Oil shock?

[william the wie]

Been seeing a lot of columns on probable write downs of investment in high energy hedges. How scary are the hard numbers that are available vs. projections and SWAGs?

 

[Mr. H.]

[MENTION=27339]RGR[/MENTION] in 3... 2...

 

[william the wie]

Not helpful Mr.H.

 

[Mr. H.]

I got nothin'. But I do think crude is going to crater over the next 10 months.

 

[percysunshine]

How are you defining the term 'high energy hedge'? Could be a lot of stuff.

 

[william the wie]

How are you defining the term 'high energy hedge'? Could be a lot of stuff.

China has built trillions of dollars worth of infrastructure in Africa and Central Asia in order to get oil at a discount. What happens when that discount starts eating into Marginal Cost?

Cities are a hedge against energy expense and it is not just Chicago, Boston, New York and Baltimore in the US that I am talking about. This is even more true in Australia, Japan and Mexico, cities worldwide will be written off by lower cost energy and the internet as not worth the expense as energy costs decline. For example some of London's sewer system dates back to Roman times which means it no longer works as well. At some lower energy cost the choice will be to tear down most European cities to get up to date on underground utilities or wait for cost driven depopulation to do the job.

There are other examples but does that answer your question about some of the "lot of stuff" or not? You are right the way to find out if something is a hedge against high cost energy is to wait and see at what price it breaks.