Category: Peak Oil

Eddie Seal for The Wall Street Journal Citigroup Inc.’s Ed Morse was the analyst who prominently called $75-a-barrel global oil prices last March, back when it was trading above $100 a barrel and prevailing wisdom had prices rising rather than falling. He was right, of course – Brent crude plummeted through that threshold in late November and has continued to fall, to $53 and change Monday . As such, oil-market watchers tend to listen to what he has to say. And what is his outlook for the foreseeable future? Look out below. Mr. Morse and his team at Citigroup have cut their estimate for global oil prices to average $63 a barrel in 2015, down from $80, and for the U.S. benchmark to average $55 a barrel this year (just FYI, Nymex prices briefly traded below $50 a barrel earlier Monday). They see a confluence of factors — including […]

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With all the conspiracy theories surrounding OPEC’s November decision not cut production, is it really not just a case of simple economics? The U.S. shale boom has seen huge hype but the numbers speak for themselves and such overflowing optimism may have been unwarranted. When discussing harsh truths in energy, no sector is in greater need of a reality check than renewable energy. In a third exclusive interview with James Stafford of Oilprice.com , energy expert Arthur Berman explores: • How the oil price situation came about and what was really behind OPEC’s decision • What the future really holds in store for U.S. shale • Why the U.S. oil exports debate is nonsensical for many reasons • What lessons can be learnt from the U.S. shale boom • Why technology doesn’t have as much of an influence on oil prices as you might think • How the global […]

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Longtime readers of the site and listeners to the show will know that the founder of Financial Sense, Jim Puplava, has been a regular proponent of peak oil since 2002, when oil prices were trading around $20/barrel. Now that oil has fallen in half from its $100+ range in place over the past few years, many have written us wondering if Jim has changed his views. That is, is peak oil now dead? In last Saturday’s Big Picture, Jim goes “on the record” by saying no, he doesn’t think peak oil is dead, though it has clearly been pushed out further with the massive increase in US shale production and deceleration of global economic growth. This, and the unwinding of massive long positions in the crude oil market, have likely exacerbated the downtrend and led to momentum selling. Though oil could move lower and possibly reach the low end […]

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The decision by president Barack Obama to open the door to US oil exports seeped out of Washington in a low-key manner last week, but the impact could be as explosive as a New Year’s Eve firework display. The ban – imposed after the Middle East oil embargoes in the 1970s – has made it close to impossible to ship abroad the fruits of America’s shale bonanza. It also long looked wrong-headed in the home of free trade. The US department of commerce quietly overturned the four-decade-old policy by saying it had started to approve a backlog of requests to sell processed light oil to foreign buyers. The issue is tremendously sensitive, which is possibly why the announcement came out at a time of year when most policymakers were still at home enjoying the Christmas holidays with their families. Many manufacturers and many domestic consumers are totally opposed to […]

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Peak Oil from the Demand Side: A Prophetic New Model This is a Guest post by Avery Morrow Avery Morrow’s Internet Fancy The most attention-grabbing attempts to predict oil futures have come from geologists and environmental activists, who tend to look solely at production. An overlooked doctoral thesis by Christophe McGlade, Uncertainties in the outlook for oil and gas , in contrast, focuses on how both supply and demand might be constrained in the coming decades. Peak oil researchers should take note of McGlade’s thesis because he predicted, in November 2013, that oil prices would sink, and that they will stay low throughout the second half of this decade. I found this paper on Google Scholar and have no connection with the author, but I appreciate his careful consideration of peak oil arguments, and his ability to distance himself from the more narrow-minded aspects of both economic and geological thinking. […]

