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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    I agree about Ethanol .. but it happens when you are trying to bring a new technology, there are failed attempts. Apart from that there may be some politics involved given that US govt hugely subsidizes corn farming and there may be pressure from corn producers etc, I am sketchy on details so may be partly wrong here.


    Originally posted by Baruch View Post
    Shale is conisdered to the best thing which happened to USA economcy in last 3-4 years and here people are calling it hogwash

    Though I agree on his comment on usage of corn...thats a crime USA is commiting on poors

    Comment


    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Ethanol production has increased from 4.85 billion gallons in 2006 to 13.9 billion gallons in 2011. Gasoline in US is now blended with 10% ethanol so based on calorific value somewhere around 6-7%.

      The real deal will be when cellulosic ethanol is produced commercially. Oil derived from algae is competitive at 300 $ / barrel of conventional oil at today's technology so you automatically have a ceiling as to how high oil prices can go and with improving technology the price of algae oil will come down.

      In UK the price of petrol is equivalent to 300 $ / barrel as the govt imposes a lot of taxes on petrol and diesel so in a way the normal public wont see a difference in retail prices if the govt removed all the taxes and all the petrol / diesel sold in UK was produced by algae. It wont happen so soon and taxes wont go down to zero but just trying to blunt the impact of 300 $ / barrel figure - we already pay a price which equates to that figure due to taxes.

      Shale oil / gas production efficiency will improve in the US and UK and China plan to join the Shale oil / gas boom soon. Improving production from existing wells is a technical issue and thankfully not dependent on some OPEC country ruler

      What we have today in the energy market is something similar to what we are seeing today in the tablet / laptop / phone market - lower prices due to innovation made mandatory by excess competition. Different fuel sources all made possible due to invention / innovation driving prices lower in the long term. No longer will oil produced in OPEC countries dominate the energy market cause the demand for oil is so high and ever increasing that any slight political or supply issue causes the oil to spike and then a host of new technologies - funded by "greedy" venture capitalist - put a new ceiling to the oil price.

      Even more interesting is the solar market and its exponential rise in US.

      Both energy sources - solar and ethanol - should logically have been adopted faster in India but again it happens only in India but India should benefit from lower oil prices in future like we have benefited from low coal prices and built massive power plants (well atleast before the Indonesians stopped playing ball)

      I am not at all worried about the amount of land it takes to produce corn. The world has enough land to produce food for humans and animals. was just reading about "vertical farming". Human ingenuity has no limits All looks like a sci-fi movie but it help puts a price ceiling to oil and land like the internet (home working and shopping) put a ceiling on commercial RE prices in all major developed countries.

      We need a separate thread "How will new technologies affect RE prices "


      Originally posted by wiseman View Post
      Ethanol program of the US is another of Obama disasters, which misused corn from its most useful form (food) to its use to fuel the crazy and out-of-control American motoring habit. Btw ethanol added so little to American Fuel (3-4%) that its negative impact on corn prices - and since Corn Syrup is so central to nutritionally worthless and health degrading American Fast Food, Food prices in general, far outweighed its benefits by way of adding to American Fuel production.

      Shale is quickly becoming a disaster. To keep the same amount of oil flowing today as it was when shale oil started being pumped (fewshort years ago), they need to drill and pump 14 times more wells today than when they started.

      Basically shale runs out of oil very quickly and so - like in Alice in Wonderland's queen - they need to run faster and faster just to keep the same amount of oil flowing.

      Shale will become an economic and ecological disaster pretty soon. Another one to hang around Obama's neck!

      Otherwise, we are in agreement on the original topic!

      cheers

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Exactly , it is this innovation that has helped the shale boom in US. Shale has been a known source of hydrocarbon for a long time but it is difficult to extract it because unlike other rock types, it has less pores and provides less passage for extraction. That is until hydralic fracturing and horizontal drilling came along and there has been no looking back since.
        As for the solar in india , here is something

        "
        India's central government has set a target for 20,000MW of installed solar generation by 2022, from under 1,000MW today. That would still represent a miserly 5% or less of total power-generation capacity in India, and cost perhaps $30 billion-40 billion to build—a fraction of the investment in new coal-fired plants
        "

        quoted from
        Solar power in India: Waiting for the sun | The Economist

        Originally posted by herohiralal View Post
        .
        Shale oil / gas production efficiency will improve in the US and UK and China plan to join the Shale oil / gas boom soon. Improving production from existing wells is a technical issue and thankfully not dependent on some OPEC country ruler

        Even more interesting is the solar market and its exponential rise in US.

