This Week in Petroleum 11-7-07
Posted by Robert Rapier on November 7, 2007 - 10:15am
Topic: Supply/Production
Tags: eia, gas inventories, gas prices, oil inventories, oil prices, original, peak oil, twip [list all tags]
Updated Following Report Release
About 10 seconds after the report was released, I scanned down and found what I was looking for: U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 0.8 million barrels compared to the previous week. I turned to the guy sitting next to me, as we had been talking about this today, and I said “$100 oil may have to wait for another day. The inventory draw was half what was expected.” We could still pop $100 today, but this inventory report doesn’t favor that. A higher expected draw was already factored in, so I don’t think this supports a quick move up from the current price level. But I wouldn't put $1,000 on it.
However, we are still close enough that it won’t take much volatility to push oil over $100. A single negative geopolitical event should do it. But in the absence of a brand new geopolitical or weather-related event, I will be very surprised if we don’t pull back a bit from $100 in the next couple of days.
So, why were oil inventories down less than expected? Because refinery utilization continues to languish. You can see that in the utilization numbers, and you can see it in the fact that gasoline had an unexpected draw. Imports were also up from the previous week, surprising given the situation in Mexico. The other big surprise? Gasoline demand is still almost 1% above last year’s level. (Don’t overlook the role of ethanol there. As ethanol is added to the fuel supply, volume demand will go up even if miles driven don’t. I have documented that here).
(those linking directly to this point, scroll up for the beginning of the post, please)
Here were the highlights:
U.S. crude oil refinery inputs averaged 14.9 million barrels per day during the week ending November 2, down 43,000 barrels per day from the previous week's average. Refineries operated at 86.2 percent of their operable capacity last week. Gasoline production fell compared to the previous week, averaging nearly 8.9 million barrels per day. Distillate fuel production rose last week, averaging nearly 4.2 million barrels per day.
U.S. crude oil imports averaged nearly 9.7 million barrels per day last week, up 275,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 9.6 million barrels per day, or 461,000 barrels per day less than averaged over the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1,131,000 barrels per day. Distillate fuel imports averaged 270,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 0.8 million barrels compared to the previous week. At 311.9 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories decreased by 0.8 million barrels last week, and are at the lower end of the average range.
Both finished gasoline inventories and gasoline blending components fell last week. Distillate fuel inventories increased by 0.1 million barrels, and are at the upper limit of the average range for this time of year. Propane/propylene inventories decreased 0.4 million barrels last week. Total commercial petroleum inventories decreased by 0.9 million barrels last week, but are in the upper half of the average range for this time of year.
Total products supplied over the last four-week period has averaged nearly 20.7 million barrels per day, down by 0.4 percent compared to the similar period last year. Over the last four weeks, motor gasoline demand has averaged 9.3 million barrels per day, or 0.8 percent above the same period last year. Distillate fuel demand has averaged 4.2 million barrels per day over the last four weeks, down
2.4 percent compared to the same period last year. Jet fuel demand is down 1.2 percent over the last four weeks compared to the same four-week period last year.
$100 Edition? - to be updated following the release of the report
It seems that every bit of news lately favors higher oil prices. In the wake of a perfect storm of weather-related and geopolitical events, Tapis went through the $100 mark overnight, and WTI is knocking at the door. In case you have been asleep for a week, the Fed cut interest rates, Mexico’s oil-rich Tabasco region is underwater, and oil companies are evacuating platforms in some parts of the North Sea ahead of a fierce storm predicted to generate 35-foot waves. The wind is howling in Aberdeen already, and did so throughout the night. (One of my engineers is stuck offshore and may have to ride out the storm, forecast for Thursday.)
Predictions are for a 1.6 million barrel draw for crude oil stocks this week. That expectation is factored into the price, so if we see less than that, crude could quickly give up some ground to profit-taking. However, the predictions for a draw may be too conservative, in which case WTI should quickly pop over $100. Gasoline inventories are forecast to rise by 200,000 barrels, and distillate inventories are expected to fall by 500,000 barrels.
Consider that the draws of the past 3 weeks have been much larger than predicted. I think the primary reason for that is a variable that analysts haven’t factored in: Some refiners are drawing down stocks and trying to wait out these prices. Consider it from their perspective, and it makes perfect sense. You have filled your tanks with oil at $80. You believe that we are in a speculative bubble. Therefore, you will risk drawing down inventories somewhat, and hoping that prices correct soon. If you fill your tanks at $100, and the price corrects back to $85, you are going to sell gasoline at a loss for a while. The risk in that strategy is obvious. But I do have direct knowledge that some are employing such a strategy.
