Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Oil Industry

An Inside Look at Venezuela’s Collapse

This article was published by The McAlvany Intelligence Advisor on Friday, April 21, 2017: 

Português: Brasília - O chanceler da Venezuela...

Marxist Nicolas Maduro

Andres Malave grew up in Caracas until Chavez took over. Then he and his family were able to escape – barely – to the US. Wrote Malave, “It was a hard choice, but in hindsight, we were the lucky ones.”

Now he laments the blind eye many Americans turn towards the rioting, the deaths, the crime, the economic devastation, and the ravages of inflation that Venezuela is suffering:

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GM Ceases Operations in Venezuela Following Government Seizure of its Plant

This article appeared online at TheNewAmerican.com on Thursday, April 20, 2017:  

English: Logo of General Motors Corporation. S...

Following the government’s confiscation of its parts plant, General Motors announced on Wednesday it was ceasing all operations in Venezuela. The company said the seizure was illegal and that it would seek legal remedies.

The announcement puts 2,700 workers making replacement parts in the plant out of work, with small comfort coming from GM, which said it would make “separation payments” to those employees.

But what then? Another 3,900 people will likely find their jobs in jeopardy as the 79 car dealers that employ them will also shortly disappear in the aftermath of GM’s decision.

GM joins an ever-growing list of companies that can’t operate in the socialist paradise run by Marxist dictator Nicolás Maduro, including

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More Evidence that OPEC’s Influence is Waning

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 22, 2017:

A measure of the success – and failure – of OPEC’s agreement to limit crude oil production can be seen in the chart of NYMEX crude oil price behavior (Sources below) dating from last fall. When the agreement was inked back in November, crude was at $46.50 a barrel. The price soared and traders got excited, putting in long bets that set records.

By early January, reality began setting in as compliance among the cartel’s members and non-members (who agreed to go along for the ride) began to wane. The roof fell in a couple of weeks ago when inventory builds continued to set records, and the price dropped through support at $50.

In other words, in OPEC’s attempt to birth an elephant, it succeeded in birthing a gnat.

Saudi Arabia maintained a stiff upper lip during the Houston oil conference, stating flat out that

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Obama Places Vast Majority of Arctic Ocean “Indefinitely Off Limits” to Drilling

This article appeared online at TheNewAmerican.com on Wednesday, December 21, 2016:  

The joint U.S.-Canada statement issued by the White House on Tuesday permanently blocked 115 million acres of the Arctic Ocean — including all of the Chukchi Sea and the vast majority of the Beaufort Sea — from energy development. Said the statement:

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EIA’s Energy Forecast for 2017 Laced With “Uncertainty”

This article appeared online at TheNewAmerican.com on Wednesday, December 14, 2016:  

English: Logo of the U.S. Energy Information A...

The U.S. Energy Information Administration (EIA) was hesitant to forecast where oil and gasoline prices might be in 2017. It said in its Short Term Energy Outlook published last week: “The values of futures and options contracts indicate significant uncertainty in the price outlook.”

Indeed they do. With a 95-percent confidence level, the EIA says the price of oil next year could vary anywhere between

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Oil Now in a Bull Market?

This article appeared online at TheNewAmerican.com on Friday, August 19, 2016:  

English: Logo of the U.S. Energy Information A...

Energy traders looking for any sort of news that would push crude oil prices higher have found two slender reeds: a falling dollar (making American oil more expensive overseas), and a surprise report from the U.S. Energy Information Administration (EIA) showing shrinkage in the vast oversupply of crude and gasoline that has weighed on the market.

Accordingly, the price of Brent crude (priced in London) and West Texas Intermediate (priced in Oklahoma) jumped by more than 20 percent over the last week, putting it into “bull market” territory. It has led observers to conclude that

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Oil Price Rise Only Temporary; Could Drop Back to Low $20s

This article appeared online at TheNewAmerican.com on Wednesday, August 10, 2016:  

On November 17, gas prices had dropped to $1.9...

