what is this? Ready for $262/barrel oil?

[jokerman93]

This is on one of the CNN websites:

Ready For $262/Barrel Oil?

Two of the world's most successful investors say oil will be in short supply in the coming months.
By Nelson Schwartz, FORTUNE senior writer
January 27, 2006: 4:40 PM EST

That's the message from two of the world's most successful investors on the topic of high oil prices. One of them, Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.

The other, billionaire investor George Soros, wouldn't make any specific predictions about prices. But as a legendary commodities player, it's worth paying heed to the words of the man who once took on the Bank of England -- and won. "I'm very worried about the supply-demand balance, which is very tight," Soros says.

"U.S. power and influence has declined precipitously because of Iraq and the war on terror and that creates an incentive for anyone who wants to make trouble to go ahead and make it." As an example, Soros pointed to the regime in Iran, which is heading towards a confrontation with the West over its nuclear power program and doesn't show any signs of compromising. "Iran is on a collision course and I have a difficulty seeing how such a collision can be avoided," he says.

Another emboldened troublemaker is Russian president Vladimir Putin, Soros said, citing Putin's recent decision to briefly shut the supply of natural gas to Ukraine. The only bit of optimism Soros could offer was that the next 12 months would be most dangerous in terms of any price shocks, because beginning in 2007 he predicts new oil supplies will come online.

http://money.cnn.com/2006/01/27/news/international/pluggedin_fortune/?cnn=yes

Is this fear mongering, sober assessment of the situation, or a gambit of some other kind?

[Dogmudgeon]

1. It's real, all right.

But, if you read it, you'll see it's a scenario based on Soros' view of what a coup in Saudi Arabia would do to oil prices.

A simultaneous coup in SA, with a boycott action by the rest of OPEC, would drive the price of oil even higher, but Soros doesn't think that will happen.

We're also AT "Peak Oil". It's more of a bumpy plateau, one we're likely to be stuck on for several years. There may even be short-terms gluts lasting a year or two at a time. But in time -- five or six years, without any major new oil fields being found -- the peak will turn into a decline. Then, $262/bbl oil will be a certainty.

We have to develop new sources of energy -- it's as simple as that. The jokes about granola and "Kumbayah" have to stop, and we have to get to work.

--p!

[jokerman93]

2. understood it's a scenario projection

I like to ask rhetorical questions as a hook. :-)

And I'm in complete agreement with you. It's time to get real about energy independence.

[apple_ridge]

3. It could also occur as a result of an attack on Iran.

If Iran fought back hard enough to shut down the entire Persian Gulf, we could see a similar price on the barrel.