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186 comments on DrumBeat: March 3, 2008

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CO2 on March 3, 2008 - 10:51am Permalink | Subthread | Parent | Comments top

Appreciate the validation, possom. Curious- what did you calculate as 10x oil for your family?

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olepossom on March 3, 2008 - 12:07pm Permalink | Subthread | Parent | Comments top

I figured about 1400 gallons of gasoline per person, equivalent, per year, which meant 4200 gallons per year for a family of three, which translated into (surprise!) 100 barrels per year. Multiplied by 10, that was 1000 barrels. So, I needed to control 40,000 bbls worth of production in a long-lived reservoir, such as heavy oil. Our actual consumption is much less than that now.

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garyp on March 3, 2008 - 2:00pm Permalink | Subthread | Parent | Comments top

I assume that that 1400 gallons was taking into account a whole range of energy uses, not just transportation. Certainly hedging against natural gas is as important (certainly in the UK where power generation is so dependent on it). I'd worked out that 250 gallons was more than enough car wise, not sure about other uses.

Anyone know where to source good commodity options figures for distant times? It would be interesting to do the calcs to determine what investment would be needed now to hedge against future movements. Might be a better place for money than the stock market. Would also be interesting to determine how you could hedge against food prices.

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Durandal on March 3, 2008 - 4:34pm Permalink | Subthread | Parent | Comments top

Hedge against food prices? Buy lots of pasta and grains now. Dry goods, if stored properly, can keep for a good while. Pasta, rice, beans, and Textured Vegetable Protein. You can even venture into freeze-dried vegetables and fruit if you like.

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garyp on March 3, 2008 - 5:20pm Permalink | Subthread | Parent | Comments top

That's not a hedge, that's just preparing a backup plan.

What I'm saying is can you buy REAL futures in foodstuffs such that if the price of food goes up, your options increase in value as well and the net effect is to remove the price risk?

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greenish on March 3, 2008 - 9:21pm Permalink | Subthread | Parent | Comments top

Anyone know where to source good commodity options figures for distant times?

As I noted just above, I have not found options to be readily available far-out. There seem to be very few who are willing to sell naked calls these days, not least since those who have done so for the last couple years have "gotten their asses handed to them" in the words of one broker.

Here's one link which I don't think is proprietary... but just because something shows up here doesn't mean "you" could get it; apparently the 'settlements' between large institutions show up, but that doesn't equate to the "street value" of what someone in the NYMEX pits will actually sell you one for.. IF they'll sell you one at all. At least that's what I've been given to understand. These charts show very few options during trading hours, and not all of those are 'available'; after hours the settlements will be included and give rough values, except that there's a premium added to those values if you were to buy...

http://man.barchart.com/pl/man/ib/optqte.asp?sym=CL&mode=i

Lotsa luck... and if anyone can correct any wrong impressions I have, please do!

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