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ENLARGE An aerial view of Petrobras’ Abreu e Lima oil refinery in Recife, Pernambuco state, Brazil. Agence France-Presse/Getty Images The drops last year in the prices of oil and other commodities are threatening to stunt growth in poor African and Latin American nations that sought to use vast natural-resource wealth to climb the development ladder. During a decadelong boom, governments on those continents vowed to use a windfall from surging raw-material prices to lift the vast underclass. Governments that sought big development leaps by funding social-welfare programs and ambitious infrastructure initiatives, such as building roads, ports and power plants, may now have less money to do so. “The good-governance records in many [Latin American] countries were linked to commodity prices, and this will be tested by the end of the commodity boom,” said Jorge Castaneda, Mexico’s former foreign minister. The commodity-rich nations of Africa and Latin America are also […]

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What in the world? Pieces of global opinion A review of the best commentary on and around the world… Related Stories Today’s must-read Americans have become used to the bouncing cost of oil over recent years. Prices have spiked, causing angst and political posturing ("Drill, baby, drill" and all), and they’ve tanked following the economic upheaval of the Great Recession and the 9/11 attacks. The bottom has again dropped out of the oil market, as the cost per barrel has declined more than 40% since June. The change has been a welcome relief for consumers and energy-intensive industries, for which the change is an unexpected financial windfall. While most have a nagging suspicion that the drop is only temporary and prices will, at some point soon, begin an upward climb, Bloomberg View’s Mohamed A El-Erian isn’t so sure . What the world is currently experiencing is a "fundamental shift" […]

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No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat. In that light, it’s less than shocking to see one analyst making a case—albeit in a pure outlier sense—for a drop all the way below $14 a barrel. Abigail Doolittle , who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support—$44, $35 and the nightmare scenario of, yes, $13.65. Make no mistake, she thinks that’s an extreme case. Her target for the more likely move is the $35 range, which in itself is quite a call considering light crude had been just above $100 a barrel this summer and the […]

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In the current debate about the  Nature  article  "The Fracking Fallacy,"  the discussion has focused on estimates of cumulative production of shale gas plays by the Energy Information Administration (EIA) and The Bureau of Economic Geology at the University of Texas (UT/BEG).  David Hughes  provides another estimate in his recent post  "Fracking Fracas: The Trouble with Optimistic Shale Gas Projections by the U.S. Department of Energy ," a summary of his comprehensive study of all U.S. shale plays  Drilling Down  published by The Post Carbon Institute. The Fracking Fallacy debate is important because it casts doubt on the reliability of government estimates of our natural gas supply.  If U.S. gas production is in decline by the early 2020s as described in the  Nature  article, or sooner as I suspect, then important policy decisions about the export of natural gas and the retirement of coal-fired electric power plants have been […]

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Summary There have not been any considerable fundamental changes in the oil market from June to December that justify the big drop in oil prices. OPEC surplus of crude oil production capacity has changed very little between June and December. Now is an excellent opportunity to make a long-term investment in good energy stocks at a relatively cheap price. Oil prices have fallen sharply during the last six months. WTI crude oil’s last price of $54.73 per barrel is a 45.9% drop from its peak of $101.18 on June 25, while Brent crude oil has declined 46.6% from its peak price of $112.12 per barrel. WTI crude oil February 2015 leading contract Chart: TradeStation Group, Inc. According to the U.S. Department of Energy’s recent analysis release on December 18, the principal reasons for the sharp fall in crude oil prices are as follows: lowered expectations for global economic growth, […]

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The world’s 1.635 trillion barrels of proved oil reserves are not evenly distributed among the globe’s 216 nations. Just three — Saudi Arabia, Venezuela and Canada — account for nearly a third of the total.There are far more countries with no or very little oil than those countries with deposits that can be developed and used internally or exported. According to the U.S. Energy Information Administration (EIA), of the world’s 216 nations only 99 have any oil reserves at all. And only about 40 nations have proved reserves totaling more than a tiny 1 billion barrels.Global consumption of crude oil grew from around 83.2 million barrels a day to 90.4 million in the 10-years from 2004 to 2013, according to the EIA. With the exceptions of 2008 and 2009, when the global financial crisis stifled economic growth in much of the world, oil consumption has been rising, but about […]