So, there is that factor to consider with respect to the crude draw down. But the situation in Mexico, a large provider of U.S. imports, may cause the draw to be much steeper. This event has gotten very little attention in the media, but Mexican President Felipe Calderon said that the oil industry there has been devastated, and exports have ground to a halt. If it is as bad as it sounds, we should see a much larger draw than anticipated.
The final factor that may contribute to a larger than anticipated draw is the one that analysts have factored in: Refineries will be coming out of turnarounds. However, utilization rates have been lower than expected, primarily due to low margins. As I have mentioned before, if margins are poor, you aren’t exactly scrambling to process as many barrels as you can. So the utilization patterns of the past couple of years may not be a good guide for this year’s utilization pattern. Utilization should come up, which would lead to downward pressure on inventories, but it's not a sure thing.
My prediction? While I have made it through 85% of the year, I think I will lose my $1,000 bet within 24 hours. However, I don’t expect oil to stay there for very long. I think it will return to $100 - probably to stay - in 2008, but I believe it has gotten ahead of itself at the moment.
There were two scenarios that I foresaw as potentially causing me to lose the bet. One, Saudi production could continue to decline, and I would surely lose it. That did not happen. In fact, indications are that Saudi is increasing production, although just how much spare capacity they have is debatable. Two, a series of unfortunate events, which I identified as "a bad hurricane season in the Gulf of Mexico, combined with terrorist attacks or pipeline problems (or any number of things)" could cause me to lose it. Well, we have had saber-rattling and finally sanctions with Iran, storms in Mexico, storms in the North Sea, a collapsing dollar, and growing demand combined with flat production. I think that qualifies as a series of unfortunate events. If that happens, I will have a post dedicated to the bet, including a bit of information about my mystery betting partner.
Do you have a link to the assertion that "Mexican President Felipe Calderon said that the oil industry there has been devastated"?
Bunyonhead, its not an assertion that the oil industry will be devastated by these floods. Mexico lands the oil with pipelines from the offshore fields, then puts it in storage tanks and then loads it in tankers that mainly come to the Houston through Lousiana refinery and petrochemical area.
The workers mostly live in the areas which are having flood problems. They are likely to have road problems because of the high water, and people tend to stay home to take care of their personal damage problems rather than come to work.
The Golden Lane fields in Tobasco onshore produce about 30% of the Mexican total oil production if my recollection is correct, and the wells will be isolated and shut in until the water goes down and Pemex assesses how much damage has happened. Its likely fairly large, the oil in pipelines moves through electrical pumps on the pipelines and the storage tanks. Dirt roads to oil wells and berms protecting the wells are subject to washing out, and so are pipeline crossings of creeks and rivers.
At any rate, its likely to be a big mess and nobody can do much until the water goes down, well within a politician's right to call it devastation.
Bob Ebersole
Do you have a link to the assertion that "Mexican President Felipe Calderon said that the oil industry there has been devastated"?
Mexican President Calderon: Floods Cripple Mexico's Oil Industry
I suspect the Mexican flood situation will show up in next week's inventory report. This week was a bit too soon, as you have to account for barrels arriving at U.S. ports as of last Friday.
Hi Robert,
I, like a lot of others I'm sure, thought of taking the bet during the several hours that it was open. I let it go becauseyou are generally a better oil price prognosticator than I, especially where it comes to actual fundemental problems. However, people have a real propensity for testing limits. There are always some little kids that will , when told that something is hot and will burn them, stand as close as possible and stick out one finger just to see if the limit is real.
Applied to the $100 a barrel limit, I believe we will hit a top shortly past $100, then fall back a little below $100, about $95 or so, then stick one finger out for a while looking for the next limit to test. My guess is the limit is seeing if $4 gasoline causes demand destruction or a huge recession. Bob Ebersole
The problem is that inventory is still dropping.
If the price drops like "everyone" is calling for,
how does inventory not fall more.
Do you folks think that someone is holding back here
and will flood the market once their hand is forced?
From the EIA Report:
"U.S. crude oil imports averaged nearly 9.7 million barrels per day last week,
up 275,000 barrels per day from the previous week."
So Mexico had absolutely zero impact.
I don't believe it.
If so, we need to import Mexicans to help with our Gulf Coast outages, not the other way round.
