as well.
 
It has implications far beyond the airlines.

Unfortunately, much of our infrastructure was built on cheap oil after WWII. Suburban sprawl and interstate trucking are just two examples of inefficiencies enabled by cheap oil. At $150. we're not competitive, and at $200., we're broke.

Meanwhile, the emerging economies of China, India, Brazil, etc are being built today, with $130. oil already part of the equation, with the ability to absorb $200. oil in the margins.

I'm not saying all is "gloom and doom", but it is a pretty harsh reality that we need to consider. Inflation, as well.
goes back to the only thing that ween us from cheap oil is expensive oil
 
That price would kill demand, it would be 2008 all over again. That will kill production and make a drastic reduction in money flow to OPEC nations, which they can not stand. It may hit there again, but it will not stay there. Put it in the same category as TMMT's 5.00/gal gas by June 2011. My predeiction, which is very accurate, is that gas will hit $5.00/gal on Thursday. This guess is accurate to within 6 six days of the actual event
Which Thursday?
 
This is exactly what is wrong with this country. We believe bull******************** and are fed fear. Oil pricing is nothing short of criminal but your elected officals get lots of votes and lots of money from big oil. The sooner we the public realize we are being duped the better off we will all be. I am convinced there will be a second revolution in this country if things don't change.
 
Im not so sure it's totally big oil, but it is big banks. At present, these speculators are the most powerful people on the planet and they are laughing all the way to the bank. Write a story in Moodys, and watch your oil positions sky-rocket. They got worried a week or two ago when it approached $89bbl. Lets write an article and Voilà, $97bbl and rising...ahhhh, thats much better!!
 
Get real, all this talk about the USA getting dumped on by loss of currency trading, debt ect is some pencil neck, chicken little, insecurity bedwetting fearfest.

All politics is local and international relations function just like those a neighborhood level.

Where am I going with this? Depsite the world's wetdream of sending the USA into the used condom of history, it's not happening for along time. Some may dream of subjecating the US like Mexico, Argentina or Greece in the world of finance, but at then end of the day, the real people in charge of the money know better than to drive a country and it's citizens to the level of a "sheethouse" rat when those same people possess 12 aircraft carriers spread throughout the world, X-number of ICBMS at standby, hundreds of assets that can picture a target picking their nose right before vaporization on command from Nevada, 18 thousand miles away, as well as a select few of trained soldiers around the world willing to eliminate any threat to the Union as ordered.

It's like being owed $1000 by the 6'5" inch, bad tempered martial arts expert in a small town. Go ahead and collect after you piss him off.
 
The long-term rise in oil prices we are seeing is because of peak oil. In 2008 we pumped more oil out of the ground than in any year, including 2009 and 2010.

Many people, mostly conservatives, in my opinion, do not believe in Peak Oil. However, it doesn't matter if you believe in it or not, it is real.

Proof? Saudi Arabia is planning on producing as much energy from solar electricity, as they currently produce from oil. That is, they are building up their infrastructure to produce as much electricity as is currently produced in all of Europe, or 1/4 of the world's total production.

Why is Saudi building up their solar electricty production to this extreme amount? Because they want to continue to make money, and they know that their oil money is ending, because their oil is running out. They want to continue to make money, and they have decided that using their massive solar energy potential is the best way to keep the money flowing into Saudi Arabia.

cliff
ANC
 
We are far from the "peak oil" concept of a rapid drop in production, supply demand forces will reduce demand as prices rise as supplies are reduced. The change to alternate sources of energy will only be driven by high priced oil, no one is going to develop shale oil at $150/brl when you can buy OPEC oil at $120/brl. And no one is going to invest in these other sources of energy when they know there is no energy policy to protect their investment. Exxon spent over $1B in the mid 70's setting up a shale oil operation, but they could not sell any of it because it was so high priced. So unless congress sets a tariff on imported oil, we are slaves to OPEC who can drop the price anytime they want and destroy the alternate energy solutions.

But no politician has the guts to step and raise the price of gas; he would be booted out of office in the next election. Americas have a sense of entitlement on gas prices and anyone who tried to fix that is in trouble.

The only way to separate us from those suppliers is to raise the price of the product. Then less of it will be consumed, alternate energy sources will become more available because there will now be a market for them that someone can make money with without a subsidy from the gov't. I hope it goes to $5 or $6 a gallon, here are just too many good things that happen when we have expensive fuel.

As I have said before the only thing that will wean us from cheap gas, is expensive gas.
 
So unless congress sets a tariff on imported oil, we are slaves to OPEC who can drop the price anytime they want and destroy the alternate energy solutions.


OPEC does NOT control the price of oil. We are slaves to the market and those who manipulate it...I.E. banks and speculators.
 
$96/barrel currently + Large Media Source reporting $150/barrel in the future = Possible Speculator Feeding Frenzy.

Hopefully this is nothing more than Barron's trying to strum up readership by printing a fearful sounding article.
 
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OPEC does NOT control the price of oil. We are slaves to the market and those who manipulate it...I.E. banks and speculators.

We are slaves to the market because as the junkie is hooked to the needle, the consumer is hooked to cheap oil. Banks and speculators merely exploit the consumer's demand and profit by it. Tariffs on foreign oil will only exacerbate the problem. (This is how the Texas oilman G.W. Bush rose to power, on this very platform.) It didn't work then, and it won't work now, it merely prolongs cheap oil for the oil junkie. Taxing ALL oil will eventually cut demand, and use the tax revenue for R&D on other energy sources. John Anderson, who ran for prez in 1980 against Reagan and Carter proposed exactly that and was soundly defeated. Imagine how much better this country would be now had his energy policies been adapted. The day of reckoning is coming, make no mistake.


http://www.4president.org/brochures/andersonlucey1980brochure.htm
 
OPEC does NOT control the price of oil. We are slaves to the market and those who manipulate it...I.E. banks and speculators.
True, but they affect the actions of those who speculate by controlling production.

We are slaves to the market because as the junkie is hooked to the needle, the consumer is hooked to cheap oil. Banks and speculators merely exploit the consumer's demand and profit by it. Tariffs on foreign oil will only exacerbate the problem. (This is how the Texas oilman G.W. Bush rose to power, on this very platform.) It didn't work then, and it won't work now, it merely prolongs cheap oil for the oil junkie. Taxing ALL oil will eventually cut demand, and use the tax revenue for R&D on other energy sources. John Anderson, who ran for prez in 1980 against Reagan and Carter proposed exactly that and was soundly defeated. Imagine how much better this country would be now had his energy policies been adapted. The day of reckoning is coming, make no mistake.


[URL="http://www.4president.org/brochures/andersonlucey1980brochure.htm"]http://www.4president.org/brochures/andersonlucey1980brochure.htm[/URL]
goes back to no ploitican can get elected by saying he will raise the price of oil.
 

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