        Both energy sources - solar and ethanol - should logically have been adopted faster in India but again it happens only in India but India should benefit from lower oil prices in future like we have benefited from low coal prices and built massive power plants (well atleast before the Indonesians stopped playing ball)
        We need a separate thread "How will new technologies affect RE prices "
        Last edited by sheeshu; January 3 2013, 12:19 AM.

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          A little more digging is in order ...

          Originally posted by Baruch View Post
          Shale is conisdered to the best thing which happened to USA economcy in last 3-4 years and here people are calling it hogwash

          Though I agree on his comment on usage of corn...thats a crime USA is commiting on poors

          With regard to Ethanol (as in all energy calculations), its EROEI or EROI that is important. Besides the serious inflation in food prices that it causes (aggravated by last year's drought in the US) it also means that this source of energy is DOA (dead on arrival) since it implies very high oil prices to make etahnol a meaningful play for investors. So far, its only Obama's Govt thats been throwing billions into ethanol subsidy that makes it commercially viable.

          What is EROI? Its the Energy Returned On Energy Input. That is, for every KCal of Energy created in the form of Ethanol, how much Energy was input to achieve it. Obviously, if its less than 1.0 its an "Energy Sink" and useless as a net generator of energy.

          Coming to the data (as you are so fond of stating), the EROI of ethanol varies from 0.36 in less-optimal corn growing areas (Texas) to 1.18 in optimal areas (Nebraska) giving an average of around 1.07.

          Compared to conventional crude oil (the alternative to motor fuel) which has an EROI of around 18-22 in crude form and 4.5-4.7 in refined form, you can see that Ethanol barely makes it on its own.

          This is why so much money had to be thrown into the Ethanol equation (and the Govt had to force the issue) for Ethanol to be a "successful" alternative. Classic Govt interference making things much worse! Typical Crony Capitalism as in other areas like Solyndra, etc.

          Coming to Shale, the top Shale field in the US has an annual decline rate of 42%! Compare that to conventional Crude wells where decline rates at early stages were negative! That is, the giant fields (last known giant field discovery was in 1960s) that still output much of our conventional oil would continue to dominate their field 50 years after starting to yield.

          Thus, enormous amounts of money is needed to find, drill and productionize new Shale fields to just keep output at current levels. Therefore, its being seriously discussed that the famous Trillion barrel shale reserves may simply be off by an order of magnitude (1/10ths) in terms of that which is actually commercially convertible and that too, with the kind of decline rates, even this may become way too costly to be extractable at current conventional energy prices. And we are not even getting into Environmental Pollution issues (which are enormous in the case of Fracking with regard to water usage and pollution as well as seismic issues - please note that the middle-America geological fault line's increased activity recently is being attributed in part to fracking, though this is very much in contention for the time being.

          Then again let us get into the EROI of shale. At the Crude stage, EROI of shale ranges from 1.7 to 2.1. Compare this to EROI of crude at this stage, which ranges from 18 to 22.

          Combining the two most important factors, Shale will have to sell at 10 - 20 times conventional oil price to be viable. Or, turned around, oil price will have to rise to $900 a barrel (in the case of refined crude where EROI is 4.5 - 4.7, $300 a barrel), before shale can become viable.

          So, its not all hogwash. As you can see, getting carried away with Govt (and Big-oil) propaganda is the real threat to your reputation.

          A little digging and understanding of ground realities is definitely in order, especially when it comes to Govt and Big Business propaganda.

          cheers
          Last edited by wiseman; January 3 2013, 02:19 AM.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            If you are saying Solar is one of the ways forward, Im with you

            Originally posted by sheeshu View Post
            Exactly , it is this innovation that has helped the shale boom in US. Shale has been a known source of hydrocarbon for a long time but it is difficult to extract it because unlike other rock types, it has less pores and provides less passage for extraction. That is until hydralic fracturing and horizontal drilling came along and there has been no looking back since.
            As for the solar in india , here is something

            "
            India's central government has set a target for 20,000MW of installed solar generation by 2022, from under 1,000MW today. That would still represent a miserly 5% or less of total power-generation capacity in India, and cost perhaps $30 billion-40 billion to build—a fraction of the investment in new coal-fired plants
            "

            quoted from
            Solar power in India: Waiting for the sun | The Economist

            Like Moore's Law for Transistors (which states that roughly every 18 months, transistor density on silicon doubles), there is the growing "Swanson Effect" for criystalline Silicon PV (which states that, for every doubling of PV capacity installed, price of PV will decline by 20%).

