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    Friday, May 12, 2006


    Oil from coal costs $40 a barrel

    As part of an article on oil prices falling over the next 50 years Australian Bureau of Agricultural and Research Economics executive director Brian Fisher said that Oil can be produced from coal for around $40 a bbl. He was saying that this probably sets the fair value for Oil over the very long term. He might be right but the infrastructure to produce 120M bbl per day of oil from coal is probably 50 years away too! It also doesn't take account of the increased price of coal when the extra oil demand arrives - so maybe the number is much higher.

    Either way this is very bullish for coal. Coal is pretty overlooked right now by the investment community and I really like Felix Resources on the ASX. I've blogged about them before and believe there is over 3 times upside from the current price without a large increase in coal prices.

    Coal is the cheapest source of energy aside from Uranium (though plants are so much cheaper). The price of cheaper sources of energy will rise as consumers switch to the cheaper sources and there are quite a few coal companies that are well below their 12 month highs. A good way to get in on the commodities boom with pennies to the downside and dollars to the upside!
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    Disclaimer and Disclosure Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
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