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The oil price decline of 2014 upended the geopolitical chessboard. Worth watching in 2015 will be who can recover and dominate play — OPEC, Vladimir Putin or U.S. shale drillers. Oil’s international benchmark price dropped as much as 49 percent in 2014. Those looking for a quick rebound may be disappointed, as world consumption growth slowed to the least since 2009, U.S. companies pumped more than they have since the 1980s and a price war broke out among members of the Organization of Petroleum Exporting Countries. “It’s a turning point in the way people perceive OPEC, that this so-called cartel is not really driving prices,” said Jeff Colgan, a professor at Brown University’s Watson Institute for International Studies who researches the geopolitics of energy. “The real story is going to be about the fracking industry. How much pain can North American producers take?” Here are five concerns about oil […]

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The coming year is likely to be as full of surprises in the field of energy as 2014 was. We just don’t know which surprises! I am not predicting that any of the following will happen, and they will be surprises to most people if they do. But, I think there is an outside chance that one or more will occur, and this would move markets and policy debates in unexpected directions. 1. U.S. crude oil and natural gas production decline for the first time since 2008 and 2005, respectively. The colossal markdown in world oil prices has belatedly been followed by a slightly smaller, but nevertheless dramatic markdown in U.S. natural gas prices. The drop in prices has already resulted in announcements from U.S. drillers that they will curtail their drilling operations significantly next year. But drilling that is already contracted for will likely go forward, and wells […]

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OPEC will not cut output even at $20 a barrel … OPEC will not cut oil production even if the price drops to $20 a barrel and it is unfair to expect the cartel to reduce output if non-members do not, Saudi Arabia said. “Whether it goes down to $20 a barrel, $40, $50, $60, it is irrelevant,” the kingdom’s Oil Minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES), an industry weekly. In unusually detailed comments, Naimi defended a decision by the Organization of the Petroleum Exporting Countries, whose lead producer is Saudi Arabia, last month to maintain a production ceiling of 30 million barrels per day. – Daily Mail Dominant Social Theme: Nothing that is happening to oil is surprising. Free-Market Analysis: For years we had arguments with “peak oilers” who maintained that the world was running out of oil. Of course, they always […]

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Regular readers know I often write about energy, and while this piece may not at first blush seem like an energy story, you’ll soon see that the quest for an ample supply of energy is, in fact, at the heart of human greed. Greed is often said to be a central cause of our ecological and social ills. It motivates excessive and injurious exploitation of the planet and thus threatens the existence of many species including humans themselves. It leads to excessive economic inequality and the social ills presumed to be associated with that inequality. And, of course, greed is regarded as not just bad for the biosphere or society; it’s bad for the soul and therefore earns a place on the list of the  seven deadly sins . Many people are convinced that greed is learned and therefore can be unlearned or not taught in the first place. […]

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Saudi oil minister Ali al-Naimi: We’ll never cut production despite plunging prices thumbnail The Saudi Arabian Minister of Petroleum and Mineral ResourcesAli al-Naimi has declared that the country will “never” cut oil production despite prices hitting five and a half year lows on over-supply and weak demand. Al-Naimi added in a CNN interview that Saudi Arabia was also “not conspiring” to target US and Russian oil producers by not cutting supply and that it was too late for non-Organisation of the Petroleum Exporting Countries (Opec) members to offer any cuts. Saudi Arabia will not cut prices, neither now nor ever in the future, he said. “These rumours or whoever generated them, is completely mistaken. I was the first minister to welcome the production and addition of shale oil in 2008 and 2009, in Washington, why? Because it would give better stability and assurance to the world that peak oil, is a theory now […]

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Cheap oil just keeps on coming thumbnail The stunning plunge in oil prices – almost 45% since June – has roiled the global oil markets; creating new winners and losers almost overnight. It has also unlocked a number of potential problems and opportunities we would be wise to consider. In our consumer-based economy, savings at the gas pump provide a direct stimulus to the economy – freeing up a reservoir of new discretionary dollars to fuel the economy. Indeed, SUV and small truck sales are skyrocketing (How soon we forget how quickly gas prices can go up) and fuel-intensive sectors – like airlines – are enjoying record profits. For others, falling oil prices are not so good. Geopolitically, it has been a disaster for oil-exporting countries; Russia, Iran, Venezuela and others are all getting clobbered. Shale oil producers – with fracking and horizontal drilling costs that far exceed OPEC’s […]