Arkansaw of Samuel L Clemens
I seem to recall reading that Mexico started cutting back (production? shipments?) on Oct 28th. It must take at least a couple of days for a tanker to make it from Tabasco to Houston or LOOP. Maybe more like 3 or 4. Perhaps as little as one day's production cutback was factored into this report. If it was production only that was cut back that first day or two, but shipments continued, they could probably continue loading tankers from storage, and we would see zero impact in this report.
Tanker traffic was definitely stopped for a few days. I think that will ALL be in next week's report. Perhaps an extra 5 million barrels, or thereabouts. If we don't hit $100 this week, that should be enough to do it.
If you look at the data for Gulf Coast stockpiles and imports in the report you'll see that crude stocks have been dropping by 3.3-3.5 million barrels per week for the past 4 weeks, and the weekly draw to last Friday was bang in that range - which suggests that there has, thus far, been no impact from the loss of Mexican production.
The import data for the Gulf Coast shows a slight increase over the two prior weeks which, again, suggests that there has been no impact yet.
Yes, it seemed that the impact of the floods really hit on Friday as well as I can tell, and only represents one day (maybe two) of the relevant week. Beyond that, shipments would have been in progress from several days before and continued to arrive in US. It always seemed to me that it will be next week's report that will really show the Mexican impact.
Next week's report is going to be very interesting. Not only will the full impact of Mexico be felt, but there was a story a couple weeks ago that the ship watchers were saying OPEC deliveries for 11/1 - 11/15 were running behind October's levels.
And do you know WHY this is the case? Most OPEC countries increased their production in October AHEAD of the scheduled start to do so on November 1st. Remember, the total increase was ONLY supposed to be 500,000. Then we add in that PESKY maintenance from UAE which took 600,000 BPD off the market for 4-6 weeks, and suddenly your production is actually down 100,000 bpd.
Naturally your shipments will be lower. Naturally WT touts this to his hearts content :P
PartyGuy,
I feel your pain. It must really be distressing you that westexas is right most of the time and that people respect his opinion for both his good manners and clear exposition of his ideas, but its value as being predictve about the amounts of oil available in the future in the US market place from imports. (sarcanol alert) Bob Ebersole
I never said WT was wrong. Have I commented that he repeats himself endlessly with the same cut/pastes post, of course. My main grip is that he likes to ignore the 'dog legs up' and cherry pick his data, and I am not the only one who has told him this in public or privately.
Then what are we discussing?
And what part of the post-1990 Saudi production data did Khebab ignore in the following article?
Texas and the Lower 48 as a Model for Saudi Arabia and the World (May, 2006)
http://www.energybulletin.net/16459.html
BTW, anyone else find it ironic that I seem to be constantly replying to allegations that we "ignored and cherry-picked" data, and then I am accused of being repetitive when I defend our work?
Westexas,
ELM is your theory so it falls to you to defend it. It is scary and depressing. People are going to complain that your data is bad, that your conclusions go too far or don't go too far enough. And, years from now when you are proven correct to a greater or lesser degree nobody is going to be happy about it.
Sorry man, it is a rough job you have.
Tim Morrison
When this whole global energy problem winds down and people are back to worrying about sports I'll buy you a beer.
I talked to Matt Simmons at ASPO-USA and told him that I started looking at net export capacity because of some of his prior work. Matt said that he took no comfort from apparently being right about so many aspects of Peak Oil/Peak Exports. I feel the same way.
The 'cherry picked' data is the fact that you are relying on the HL for KSA without taking into consideration how unstable it is. The URR has increased by 25% in the last half a decade alone. Therefore it is impossible to assign a realistic depletion rate to KSA at the present time. Stating that they are 58.1% depleted as of 2005, when they could just as easily be 40% depleted is highly misleading.
And I am not attacking your ELM. Any rational person understands it, though you must also take into account the oil exporting countries controlling their demand to make a completely accurate prediction. The recent events in Iran in which they increased the cost of their oil should be a red flag for you, but its not.
Your picking on the wrong guy I think. WT made some valid observations that the doglegs may just represent increased drilling activity and thus URR estimates that include them may be inflated. The technology and drilling program used for a field and especially changes in the program will result in new URR estimates how much of that is real and how much of it is just faster extraction is open for debate. I'm the dogleg guy.
And I think that its valid to question HL results. But so far they have both been fairly accurate and lower than all other methods. And if HL is wrong its wrong on the high side and given that the HL predictions are already fairly sobering I don't think thats a huge issue.
