Hi!
Here is most of Tobin's opinions-from Changewave:
"> 2. THE KAHUNA'S RANT O' THE WEEK: When Will the Energy “Analysts”
> Get It? -- By Tobin Smith
>
> “U.S. crude oil futures hit a new record high of $55.70 per barrel
> on fund buying, refinery glitch.”
>
> This was the report at 1:50 p.m. today.
>
> You can bet that on the squawk boxes of Wall Street energy
> analysts, the message they are delivering sounds like this:
>
> “During the next few years, oil prices will drop to less than $30.
> History has shown us one thing: the cure for high oil prices is
> high oil prices. Those who ignore history are destined to repeat
> it.
>
> “The forces of demand destruction will take the supply/demand
> equation clearly to the supply side and just like in the past, oil
> prices will come back to the historical range of $22-$28.
>
> “This oil price bubble is simply that -- a bubble. This applies to
> natural gas prices as well.”
>
> Well, friends, as someone who has actually been RIGHT on my call
> for a secular imbalance between oil/natural gas supply and demand,
> I want to make sure I do everything possible to make you IGNORE
> this advice.
>
> Long before oil and natural gas price bugs were flashed on CNBC or
> Maria B. began breathlessly talking about oil prices, we were
> right about energy prices and energy investing.
>
> Ignoring most of the energy analysts on Wall Street has been the
> most profitable experience of my investing life. I want it to be
> for you, too.
>
> Let’s start with the blinding flash of the obvious: Until about
> three to five years ago, previous history of demand destruction
> was indeed the driver of price corrections in the oil market.
>
> Until 2000, China and India were relatively minor importers of oil
> and gas -- not enough to imbalance the excess capacity at the
> margins of demand.
>
> From about 2001 forward, that fact was NEVER true again. Since
> 2001, China and India became MAJOR energy importers, and that
> trillion-dollar ChangeQuake in the supply/demand calculus of oil
> and gas, and its resulting wave of pricing power, has changed the
> nature of energy (and basic materials) investing for the
> foreseeable future.
>
> Tobin’s Rule: Those who ignore secular transformational change in
> the underlying fundamentals of an industry or company are destined
> to be dead WRONG in their forecasting.
>
> THE GLOBAL ENERGY REALITY CHECK
> Here is the reality of the demand side of our global energy
> resources from a BusinessWeek online article in November 2004:
>
> “Today, China accounts for 12.1% of the world's energy
> consumption. That's second only to the U.S., at 24%, and up from
> 9% a decade ago. China's whole modernization strategy is based on
> access to abundant supplies of energy. Its hungry basic industries
> such as steel, aluminum and chemicals devour electricity and coal.
> A mushrooming middle class consumes growing quantities of heating
> oil and gasoline. By 2010, analysts expect some 56 million cars,
> minivans and sport-utility vehicles to be rolling on China's
> highways -- more than twice the number today. By 2020 the
> country's demand for oil will nearly double, to 11 million barrels
> a day, natural gas consumption will more than triple, to 3.6
> trillion cubic feet annually, and coal use will grow by 76%, to
> 2.4 billion tons a year, according to a U.S. Energy Dept.
> forecast.”
>
> Here is a digest of Beijing’s latest report on their energy
> consuming future:
>
> “China will see an increasing dependency on crude oil imports,
> with the amount of crude oil imported rising from 31 percent in
> 2002 to 50 percent four years later in 2007. China will import 100
> million tons of crude oil in 2005, 150 million tons in 2010 and in
> 2020 the number would soar to 300 million tons per year.”
>
> China will become the world's second biggest oil consumer
> following the United States and third largest oil importer after
> the United States and Japan, said the research report.
>
> The more than 6% annual growth of China's national economy and the
> readjustment of the economic structure are behind the country's
> higher demand for crude oil, but oil production has failed to keep
> pace with the economic growth.
>
> With oil demand growing on average 8% a year and production
> growing 1.7 percent annually, the shortage of oil supply forced
> China to become a net oil importer since 1993.
>
> The experiences of foreign developed countries proved that the oil
> consumption would increase at a LOW speed in an economy backed by
> industrial sectors and during the industrializing process.
>
> When tertiary industries become the backbone of the national
> economy, the domestic oil consumption would undergo ROCKETING
> growth, the report further explained.
>
> China will be in a vital period of industrialization from now
> until 2020, per the report, predicting that China's average annual
> consumption of crude oil would secure an increase by 4%-5% in the
> coming five to 10 years.
>
> “China's oil imports may rise at a level of around 30% for the
> next three years as domestic production increases less than 1%
> annually,” said Michael Lee, a Hong Kong-based oil and gas analyst
> at UOB-Kay Hian Ltd.
>
> Now India is joining China in a stepped-up contest for energy,
> with both economies recently booming just as their oil production
> at home has sagged. China trails only the U.S. in energy
> consumption; India has moved into fourth place, behind Russia.
>
> Only 7 in 1,000 Indian households own a motor vehicle -- only 3 in
> 1,000 Chinese own a motor vehicle. (To put this in context,
> Californians’ own 1.023 cars per each PERSON.)
>
> Thus, future oil consumption in India is expected to grow rapidly,
> to 3.1 million barrels per day by 2010, up from 1.8 million
> barrels per day in 1998.
>
> Now the problem: the world production of oil has peaked -- and
> excess capacity is down to around 1 million extra barrels per day.
> But since ANY commodity is priced based on the available supply at
> the balance point of demand and supply, excess energy production
> is growing slower than energy consumption growth.
>
> Global daily oil consumption today stands at around 82 million
> barrels, and the mega-industrialization of nations like China and
> India will take that daily consumption up to at least 120 million
> barrels a day by the year 2030.
....
> THE PEAK OIL THEORY
>
> Over the last several years, a theory known as “Peak Oil” has been
> working its way into the mainstream. The chief proponent of this
> theory is Dr. Colin Campbell, a retired oil-industry geologist now
> living in Ireland. Dr. Campbell, who has been raising warnings
> about Peak Oil for some 15 years, believes that global consumption
> of oil is surpassing not only the amount of oil being pulled from
> the groundand the amount of oil left to be found, but is also
> surpassing the ability of technology to compensate for what he
> sees as an inevitable and looming shortfall.
>
> The “peak,” Campbell believes, will come as early as next year,
> heralding a steady rise in prices and the end of cheap oil as we
> have known it, causing a seismic shock within the global economy.
> “The perception of this decline changes the entire world we know,”
> said Dr. Campbell in a September 2004 report from The Wall Street
> Journal. “Up till now we've been living in a world with the
> assumption of growth driven by oil. Now we have to face the other
> side of the mountain.”
>
> Maybe I’ll give the "peak oil" idea an upcoming rant, but let’s
just deal with reality of today.
>
> Mick Mayer of Prudential does good work on the value of
> oil-intrinsic energy companies. He figures analysts are using
> $25-$27 as their average price for the next 10 years.
>
> This thinking simply does NOT include the emergence of China and
> India as energy consumers. Unless China and India stop growing, we
> have a three- to five- year global recession that includes India
> and China, or there is a sudden and miraculous change in oil and
> gas exploration rates for the next five to 10 years, the average
> prices for light sweet crude are LOCKED into $40-$80 price swings.
>
> That means natural gas above $6 and coal prices going to $50 for
> utility coal and $150 for metallurgical coal.
>
> This is the reality of energy prices in the post India/China
> energy importation world.
>
> I pray these analysts don’t get this fundamental shift and
> continue to keep their price models 40%-50% TOO LOW.
>
> As they come to their senses, energy company valuations will
> follow.
>
> Toby"
Cliff
YIP