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A few commenters have mentioned peak oil recently. I am cautious about making forecasts and predictions and prefer instead to observe and document the data as the peak oil story unfolds. I have in fact published a couple of charts recently illustrating aspects of peak oil, one showing a possible peak in the rest of the world that excludes N America and OPEC (Figure 1). The other showing the undulating plateau in conventional crude + condensate that has persisted since 2005 (Figure 2). In my last post on oil price scenarios two of those showed global oil production capacity 1 to 2 Mbpd lower in 2016 than 2014. If that comes to fruition, will we have passed peak oil but does it matter? Figure 1  Global oil production has been split into three geo-political categories: 1) USA and Canada, 2) OPEC and 3) the Rest of the World (RoW). RoW […]

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Global Systemic Financial Crisis 2015: Geopolitics, Oil and Currency Markets thumbnail For almost two years, by combining various points of view (speculative, geopolitical, technological, economic, strategic and monetary…), we have continued to anticipate a major crisis in the entire oil sector. Today, no one doubts the fact that we are actually at that point, and the GEAB must therefore anticipate the consequences of this veritable atomic bomb, which has begun to blow up all the old system’s pillars: everything which we have known, international currencies, financial markets, the US, the Western alliance, world governance, democracy, etc. Global systemic crisis: the end of the West we have known since 1945 Here, we would like to look back on a historic GEAB anticipation, that of Franck Biancheri in February 2006, which announced the beginning of the global systemic crisis under the title “the end of the West we have known since […]

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Oil storm clouds image via shutterstock. Reproduced at Resilience.org with permission. Oil prices have fallen by half since late June. This is a significant development for the oil industry and for the global economy, though no one knows exactly how either the industry or the economy will respond in the long run. Since it’s almost the end of the year, perhaps this is a good time to stop and ask: (1) Why is this happening? (2) Who wins and who loses over the short term?, and (3) What will be the impacts on oil production in 2015? 1. Why is this happening? Euan Mearns does a good job of explaining the oil price crash here . Briefly, demand for oil is softening (notably in China, Japan, and Europe) because economic growth is faltering . Meanwhile, the US is importing less petroleum because domestic supplies are increasing—almost entirely due to […]

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A couple of years back, I attended a presentation by Tom Eizember, Exxon’s head of strategic planning.   During the presentation, Eizember asked how many in the audience believed in peak oil, and I raised my hand.  I believe I was the only one.  Exxon does not subscribe to peak oil And yet.  Exxon has issued its new Outlook (which is well worth a look).  One of the interesting features of this report is its view of conventional oil production, comprising traditional onshore and offshore / deepwater production.  In Exxon’s view, conventional production peaked around 2005 and is not projected to revisit this level until, at best, around 2040.  This is not particularly controversial, but it is interesting to see Exxon acknowledge it.  And it’s important for our understanding of the long term outlook for the oil supply and oil prices, which I consider in greater detail below. Exxon Global Oil Supply Outlook 2015 Source: Exxon […]

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Even some Opec members are fixing their spot crude contract prices on the assumption that contango is already under way According to the International Energy Agency, growth in world demand for oil will next year again fall below the critical figure of 1m barrels per day, reaching 93.3m bpd in total Photo: Alamy Contango, or not contango? This is perhaps the most important question facing oil markets right now. In the space of a week, the global three top energy organisations have downgraded their forecasts for the amount of oil they think the world will need next year to fuel the economy. These revisions are significant in the context of understanding why the price of oil has fallen so dramatically in such a short period of time — down 45pc since June — and helping to predict accurately where it is likely to be heading in the future. One […]