Time will tell but its reasonable to consider that global oil production will not be symmetric i.e past performance does not insure future results. I myself find the doglegs very worrying since they imply a significant overestimation of remaining URR using HL maybe up to 50% in some cases.
For example I'm pretty convinced that KSA remaining reserves are between 40-60GB only by aggressively adopting the latest technologies have they managed to maintain production. This does not bode well for the future.
But WT is not the person presenting this argument his insight about the possible implications of the dogleg provided the basis for the argument that HL URR's may be inflated.
But as far as I know I'm the only one thats saying that we have used technology to dramatically increase extraction rates over the last 20 years leading to high HL estimates so I expect decline rates to be fairly steep soon.
So bash the right guy but the implications of the doglegs scares the piss out of me.
You bring up a good point. SA boosted prod with their new project as expected and starting in oct, so with 21 day lag we probably are now seeing this arrive in port. UAE supposedly began cutting nov 1, not confirmed that this has begun. If so, we will see lack of shipments in last week of nov. So, current boost is now depressing price, dec cut has not yet boosted it. Stocks at end of year probably not good and declining, just as xmas and winter arrives.
Note that Gulf Coast inventories dropped by 3.3 mb, and Cushing dropped by 1.7 mb, partially offset by gains elsewhere.
mcgowanmc
it takes a day for a tanker to load at the dock in Mexico, then a two day trip across the Gulf to the refineries, wait in line for the dock, and then offload. Its at least a four day process, and mostly longer. So inventory problems won't show up for at least a week. Bob Ebersole
I, like a lot of others I'm sure, thought of taking the bet during the several hours that it was open.
I know you did, but as I have written in my yet to be published essay on the bet, if you felt strongly that oil would reach $100, you want something better than even odds on it. If you put that $1,000 in the commodities market, you make more than 10 times your money.
Some people forget that I am very bullish on oil, I just recognized that this would be an unprecedented price move. In the words of my good friend Nate Hagens, who used to do this for a living, "I have been very bullish on oil but even I would have made the bet you did - no brainer - the option vol gave that about 1 in 12 chance of happening when you made bet..."
Robert, you and Nate are definitely right, its just that the psychology of the bettors, I mean commodity traders doesn't follow any real supply and demand indicators. That's why I'm afraid to bet that way-there are about 30 times more contacts for oil floating around the data banks than there are physical barrels of oil out in the world. Its so divorced from reality that I'm scared to gamble.
At least if I loose money in a poker game I can see where the money is going, but this is more like slots.
If I were King of the Federal Reserve Bank, I'd set the margin rate on crude contracts at 50%. That would sure cut the speculation back to reasonable levels. I suspect that if this all becomes unwrapped on oil futures like the subprime mortgage money market, it would show that the real price of oil demand and production is maybe $30 or $40 a barrel, but that the difference is being sucked up by the guys controlling the production from national oil companies. I doubt seriously that its going in the national treasuries of Mexico, Venezuela, Russia, ect. Since the Saud family owns Aramco, that may be going in the right pockets already. But, thats just my hunch-it seems to be too much money to not steal it. But I bet we find out pretty soon. So hang on to your Confederate money boys, the South will rise again! Bob Ebersole
Bob, with no spare capacity, inventories running down, production in apparent decline [admittedly in a small way to date] since mid 2005 and with the dollar so intrinsically valuable that a cup of coffee at Starbucks complete with its own deluxe paper cup sells for $5, tell me again why oil should be selling for $30 bucks per barrel?
The tar sands is a big money loser with oil selling for $30 US a barrel.
I would imagine a new issue of slave labor would coincide with lesser oil and thus the southerly winds blowing up yer ass? Really, it wood be rather nice if the nation of states cood help one another with their traded assets...
Do not presume a stance based on bullshit fiat,
Takecare
With oil falling back to $95 territory the bet looks safe for another week.
It does seem strange that so many are looking forward to $100 oil, kinda like the crowd willing the ledge stander to jump.
I was thinking about this!
I have been willing oil prices up to 100 for 2 reasons:
1. because bursting the bubble now will hurt less than later. i.e. the further on we go with BAU (Business As Usual) the less mitigating oil we will have when we really need it.
2. to bring the debate into the public sphere ( so I get to say "Look, this is what I have been talking about!" ) We can get past defining whether there is a problem in public, most people do not about PO, and get on with expalining that it is permanent fundamental and accelerating, not caused by gouging, taxes, speculators, lack of refineries etc.
