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Thursday, February 10, 2011

Peak Oil is here ..

International Energy Agency IEA has a presentation on World Energy Outlook.
(Link) dated Nov9, 2010 London. 

Here are some points which I would like to project:
- Oil Demand and supply are becoming less sensitive to price.
Basically supply is short and demand is becoming price insensitive
- Copenhagen Accord & G20 subsidy reform are key advances.
Current subsidy removal seems to be part of a global effort to reduce/discourage oil consumption by reducing oil subsidies.

Oil Production Becomes Less Crude:
If you look at the presentation slide .. we can clearly see that there is an assumption that "Crude Oil Fields yet to be developed or found" is what is balancing the equation .. without which supply is going to fall dramatically.

International Oil Price Assumption:
As can be seen .. the future is oil above 100 USD Guaranteed!!

More Oil from few producers:
If you see .. Iraq and Kazakhstan are the "new" major oil producing countries of the future
Kazakhstan is a neighbor of Afghanistan..
So now we know .. why US is in Iraq and Afghanistan.
I think Saudi production figures are "Place holders" and actually production is going to be well below projected levels (my take)

- The future is going to be vastly different from the past..
- The current financial turmoil seems to be more of an asset change effort.. to move assets from a "abundant oil business environment" to new assets for "controlled oil business environment"
- Some type of assets are just going to be worthless.. and this financial turmoil is part of the facade to shield the actual pricing of assets. 
- Ashland Inc which used to own "Marathon" brand of gas stations and refineries in US has sold its "gas station and refinery business and moved into chemicals (valvoline brand of lubricants). 
- US is planning to set up a high speed passenger train system 
- Essar Oil plans to buy Shell's European refineries.. (sounds a lot like Videocon buying Thompson's colour picture tube business becoming the largest picture tube manufacturer in the world just a few years before  "LCD" systems became the norm..)
- My take is "Jayant Oil" is going to be grow to be a major player in the world of chemicals by virtue of being one of the largest castor oil derivatives producers.
- Gujarat Ambuja Exports is a globally competitive agro processing company which produces value added  agro based products.
- NHPC : Hydro power .. well that's like free energy!!
- Tata Communications: The future is digital and they own the largest submarine cable network in the world!!

The Best Buy recommendation are all "Future Ready" Grab then in this downturn (the underlying reason for these financial turmoils is to mis-price future assets so that the transfer of assets is smooth..)

PN: These are my personal views based on my interpretation of publicly available information.. please do your own deep dive before investing


Jagan said...

Dear Prahalad,

How do you compare Sam Industries, Unique Orgonics, AVT Natural & Himalaya International AGINST/ WITH Jayant Agro & GAEL.

I am confused among above bets for future growth. Also, would love to know your take on infra, which is turmoil at the moment. Thanks for your advice!


Jagan said...

...add to the above list of confusing bets are: Agro dutch, Camson bio, excel crop.


What'sUp Prahalad said...


AVT natural looks the best..
though don't know how much growth is there in the topline but business and company looks good.. slightly expensive but dividend paying company..

I would think of buying into AVT in the future..

Jayant and GAEL will have good growth in topline and bottomline..

I hope Jayant can get its new sebacic acid plant up and running that would make a big difference in its price..

Jayant is a real good value buy at current levels of 85-90 levels..

=happy investing