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Currently lower oil prices due to a combination of increasing oil supplies and subdued demand come at a high cost to the environment and the climate. Additional oil supplies are exclusively from fracking tight oil in the US and from Canadian tar sands. Fig 1: Production of US tight oil, Canadian tar sands and rest-of-world crude The graph shows that crude oil production outside the US and Canada is on a bumpy plateau since 2005. In fact, after 2011, rest-of-world crude production declined like in 2005-2007: Fig 2: Overlay of rest-of-world crude production 2005/07 and 2012/14 periods Let’s have a more detailed look at the changes to crude oil production since 2001: Fig 3: Incremental crude oil production Jan 2001 – Aug 2014 All data are from here:  http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm Incremental production is calculated as total crude production minus the minimum production in each country in the period under consideration, […]

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A couple of years back, I attended a presentation by Tom Eizember, Exxon’s head of strategic planning.   During the presentation, Eizember asked how many in the audience believed in peak oil, and I raised my hand.  I believe I was the only one.  Exxon does not subscribe to peak oil And yet.  Exxon has issued its new Outlook (which is well worth a look).  One of the interesting features of this report is its view of conventional oil production, comprising traditional onshore and offshore / deepwater production.  In Exxon’s view, conventional production peaked around 2005 and is not projected to revisit this level until, at best, around 2040.  This is not particularly controversial, but it is interesting to see Exxon acknowledge it.  And it’s important for our understanding of the long term outlook for the oil supply and oil prices, which I consider in greater detail below. Exxon Global Oil Supply Outlook 2015 Source: Exxon […]

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Red oil barrels image via ezioman/flickr. Creative Commons 2.0 license. Three things you shouldn’t miss this week Chart:  Oil production break even prices: Article:   Oil price plunge means survival of fittest  – Crude at $70 puts at least 1.5m b/d of projects for 2016 at risk Article:   Fracking could carry unforeseen risks as thalidomide and asbestos did, says report produced by Government Chief Scientist  – Historic innovations that have been adopted too hastily with grave unforeseen impacts provide cautionary examples for potential side effects of fracking. The price of oil crashed below $65/barrel this week, its lowest level since 2009. The speed of the fall, from $100/barrel as recently as September, has caused mayhem in the financial markets. The price drop may be seen by some as a Christmas present for motorists, but for oil companies already struggling with spiralling costs, and oil producing nations trying to balance state budgets, this […]

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Want to dazzle party guests this holiday season with a data-backed argument that the US oil boom may have peaked? Well, the US Energy Information Administration has a report you should probably read. Want to shut up that obnoxious blowhard who keeps using EIA data to support his argument that the glory days of US oil may have gone by? Want some government data of your own to defend your claim that we have yet to see the peak of US oil production? I have good news: You can use the same report . Last week, the EIA released its annual estimate of recoverable US crude oil and lease condensate in the US, which is based on engineering and geologic data and factors current economic and operating conditions heavily into its assessments. In short: if potential oil plays make no economic sense for an operator, they are not seen by […]

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With the on-going drop in oil prices —down from around $100 a barrel this summer, to below $70 at this writing—I’ve been closely following various assessments of what this means. How long will prices remain low? What impact will this have on the United States’ oil boom?  I’ve been curious to see how the U.S. Energy Information Administration (EIA)—the data-collection and forecasting arm of the Department of Energy—might adjust its forecasts in response to the oil price drop. Yesterday EIA issued its latest Short-Term Energy Outlook (STEO), a monthly report that gives forecasts for the following year or two. The verdict is: Nothing will change. As The Hill put it: “ Low oil prices won’t hurt US drilling, feds say .” Sort of. Below is the price drop so far, and EIA’s expectation that it will persist at least through the end of 2015. Figure 1 Figure 1 This […]