Carbon, Coventry, UK
I have been thinking about this a lot. The entire world "knows" that oil is about to break $100. One thing about it, though. Just as soon as everyone "knows" they have it figured out, the market surprises them.
I think the bet is safe for another week, unless a major geopolitical event takes place. If it is a quiet week, we will probably drift a bit lower from here. Interestingly, the December WTI contract also expires the end of next week, which should add a lot of volatility. I think with that, and the looming OPEC meeting, investors will be cautious for a little while.
I agree with Robert but my reasoning is different. This is really the first time that the market has in a sense explored the fact that once we are really post peak their is no limit on oil prices until we see real demand destruction in the OECD countries. I posted a similar statement in another thread. We are not quite their yet and won't be in my opinion till this summer.
I fully expect prices to not rise much over 100 then pull back to 70-80 later this winter/spring.
I think whats important about the current price run up is it indicates that the market will eventually discover peak oil on its own regardless of what people say. Sooner or later it will realize that only significant demand destruction will cause prices to lower and then .....
Like any market prices are set at the margin when we finally reach the point that desperate buyers are forced to pay the spot price because they need oil then the real price run up will begin. I have to think that has to occur in the summer with next summer being the first time. After this I think it goes bimodal with a big rise in fall/winter for heating oil and agricultural diesel. But I don't think we will break out this winter.
Since everybody's pulling out their crystal balls for oil price, I'll give my comments. You can draw a trendline on a monthly chart of WTIC (West Texas Intermediate Crude) starting in late 2002. This trendline was honored for 4.5 years, until the big selloff in 2006. At $95 oil, we are only now getting back on course with that trendline. So the question now is, has the trend broken and the oil price will rise slower than it has historically over the last 6 years? That is what people are implying by saying oil prices won't hold $100+ in 2008.
I'm not making any $1000 bets, but I think we will get back in front of the trend and continue on it. That means $100 will soon be the new low price.
I think GreyZone's footer quote is appropriate here:
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
But their is still a lot of uncertainty in the oil markets.
Peak oil is not yet priced into the equation. So I really think we will see one last pull back later this winter/spring during the spring lull. Demand rises and falls on cycles throughout the year the current highs are in a large part from drawing down inventories all summer but we will I think be able to rebuild inventories and have demand lessen one more time. We start the elevator ride in prices when maximum capacity cannot meet the low in demand that in my opinion starts next summer.
We will still have price cycles but the low each year will then be higher then the highest high of the year previous.
I just don't think we are there yet. OPEC has not quite been forced into admitting they have no more oil although its getting close and its reasonable to expect a small surge some temporary some real over the winter. If I where them I'd do it when demand was lowest to get the biggest artificial price decrease. So I think we have one more drop.
If prices hit say 110 and we drop back to 70/80 thats a pretty big downward swing. On the production side I think it means we need to lose close to another 500kbp 1mbpd to ensure we have this rising floor in prices. They are only going to go zooming when OECD countries are forced to curtail demand via demand destruction. I just don't see that we are at that point. We have not yet seen a drop in US gasoline imports for example.
The first time we have really seen a peak oil effect is admittedly a bit scary but we are still very early in the post peak decline.
The OPEC meeting will probably make or break your bet for the rest of the year. If OPEC is firmly against any further production increase, you may be in trouble. If OPEC speaks with a forked tongue and tries to supply the market with wiggle room, you may get by if weather stays nice and nothing else triggers a spike.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
But what happens if OPEC is unable to supply even the extra 520 kb/d they have promised?
That, my friend, would be a bombshell!
Ron Patterson
The question is how much sustainable capacity do they have.
I'm sure they can make brief surges of say 3 months or so but I don't think they have much sustainable capacity.
memmel,
Changing the subject: my lousy memory tells you predicted last spring that there would be a price spike in the Fall? If so, good job.
Yeah that was from my simple pond model treating oil prices as waves. The prediction was that when peak oil hits we move to 3 price peak a year fall deep winter and summer with two low periods spring and end summer.
This continues with basically last years highs representing the next years lows. It does not really say how high the highs go each year.
It does not address how high the highs can go but given that the troughs are fairly well pinned I can't imagine price increase greater than 100% a year.
The observation is that oil production seems to have about a 3-4 month time scale built in from the time its pumped until its used in the final product.