            This is based on the price decline graph which saw price per watt in 1977 at $76 and today its around $0.85 (Chinese) with expectations of $0.74 in 2013.

            With total plant cost being roughly 1.5-1.8 times bare panel cost, solar is already vying with conventional electricity generation on price terms. This also implies that many of our conventional energy consumption items in daily life will eventually convert to electricity-based running (from whatever it is today).

            Yes, Solar is a much more sustainable energy source (in terms of availability, renewability, cost, cleanliness, etc) than most other forms of energy on a large scale. May take some time to gather steam, though.

            I'm on board a Solar/Wind/renewable company. Another thing I do is Electrical Energy Management software for Industrial and large-consumer use. Both over the last 3-5 years when a lot of changes have happened. A lot of insight is gained when you are on the inside during early stages of the business.

            cheers

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              hahahaha... "wiseman".. two questions

              1. Why would big oil like to bring down the prices by producing more of "the difficult to produce stuff" and that too with the help of propaganda ?

              2. How do you compare EROI between something that you can produce literally drilling in your backyard (shale gas/oil) vs something that is found in some of the harshest environments ( man-made and god-made), viz. iraq, libya, north sea, arctic, deepwater gulf of mexico?

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                The EROI of corn ethanol is poor but that of sugarcane ethanol is much better. Solar power is plagued by dumping accusations on Chinese manufacturers and some people say s US shale gas estimates are a fraud.

                All these 3 energy sources may turn out to be dude or politics will kill them but high oil prices allow for newer sources to be found and thats the beauty of it. While these current sources gain market share they disrupt traditional energy providers - Saudi Arabia for oil and Russia for gas.

                Solar is already nearing grid parity but we in India still are working on centralized solar plants rather than installation on top of individual houses - UK, USA and Germany are seriously benefiting from this decentralized approach to solar power generation. Solar will be the wind energy of this decade and unlike wind its much more predictable.

                High oil production in US is impacting Canadian oil (produced mainly from another non-conventional source - tar sands) prices like crazy. Western Canada Select benchmark is 33 $ below WTI and at one point in 2012 was 40 $ below WTI. Oil is available today at 33 $ less than WTI!!

                Fracking in UK led to 2 earthquakes and we may see stricter regulation come in play or even lawsuits against shale gas / oil producers materialize. All the -ve aspects of these disruptive energy sources cannot over power the +ve aspects that low energy prices bring - lower inflation, higher GDP, higher mobility and higher productivity.

                The world has just seen the benefits of US shale. Over the next few yr we will see UK shale, Polish shale and Chinese shale all come into play cause even if the wells run dry very quickly they do disrupt the price for atleast 10 yrs.

                By the way the subsidy on US ethanol has been removed and US still exported the highest amount of ethanol in a single yr and guess to which country - Brazil.

                Imagine what happens if the world discovers another big shale oil play in a politically stable democracy or if a energy hungry country like China or India decides to price oil at market and focus on these non-conventional sources.

                The upsides are too big to ignore and that makes me -ve on oil prices in the long term and +ve on world GDP.

                Originally posted by wiseman View Post
                With regard to Ethanol (as in all energy calculations), its EROEI or EROI that is important. Besides the serious inflation in food prices that it causes (aggravated by last year's drought in the US) it also means that this source of energy is DOA (dead on arrival) since it implies very high oil prices to make etahnol a meaningful play for investors. So far, its only Obama's Govt thats been throwing billions into ethanol subsidy that makes it commercially viable.

                What is EROI? Its the Energy Returned On Energy Input. That is, for every KCal of Energy created in the form of Ethanol, how much Energy was input to achieve it. Obviously, if its less than 1.0 its an "Energy Sink" and useless as a net generator of energy.

                Coming to the data (as you are so fond of stating), the EROI of ethanol varies from 0.36 in less-optimal corn growing areas (Texas) to 1.18 in optimal areas (Nebraska) giving an average of around 1.07.

                Compared to conventional crude oil (the alternative to motor fuel) which has an EROI of around 18-22 in crude form and 4.5-4.7 in refined form, you can see that Ethanol barely makes it on its own.

                This is why so much money had to be thrown into the Ethanol equation (and the Govt had to force the issue) for Ethanol to be a "successful" alternative. Classic Govt interference making things much worse! Typical Crony Capitalism as in other areas like Solyndra, etc.