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The media is replete with stories of low oil prices killing the shale revolution.  This is not going to happen, and here’s why: the world remains dependent on US shale oil production growth. We at Princeton Energy estimate that oil demand should grow at around 1.6 million b/d  per year at $80/b, on a Brent basis, with that demand improvement becoming evident from the second half of 2015. Now, where would supply growth come from to meet that demand? It could come from Brazil and Iraq for starters.  Brazil’s offshore program is finally finding its legs, and production has been increasing at a pace of perhaps 200,000 b/d per year. Iraq, assuming it does not implode into civil war, could provide as much with some luck.  And perhaps another 200,000 b/d could come from various other sources, for example, from the US Gulf of Mexico in 2015.  And that’s […]

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For Anyone That Still Believes Collapsing Oil Prices Are Good For The Economy thumbnail Are much lower oil prices good news for the U.S. economy?   Only if you like collapsing capital expenditures, rising unemployment and a potential financial implosion on Wall Street.  Yes, lower gasoline prices are good news for the middle class.  I certainly would rather pay two dollars for a gallon of gas than four dollars.  But in order to have money to fill up your vehicle you have got to have an income first.   And since the last recession, the energy sector has been the number one creator of good jobs in the U.S. economy by far.  Barack Obama loves to stand up and take credit for the fact that the employment picture in this country has been improving slightly, but without the energy industry boom, unemployment would be through the roof.  And now […]

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Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem . If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem? Let me explain some of the issues: Issue 1. If the price of oil is too low, it will simply be left in the ground. The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics. If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price […]

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Not long ago, I wrote Ten Reasons Why High Oil Prices are a Problem . If high oil prices can be a problem, how can low oil prices also be a problem? In particular, how can the steep drop in oil prices we have recently been experiencing also be a problem? Let me explain some of the issues: Issue 1. If the price of oil is too low, it will simply be left in the ground. The world badly needs oil for many purposes: to power its cars, to plant it fields, to operate its oil-powered irrigation pumps, and to act as a raw material for making many kinds of products, including medicines and fabrics. If the price of oil is too low, it will be left in the ground. With low oil prices, production may drop off rapidly. High price encourages more production and more substitutes; low price […]

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On Feb. 1, 2011, oil prices rose above $100 a barrel. For the next three years, they largely stayed there, with few of the dramatic ups and downs that oil markets are famous for. So when prices began falling slowly in June of this year, most industry experts shrugged. Hundred-dollar oil was here to stay, right? That attitude has made the vicious plunge in oil prices over the past few months all the more shocking. U.S. oil production has been rising for several years; more recently, Libyan oil output has surged, too. Those increases collided with a weak global economy this summer to create a glut of oil. Late last month, members of the Organization of the Petroleum Exporting Countries (OPEC) announced that they would not cut their own production to compensate and stabilize prices. Oil promptly fell below $70 a barrel, down 40 percent from its June peak. […]

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How Low Can Oil Prices Go? thumbnail The price of oil in global markets has plunged by nearly 40 percent over the past six months. As a result, the price of a gallon of regular gasoline in the U.S. has dropped from an average of $3.68 in June to $2.74 this week. In June, the U.S. Energy Information Administration had projected that a gallon of gas would average $3.48 per gallon this month. What happened, and where might oil prices go in the next two to five years? What’s going on is that the world is awash in crude oil while the world economy is slowing down. Demand for crude has dropped, yet supplies are increasing; the predictable result is lower prices. A huge part of the glut in global production stems from the fracking boom in the United States that has seen domestic oil production rise from a […]

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As everyone knows, oil prices have fallen sharply and “unexpectedly” over the last few months, though this is not really unexpected to anyone who believes in markets or technological progress. But confidence in markets and technology does rule out a lot of liberals and virtually all environmentalists. As such, it’s fun to recall his Krugmanness declaring four years ago that “peak oil” was here to stay. In “ Our Finite World ,” Krugman demonstrated that what’s finite is his intelligence and imagination: Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months. So what’s the meaning of this surge? Is it speculation run amok? Is it the result of excessive money creation, a harbinger of runaway inflation just around the corner? No and […]

