Hank [BS/MSEE,
MSM $$$, Ph.D. Mgmt] teaches Everyone from the President of Venezuela to one of the big oil think tanks believes that oil could spike well above $70 and remain there. The elements that would contribute to a big rise include lack of supply from OPEC and interruptions of drilling in Nigeria, the Middle East, or South America. And then there are Acts of God. Hurricanes probably fell into this final category.
According to the FT, “Mexico on Sunday started to evacuate 13,360 workers from its Gulf of Mexico oil rigs as the powerful Hurricane Dean neared, Pemex, the state oil company, said.”
As Hurricane Dean makes it ways across the Gulf of Mexico, watch some of the other big deep-water drillers to shut down rigs. After crossing the Yucatan Peninsula, it may move on to Texas. Not good for the refineries based there near the coast. Having just visited the Corpus Christi area, I can vouch that just north of I37 there are 5 very large refineries, the largest of which is Citgo, owned by Venezuela. If Dean swings toward the north and these refineries are stoked, stand by. According to the Corpus Christi Caller-Times, some of the roughnecks have already been pulled off the rigs.
Part of the reaction to the storm will probably be unwarranted. It seems that issues driving oil prices up often are. But, the price of oil will move up early in the week, and, if the storm is more damaging than predicted, look for a move toward $100. If indeed the magical barrier of $100 is leaped, what’s the next psychological barrier? All this when the market is just getting up off its knees from the marginal loan crisis, which, BTW, will in all probability subsume Congress when it returns from its latest extended vacation.
Traders will keep their eyes on the Atlantic. There are almost certain to be more storms coming, resulting in still higher fuel prices. So what is an entrepreneur to do about it? That’s where you come in. Hank
In response to your question, “So what is an entrepreneur to do about it?”, I am reminded of a fellow Purdue student I met this weekend (or rather encountered) who is a partner in a startup biofuels firm that has been running for a few years now. He is raising sunflowers and converting the yields from his crops to alternative fuels. This is no mom and pop business from the sound of it either. Sounds big.
I also have a friend from the Lafayette area that started an enterprise this year baling agricultural biomass from Indiana’s fields and shipping it up to nearby Reynolds, IN in conjunction with their “Bio-town USA” project. http://www.biotownusa.net
I could comment two ways on this: this is bad; this is good.
If indeed the price does go up to or exceeds $100, then we will be shelling out $100 bills, an arm, a leg, a kidney, and our first born children to pay for gas. This is bad, especially for us college students who have enough to pay for without an increase in gas prices to worry about.
In the movie “Dante’s Peak” the analogy of a frog in boiling water is used. If you put the frog in boiling water it’ll jump right out, but if you put it in cold water and slowly turn up the heat it’ll boil to death. If the prices had jumped (way back when) from under a dollar a gallon straight to the prices we have today, people would have been screaming for alternative fuels sooner. The problem is that the prices have slowly been going up and we have just sat back and said, “Well, maybe we can handle this price.”
If the price soars as it is predicted to, this could force the population to cry out for newer innovations to reduce gas consumption and increase fuel efficiency. This may be just the thing we need to push us over the edge of complacency.
I think that the type of businesses that Kevin is talking about are the next “big thing.” With the need for alternative fuels becoming more apparent every day, these companies are going to be the ones responding to the demand of the public.
They have made so many advances in gas efficency these past few years. We have gas made from corn, hybrid cars, electric cars, and on dirty jobs with mike rowe, they showed a car that ran on grease from a mexican restaurant. it will be interesting to see what more we can come up with in the future.
I think that the majority of america cannot afford $100 gas prices so as an Entreprenuer I
wouls work toward creating some type of alternative transportation device that will help cope until
gas prices become more affordable. I believe that creating some type of alternative gas is too tedious
and expensive. If the alternative bike thing doesn’t catch on. Why not go with a higher risk?…Open
Up a gas station.
I agree with Katie. The population is used to the constant and steady rise of gasoline prices. Consumers have not had to suffer a drastic price soar (eg. $1/gal. in one day). In result, alternative fuels have not made a significant appearance to the market.
What will it take to actually start mass producing alternative fuels and to implement them? When does gasoline prices become price sensitive? I guess time will tell.
The alternative fuel idea is popping up with seventy-five factories being built and a hundred factories already existing. The problem is that it is not getting to different gas stations fast enough and vehicles supporting the alternative fuel is still not available to many people. As a farmer the alternative fuel is helping the crop prices per bushel go up. That would be great but the price for maintaining and running a farm is going up every year.