Oil prices and continued investment in an LCO

Discussion in 'Lawn Mowing' started by DFW Area Landscaper, Jun 20, 2005.

  1. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Messages: 2,116

    Oil is trading at yet another all time high today. It was around $60 per barrell.

    My old man is listening to and investing with an analyst that he has great respect for. The guy has beaten the market averages for 20+ years. Anyway, this guys says you want to be out of stocks in late 2006. He is forecasting $100/barrell oil by then. He was quoted in an article earlier this spring and he forecast the recent pull back and new high almost with perfection. He basically said that anytime you have a MAJOR price change with a publicly traded item, be it tech stocks or a commodity like oil, there will ALWAYS be a reluctance amongst investors to believe it will happen in the initial stages of the move. Tech stocks, for example, lost about 20% of their value initially, then rallied back to regain some of that loss and by the time it was all said and done, EVERYONE was joking about their tech stocks. Oil had done the same thing, rising to the upper 50's, then pulling back to around 50 and now, here we are 10 weeks later setting new highs again.

    This conerns me greatly. If oil goes from $50 to $100 per barrell, this will have devestating effects on the economy. I don't know about you guys, but when my customers need to reduce spending, I am the first to get fired. If oil goes to $100 per barrell, people will lose their jobs. Make no mistake about it. If oil goes to $100 per barrell, that $300 electric bill that harry homeowner could barely manage will be $600. Where's he going to get the money to make that payment?

    I would like to add two more crews over the winter but if oil gets to $100 per barrell and the world economy tanks, I'll be lucky to have enough work for one crew. I know this sounds doom and gloom, but it might be reality and many well respected financial gurus are prediciting it. It is naive to think that a good attitude and hard work will get you through a bad investment. There were plenty of good attitudes and hard working people in technology who lost their jobs, not because of their actions, but because of being in the wrong place at the wrong time.

    Any thoughts?

    DFW Area Landscaper
  2. PTP

    PTP LawnSite Bronze Member
    from Tulsa
    Messages: 1,397

    My thoughts are that I can always get out of the office and behind a mower again. If I loose 1/2 of my customers, I can still make a good living.

    Not worried.
  3. rodfather

    rodfather LawnSite Fanatic
    Messages: 9,501

    As this time of my life, I think I will just wait and see what happens.
  4. dvmcmrhp52

    dvmcmrhp52 LawnSite Platinum Member
    from Pa.
    Messages: 4,205

    So the world economy will tank, because of $100/ barrel oil and the price won't go down at all, because no one will be able to purchase it?

    I think I'll buy more mowers..................
  5. DennisF

    DennisF LawnSite Bronze Member
    from Florida
    Messages: 1,381

    I was listening to some oil guru on television the other day and he is predicting $250 per barrel oil by mid 2007. Gasoline at $7.50 per gallon. He has supposedly been accurate at predicting oil price increases for the last 25 years. I sure as hell hope he's wrong on this one.

    Even if oil only gets to $100 per barrel...it will probably cause an economic collapse in countries like China and India. They depend heavily on oil imports to fuel their emerging industrial base. That would make their products much more expensive to produce and give American businesses an edge in the manufacturing sector.

    At $100 per barrel for oil...gasoline would probably be priced at $3.75 per gallon, so it wouldn't hurt the U.S. economy all that much. But gas at $7.50 would cause a major economic disaster in the U.S.
  6. DFW Area Landscaper

    DFW Area Landscaper LawnSite Silver Member
    from DFW, TX
    Messages: 2,116

    I think $100 per barrell of oil would cripple our economy to great depression era levels. Places like shopping malls and grocery stores simply can't afford to have their electric bills doubling from where they are now. Everything we consume must be transported from one place to another. Can our economy afford to have fuel costs double from here?

    Corporations will start eliminating jobs when their profits decrease from increased fuel costs. You can bet the lawn guy will suffer the consequences. We will be the first thing to go when they are laid off. With the more cautious home owners, we will be let go so they can hoard cash in anticipation of a lay off.

    Residential lawn mowing is not the industry you want to be in when lay offs start happening. There are aren't many industries you want to be in when that happens, but residential lawn mowing certainly isn't one of them.

    I will give heavy thought to this issue before making additional investment.

    DFW Area Landscaper
  7. Precision

    Precision LawnSite Silver Member
    Messages: 2,995

    Oil like all other commodities relies on the laws of supply and demand.

    If oil gets to over $4.50 a gallon within the next 18 months the demand will decline dramatically and the supply will jump up accordingly. This will create a situation where oil plummets almost as rapidly as it went up.

    sucks in the mean time, but it will level out. The bigger issue is what will happne if oil creeps up slowly. Then it has the potential to stick.

    But in this scenario the new clients pay for the raise and the old ones pay at anniversary time.

    The sky is always falling, the point is to dance around the clouds as they hit the ground. Besides they are only clouds.

    It is never as bad as people think.
  8. lasher66

    lasher66 LawnSite Senior Member
    Messages: 399

    I just saw on the news the other day that the Saudis are saying they have enough oil to give the world until we have no need for it anymore. And soon they will be pumping more oil than ever expected to feed supply and demand. Now why would everyone be predicting this. Maybe refining it wouldnt keep up. Oh well.
    Just like when gas went over $2 a gallon, all the predicting people said by summer it would be over $3 a gallon. They were wrong on that. At least were I live its only been slightly over $2. Scaring people make good numbers for the media.

  9. all ferris

    all ferris LawnSite Bronze Member
    Messages: 1,309

    I think you guys are jumping to conclusions. I don't think gas will go much higher than what it is now for awhile. I think the Arab countries realize that if the price of oil goes to high people will look for an alternative. If people start using something besides gasoline the middle east will have nothing to export and their economy will tank. Do you really think they will let this happen?
  10. Flex-Deck

    Flex-Deck LawnSite Silver Member
    Messages: 2,845

    Since all you guys think I am a lowballer - I will probably get more accounts than I can handle - OH wait a minute - I will get another JD tractor (One of those inefficient Dinasaurs) Maybe hire a retired person for $10 per hr.
    My going rate now (First starting I was a bit low to get into the system) is over $25 per acre on the 10 or more accounts.
    I have a couple of 1 1/2 acre accounts that are $65
    Am i really a lowballer, or is it your perception, and or obsession to call me that?????? :cool2: :cool2: :D

Share This Page