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What caused the recent crash in the oil price from $110 (Brent) in July to $70 today and what is going to happen next? With the world producing 94 Mbpd (IEA total liquids) $1.4 trillion has just been wiped off annualized global GDP and the incomes of producing and exporting nations. Energy will get cheaper again, for a while at least. The immediate impact is a reduction in global GDP and deflationary pressure. There is a lot of information to review and summarize and so this week and next we will present the story in stages culminating we hope with an oil market forecast scenario. Global Oil Production Figure 1 Global oil production has been split into three geo-political categories: 1) USA and Canada, 2) OPEC and 3) the Rest of the World (RoW). RoW production bears the hallmarks of having peaked in the period 2005 to 2010 and […]

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Resilience Published on Resilience (http://www.resilience.org) The world economy is slowing down and the authorities are fretting. Japan, Italy, and Greece are all in recession. China is slowing down according to official statistics, and even more according to whispered accounts. Germany, France and the Netherlands are all at stall speed. According to the BLS, the United States is doing just great at nearly 4% growth for two straight quarters, but you wouldn’t know that either from the quality of the few jobs being created (which is low) or from consumer spending (also low). The worry, as always, has nothing to do with the central banks’ concern for you, your job, your children, the actual prices you pay, wealth equality, or the future, and everything to do with the simple fact that the stability of the banking system absolutely depends on a steady stream of new loans. The problem, as always, is that […]

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The oil and gas boom in the United States was made possible by the extensive credit afforded to drillers. Not only has financing come from company shareholders and traditional banks, but hundreds of billions of dollars have also come from junk-bond investors looking for high returns. Junk-bond debt in energy has reached $210 billion, which is about 16 percent of the $1.3 trillion junk-bond market . That is a dramatic rise from just 4 percent that energy debt represented 10 years ago. As is the nature of the junk-bond market, lots of money flowed to companies with much riskier drilling prospects than, say, the oil majors. Maybe drillers were venturing into an uncertain shale play; maybe they didn’t have a lot of cash on hand or were a small startup. Whatever the case may be, there is a reason that they couldn’t offer “investment grade” bonds. In order to […]

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It was only four years ago that economist and New York Times Columnist Paul Krugman sounded the alarm on peak oil , lamenting that high oil and commodity prices reflect the fact that we live in a “finite world.” But now oil prices are plummeting as U.S. oil production booms due to hydraulic fracturing, or fracking, and horizontal drilling. On top of that, a new government report indicates that proved U.S. oil reserves have grown for the fifth year in a row. “U.S. crude oil proved reserves increased for the fifth year in a row in 2013, a net addition of 3.1 billion barrels of proved oil reserves (a 9% increase),” according to the Energy Information Administration (EIA). Proved reserves are oil and gas plays that are “recoverable under existing economic and operating conditions,” says EIA. As technology improves and the price of oil hits the right level, proved […]

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Remember "Peak Oil?" The world  was running out of oil , we were told: Prices would soon skyrocket, and we had better find other fuels. Well, that argument didn’t work out so well for environmentalists, did it? As oil reserves and those of other carbon fuels became scarce and prices rose, the law of supply and demand kicked in. The industry invested the profits from those higher prices in new technologies, and the oil barons found even more destructive ways to extract oil and gas—by exploiting the muck from tar sands, inventing hydro-fracking, and despoiling sources in developing countries. So now, oil is cheaper than it’s been in years, about $66 a barrel. Regular unleaded gasoline can be had for well under $3 a gallon. One of the few things sustaining U.S. consumer purchasing power in the face of dismal wages is close to $100 billion saved in energy […]

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“We don’t need to be flaring, and we can find an economic benefit to this natural gas.” These words were spoken by Mark Fox, chairman of the Three Affiliated Tribes — a group of Native American tribes from the Dakotas that joined together during the late 19th century after suffering massive population loss due to disease. The group recently bought land in some areas of North Dakota, including places where oil drilling has been prolific. Transform $1,000 Into A $238,960 Windfall With This Tiny Oil Stock! Since 2006, companies in the Bakken have drilled over 11,000 oil wells. Almost 40,000 miles of drilled space spiderwebs beneath the ground in the state. According to the  New York Times , if these well bores were dismantled and placed one after the other, they would circle the planet one and a half times. But a problem with all of the oil drilling has […]

