The Coming Oil Crisis

What really concerns me at present is not the sub prime induced credit crunch but actually the next oil crisis. There is an interesting debate going on about the future for oil supply between official oil industry sources such as the US Government backed International Energy Agency (IEA) and an independent band of mostly ex-industry professionals, the so called "peak oilers". As their name suggests, peak oilers believe that global crude production has reached it's limit and that supply is about to decline (or indeed that it already has).
This argument is very well presented in a report by the Energy Watch Group (EWG) published in October 2007 which analyses production data in detail by geographic region. The other side to the debate is led by the IEA which largely forecasts demand, where increases will come from China and India and assumes (backed by reserve data) that OPEC countries will increase supply to fill the gap. But the difference in methodology produces vastly different results: EWG predict that by 2030 global oil supply will be down to 39mbpd whilst the IEA forecast 116mbpd (against about 85mbpd for 2007). If the IEA is wrong and EWG is right we are, globally, are in for a serious shock.
The whole issue is far too lengthy for me to repeat in my blog but I will, from time to time, discuss some of the respective arguments. Suffice it to say that a key part of the differential arises in respect of the Middle East, particularly Saudi Arabia.

Royal Bank of Scotland

I had been eagerly awaiting the RBS trading update today and have listened with great interest to the press and analysts conferences (the media conference was much more interesting). The statement was very solid and Sir Fred impressed me as being very clear and straightforward in his presentation. Pragmatic and, as he put it, just delivering what they said they would. RBS (excluding ABN) is expected to produce operating profit and EPS well ahead of consensus whilst ABN is in line with guidance. Integration is going well and the acquisition is expected to produce a better return than originally envisaged. Credit market write downs were significant at £950m but were much less than the had market feared and contained within the overall earnings expectations. Sir Fred refused to be drawn on 2008 but expressed great satisfaction with the greater diversity by business and geography that RBS now had. Overall there was less business to be done but underlying business growth and ABN opportunities remained. Asia was a particular high spot. In the UK as yet there were no tangible signs of increased stress amongst corporates nor consumers and indeed they were seeing very high levels of credit card spending compared to last year which seemed positive for Christmas. An interesting point that leveraged finance is less than 2% of income so the slow down here wouldn't have a great impact. http://www.rbs.com/

Video Tour of Berkshire Hathaway

"Warren Buffett Watch" with Part II of a video tour around the Berskshire Hathaway HQ with Warren Buffett:

http://www.cnbc.com/id/22045978/site/14081545/

On the page this link takes you to is a further link to Part I of the tour.