High oil winners and losers

Forbes published their picks of companies likely to profit from high oil prices. Predictably, most of Forbes' picks are oil companies. One might ask why $55/barrel wasn't news 10 years ago when it was so easy to predict. Even amateurs can extrapolate from the popularity of Hummer H1s in the U.S. and the growing energy appetites of the developing world. The picture is even gloomier if we consider that eventually, the energy required to extract the remaining oil from the ground will exceed the energy in the extracted oil. This could prevent many "dormant" wells from ever coming back online. But what if we step back and consider the bigger picture. Do oil companies really come out ahead long term, when oil is no longer competitive with biodiesel, ethanol, methanol, gasified coal, solar, wind? Are there any other winners if oil hits $100/barrel?
    My Winner picks (if I had $ to invest)
  1. Alternative energy industries: This one's obvious isn't it? Did anyone else read the Oct 1989 Scientific American article on automotive fuels indicating that no alternatives would be practical unless gasoline reached the (then unimaginable) price of $1.75/gallon? Almost all alternatives are practical now if we can overcome inertia and tradition. And anyone burning oil to produce electricity had better take a second look. Wind is already competitive without subsidies and solar is catching up fast.
  2. Local arts and commerce. Think of how many small cities have had the life sucked out of them by the ease with which we can travel to a big city to shop, see a play or hear a concert.
  3. Sailboat industry: This grew in the 1970s when oil prices rose and faded with the cheap oil of the 80s and 90s. Look for a comeback of pleasure sailboats, sailing freighters, possibly even sailing cruise ships and ferries.
  4. Shoes: I see far more shoe and shoe repair shops here in Dublin than in similar sized U.S. cities. People might walk more?
  5. The auto industry?: Planned obsolescence. Auto fuel efficiency peaked in the mid 1980s, more recent guzzlers will be quickly replaced with hybrids or more efficient cars when oil prices hit us in the pocketbook. Surely the auto industry has planned for this, surely they learned something from the huge mistakes of the 1970s, didn't they?
  6. Airlines?Like the auto industry, this could go either way. Will the industry choose to produce and fly efficient aircraft? My friend's 1946 Beechcraft Bonanza 4 seat airplane still gets better gas mileage than most SUV's, it also goes faster and further offroad. Who knows, with GPS assisted air routes and other technical advances, maybe we will have the flying cars we were promised back in the 1950s. We finally got the picture phone 40 years late and the fax machine finally caught on about 150 years after it was patented.
  7. Network and telecom industry: I'd like to see an estimate of how much oil would be saved if those who could telecommute, did. I sure wish I could think of a good network company.
    A couple of possible losers
  1. Powerboat industry:Some cruisers and cigar boats get less than 1 mpg. The weekly wallet depletion might detract some of the fun of these toys. Sailboats and kitesurfers might start to look more exciting.
  2. Remote Real Estate: The demand for "low cost" vacation property in faraway destinations might fade a bit if it costs too much to travel to that inexpensive destination.
  3. The personal computer:Today's 3Ghz Pentium 4 desktop PCs are the equivalent of the 1969 Pontiac GTO. They compensate for mediocre steering, suspension and brakes by installing a huge hot-burning engine. The GTO couldn't be beat if you were in a fuel burning competition, but meanwhile Porche and others were making cars with half the engine capacity and more horsepower. Ditto for PCs, usefulness won't always be measured in Gigahertz.
Note:These are wild guesses by someone who doesn't claim to know the ins and outs of the stock market or the economic world. They are probably no more able to predict the future than the output of the /dev/random device. Your mileage may vary.
Update 6 April 05:
I like today's newratings.com headline: Greenspan says high oil prices could spur conservation investment. Maybe? Remember, you heard it here first.
Comments:

Hi Brian, Good post. Ironic that even pointing out the economic argument for alternative energies doesn't seem to change people's minds. Hopefully now that oil is at such a crazy price even the most stubborn will have to change. Ronan P.S. I want tickets on the Malahide estuary to East Point Business Park sail ferry :-)

Posted by Ronan O'Driscoll on April 04, 2005 at 02:56 AM GMT+00:00 #

Thanks, I'll have to admit that our last two sailings didn't beat the bus time. Saturday was the least amount of wind I've ever seen here. But at least we had fun.

Posted by bnitz on April 04, 2005 at 03:14 AM GMT+00:00 #

Bicycles will do well with high oil prices.

Posted by Scott Mace on June 25, 2005 at 03:33 PM GMT+00:00 #

I hope so!

Posted by bnitz on June 26, 2005 at 01:47 PM GMT+00:00 #

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