                Coming to Shale, the top Shale field in the US has an annual decline rate of 42%! Compare that to conventional Crude wells where decline rates at early stages were negative! That is, the giant fields (last known giant field discovery was in 1960s) that still output much of our conventional oil would continue to dominate their field 50 years after starting to yield.

                Thus, enormous amounts of money is needed to find, drill and productionize new Shale fields to just keep output at current levels. Therefore, its being seriously discussed that the famous Trillion barrel shale reserves may simply be off by an order of magnitude (1/10ths) in terms of that which is actually commercially convertible and that too, with the kind of decline rates, even this may become way too costly to be extractable at current conventional energy prices. And we are not even getting into Environmental Pollution issues (which are enormous in the case of Fracking with regard to water usage and pollution as well as seismic issues - please note that the middle-America geological fault line's increased activity recently is being attributed in part to fracking, though this is very much in contention for the time being.

                Then again let us get into the EROI of shale. At the Crude stage, EROI of shale ranges from 1.7 to 2.1. Compare this to EROI of crude at this stage, which ranges from 18 to 22.

                Combining the two most important factors, Shale will have to sell at 10 - 20 times conventional oil price to be viable. Or, turned around, oil price will have to rise to $900 a barrel (in the case of refined crude where EROI is 4.5 - 4.7, $300 a barrel), before shale can become viable.

                So, its not all hogwash. As you can see, getting carried away with Govt (and Big-oil) propaganda is the real threat to your reputation.

                A little digging and understanding of ground realities is definitely in order, especially when it comes to Govt and Big Business propaganda.

                cheers

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Gold: Higher duties will result in more illegal imports | Firstpost

                  The moral for our policy-makers is clear. It is the essential conservatism of Indian investors that is paying off in spades right now, and the Indian economy is holding up better than some others.
                  By flaying Indians’ preference for gold, our policymakers are essentially looking for alibis when it is their policies that have dented business confidence and ruined the India story. The Indian public is rightly buying gold, which can’t be debased like paper currency.
                  The moment the India growth story revives, Indians will ease up on their gold fetish.

                  Comment


                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    Originally posted by CAPT RAJESH View Post
                    Gold: Higher duties will result in more illegal imports | Firstpost

                    The moral for our policy-makers is clear. It is the essential conservatism of Indian investors that is paying off in spades right now, and the Indian economy is holding up better than some others.
                    By flaying Indians’ preference for gold, our policymakers are essentially looking for alibis when it is their policies that have dented business confidence and ruined the India story. The Indian public is rightly buying gold, which can’t be debased like paper currency.
                    The moment the India growth story revives, Indians will ease up on their gold fetish.
                    At the moment with high inflation and investors being cautious about RE, Gold will be the most sought after asset by the investors. Even if import duty is increased and Gold is made costlier, people will still go ahead and buy due to smaller ticket size (1 gm) compared to RE.

                    The FM has a daunting task to bring the inflation down and cut the interest rates at the same time.

                    If FM fails to bring the inflation down, Gold will be asset to be in. Remember unlike the 80s where inflation was consistently high and people had safe investment options in the form of NSC which would double the amount in 5 years. This time, no such instrument exists! No option but Gold to retain purchasing power of your savings.

                    RE has come to standstill in rural maharashtra which has seen phenomenal RE boom since 2009-10. Marathwada has seen deep correction of 30-50%. Now, Vidarbh has started seeing stagnation for last few months with almost no transactions and people are expecting correction soon. Don't have updates about other regions though.
                    Last edited by realpune; January 3 2013, 11:34 AM.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Originally posted by realpune View Post
                      At the moment with high inflation and investors being cautious about RE, Gold will be the most sought after asset by the investors. Even if import duty is increased and Gold is made costlier, people will still go ahead and buy due to smaller ticket size (1 gm) compared to RE.

                      The FM has a daunting task to bring the inflation down and cut the interest rates at the same time.

                      If FM fails to bring the inflation down, Gold will be asset to be in. Remember unlike the 80s where inflation was consistently high and people had safe investment options in the form of NSC which would double the amount in 5 years. This time, no such instrument exists! No option but Gold to retain purchasing power of your savings.

                      RE has come to standstill in rural maharashtra which has seen phenomenal RE boom since 2009-10. Marathwada has seen deep correction of 30-50%. Now, Vidarbh has started seeing stagnation for last few months with almost no transactions and people are expecting correction soon. Don't have updates about other regions though.
                      land prices in most of the rural India is stagnant from almost one year now

                      Comment

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