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Summary Shale oil is totally different from conventional oil – production tracks oil prices lagged one year; new wells get payback in two years and their production is hedged. U.S. shale oil production in 2015 will be 6 Million barrels/day up from 4 Million in 2014 -regardless of oil price slump. Production will be flat in 2016 if oil prices stay low – which likely they will for four years. Saudi Arabia did not engineer the drop in oil prices – likely it was prospects for massive increase in U.S. shale-oil production. According to Reuters and CNN …and others, “OPEC” has declared war on shale-oil drillers in America. That’s a serious accusation. In the not too distant past whole countries were bombed back into the Stone Ages for lesser transgressions!! Saudi Arabia was the only OPEC member to forcefully advocate not cutting back, so for “OPEC” read “The Saudis” […]

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British banker and politician Nathan Rothschild once said: “Buy when there’s blood running in the streets.” And blood is certainly spilling in the streets of the oil and gas industry. The North Sea benchmark, Brent crude, closed at $70 a barrel on Friday, declining by 40% since June. Today it’s trading at around $71. Energy stocks around the world lost $500 billion of market value in the past week, while many oil-exporting countries will face budget crunches in 2015. Saudi Arabia needs Brent at $93 a barrel to balance its budget; for Russia, as high as $120 a barrel. We have argued for lower oil prices since last year, due to these three factors: 1. The unprecedented increase in U.S. oil production due to more efficient horizontal drilling and hydraulic fracturing technologies; 2. Weak demand growth in developed countries; 3. The imminent slowdown of the Chinese economy, which has […]

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Years ago, at an international conference on peak oil, I met I had no way to check Ruppert’s statement, but, on the whole, it made sense to me. The CIA, after all, is an “intelligence” agency and their main purpose is to collect data. So, the fact that some CIA people were attending a meeting on peak oil didn’t mean that it was because they thought we were dangerous subversives. They were simply doing their job: collecting data about peak oil; a dangerous economic and political problem (or maybe both things….. Who knows?) Over the years, I have occasionally wondered about what the Central Intelligence Agency may know about peak oil. They surely have lots of data on the world of oil, including data that for us – common citizens – are not available. In principle, they could do a much better job than the ragtag group of geologists […]

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When an asset class takes a swan dive off the cliff, fortunes can be lost trying to call the bottom. It’s often impossible to tell whether the asset in question is on a suicide run or undergoing a short-term correction. And so it is with oil. Oil prices are down by a third since June and are less than half of their 2008 high of $147 (U.S.) a barrel. So time to buy? If I knew how to call bottoms, I would not be a miserable, ink-stained wretch; I would be filthy rich and living in a villa on the Amalfi Coast or Côte d’Azur, martini in each hand. But allow me to present four ideas of why the foundation for a compelling oil price bounce-back is being set even as prices tumble. I’m just not going to tell you when that might happen, because I have no clue. […]

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The recent price crash in crude oil, if it lasts for any length of time, will certainly affect oil production. The question is, just how great an effect will it Continue Reading

Crude Oil Does The Limbo: How Low Can It Go? thumbnail The commodity market for crude oil may have been the one of the two most exciting financial markets around the world during 2014’s first 11 months. Crude’s price per barrel rose to a high of $107.95 June 20, according to Federal Reserve Economic Data , or FRED. And oil’s price per barrel fell to a low of $66.15 Friday, based on its January 2015 futures settlement price at the CME Group . This breathtaking plunge of -$41.80, or -38.72 percent, has had and will have major — and wildly uneven — implications for crude-oil consumers and producers globally. Accordingly, both the winners and the losers in the new petroleum pricing game have stakes in attempting to contextualize where the commodity’s market has been, is and will be. For example, airlines in the Asia-Pacific region generally have not yet […]

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