This includes storage before shipping shipping refinery storage pipeline transits etc. So the natural cycle if for increasing prices to increase production but this pretty much finally shows up during the down periods. And we really have only two natural down times.
Thanks we will see how it goes next year I think thats going to be the big test. I'm more concerned about my current ideas.
I found a very interesting number here.
http://globalpublicmedia.com/an_open_letter_to_cera_from_chris_skrebowsk...
This is a very important number since it shows that the technical impact of EOR is very low. Given the uncertainty of oil production its effectively in the noise.
On the other hand I do believe that the technology of oil extraction itself has made significant strides. Anyone reading about oil extraction technology cannot fail but be impressed with how far we have come. Although I've not found any hard numbers on the effect of technical enhancements we can consider the follwing.
Using a simple compound interest model and assuming that we would extract 100 barrels of oil using a constant technical level and then that technology enhancements result in a 2% increase in extraction rates compounded annually we end after 20 years with 148 or 50% more oil extracted. At 30 years we end with 181 so close to doubling in 30 years.
At 3% growth from technology we have. 242% at the end of the year.
Lets assume that technology has allowed us to about double the rate of extraction. We know we burned 1 trillion barrels of oil for physical reasons I think its clear that we probably are close to the peak as far as technology that increases extraction rates go. The will still increase somewhat as the latest technology still is not widely deployed but for political reasons we can figure that it may never be widely deployed are at least not any time soon.
The end result is that this 2-3% technical boost has just recently gone to zero in fact looking at the history books the widespread deployment of MRC and horizontal drilling has only resulted in a slowly declining plateau as underlying geologic decline and slowing technical progress has met.
Also this shows that we probably passed the 50% URR mark back in the 1990's with technical improvements in extraction providing basically all of the increased production since.
Given all this we have in my opinion about 500GB of extractable reserves left and about 200GB that will be extracted at a high rate. Given we extract about 18GB a year this means less than 5 years before serious declines are obvious probably close to 7-8% anually. Assuming a geometric increase in decline rates and a peak end 2005 so starting 2006 we have.
Start 35GB
2006-2007 1% 34.65
2006-2007 2% 33.95
2007-2008 4% 32.6
2008-2009 8% 30
2009-2010 16% 25.2
2010-2011 32% 17
Or about 139 GB by 2011.
This is a level last seen back in the 60's 70's and at the height of the Iran/Iraq war. But with 40 years of population increase in between. My prediction looks like a cliff on the graph.
Even if I'm off by 50% in my estimate the world as we know it effectively comes to a end 2011-2012. Export land probably has the same geometric decrease in exports. So mistakes here are made up in export land.
Now you see why I think 2009 is the pivotal year its the last year we have a functional oil based economy probably in a fairly deep depression at this point but functional. It when I plan on making my move either back with my parents or buying a place outright. Also I'll know if I'm employable still at this point I work on mobile phones and my experience in third world countries leads me to believe that wireless technologies will remain viable and hopefully I'll have a job. But in any case I have to move to my safe house in 2009 and be able to raise a garden. This gives me 2-3 years too get a viable personal food supply going.
I know I'm pushing it but its senseless now to move to a small farm and have a mortgage its too late. I'm assuming that assets like homes in the country will be at rock bottom prices in 2009 so I'm going to have to gamble and can afford too since my parents have a nice 20 acre farm ten miles outside of Little Rock AR as my plan B. I really want to move to northern California/Oregon mainly because I like seafood cheese and good wine :)
I'm hoping to have 200-300k to invest and I really believe that right before things get really bad a good small farm in Oregon will be selling in this range if not lower. In any case I'm not going to make a move until we are obviously in a deep depression and I have determined if I have a stable income.
Consider this.
globalhouseprices.blogspot.com
We should see a 50% drop to get back to normal than a further 30% drop as we enter the depression for a total of 80% price reduction off of current prices.
So given that many decent small farms are at 500k now this gives about 100-200k for a nice farm by 2009-2010 assuming that your savings are invested in a mix of euros and gold.
No telling what the actual dollar price will be.
What interesting is this is in inadvertently predicting about a 40% drop in home prices next year which I really cant see happening. This is very pessimistic so I could easily be ahead by a year or two. But assuming the economy closely tracks oil supply we are looking at a crash that dwarfs the great depression by a order of magnitude within two years. I find this result a bit amazing myself but at best I can only convince myself I'm off by a year or so.
My gut tells me this analysis seems to be too pessimis