In light of record supplies of gasoline and crude oil, why are prices rising? After hitting a low of $26 a barrel in January, crude oil topped $52 a barrel in early June, only to drop below $40 a barrel last week. The recent rise back above $40 is a head fake, according to oil analyst Stephen Schork, editor of the daily subscription Schork Report. The recent bounce forced massive short covering by traders convinced oil was headed back down to the $20s and had nothing to do with the fundamentals.

The fundamentals, according to Schork, are bearish for oil (and gasoline) prices, and not likely to change any time soon. Even the Energy Information Administration (EIA), the government’s watchdog agency in charge of predicting the future, has been forced to

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Comeuppance in the Oil Patch

This article was published by The McAlvany Intelligence Advisor on Wednesday, August 3, 2016:  

Looking down from Heaven, George Mitchell must be pleased with what’s going on below: oil inventories are growing to the point where offshore tankers and railroad tank cars are having to be used for storage, oil and gas prices are dropping along with the costs of all the other 6,000 consumer products made from petroleum, rig counts are increasing, production costs are dropping, and, best of all, OPEC’s influence is waning daily.

The Economist called Mitchell the father of fracking in its eulogy following his death in July, 2013. They referred to him as

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U.S. Oil Shale Producers Putting OPEC Into Financial Bind

This article appeared online at TheNewAmerican.com on Tuesday, August 2, 2016:  

This wasn’t supposed to happen. When OPEC decided in November 2014 to keep producing crude oil at or near maximum rates, it was following an unspoken strategy to force the U.S. oil shale industry to back off. That would allow prices to rise back to levels needed to fund the cartel’s military adventures and their welfare states.

Marginal producers in the United States did declare bankruptcy, while other producers stacked most of their oil rigs, cutting daily production in the country from 9.7 million barrels per day (mpd) to 8.5 mpd. This caused crude oil prices to rise from the low 30s to the mid 50s.

But then oil prices levelled off and began to decline,

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Ending Crude Oil Export Ban Already Helping U.S. Economy

This article appeared online at TheNewAmerican.com on Friday, July 8th, 2016:  

English: Crude oil tanker SAFWA moored off Rot...

Crude oil tanker SAFWA moored off Rotterdam.

Since the 1970s ban on exporting crude oil was lifted last December, the oil industry has given statists and anti-growth politicians a lesson in free markets: exports increased seven times their previous levels in just the first three months of 2016. And this in the face of an economy that is still suffering from the dregs of the Great Recession.

This was predicted by IHS (Information Handling Services), located near Denver, two years ago when the group stated that

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Oil Industry Facing Massive Challenges

This article appeared online at TheNewAmerican.com on Monday, February 29, 2016:  

Sunoco

Energy producers are facing challenges that are threatening the existence of not only marginal, highly-leveraged producers, but large companies as well.

Canadian-based Suncor is just one example. Known for its Sunoco brand (now Petro-Canada), Canada’s largest crude-oil producer reported three weeks ago that it suffered a fourth-quarter loss of $1.45 billion and that it was slashing its capex (capital expenditures) for 2016 by 10 percent, forcing its expected 2016 production to fall by the same amount. It is also selling assets in order to keep paying its dividends to nervous investors. But Steve Williams, the company’s CEO, told equally nervous participants that “We will be one of the last guys standing.”

Lamar McKay, BP’s deputy chief executive, did the same: “Times are tough. You’d almost call them brutal right now. But we will adapt. We will make it.” This from the world’s sixth-largest oil and gas company which lost $6.5 billion in 2015 and was forced to lay off more than 3,000 employees.

John Hess, CEO of the Hess Corporation, also pumped his company’s resilience in the face of low crude prices. A much smaller company than BP, Hess Corporation suffered a loss of $3 billion last year, its first in more than a decade. Said Hess: “Our company has some of the best acreage [in North Dakota]. We can be more resilient as prices recover.”

Taken together, the oil industry worldwide has cut more than 300,000 jobs since the summer of 2014 (the peak of oil prices), while capex of nearly $1.5 trillion will be cancelled between 2015 and 2019, according to the conference sponsor. So far nearly 50 U.S. oil producers have filed for bankruptcy protection this year, with many more sure to follow this spring as banks readjust their reserve valuations used to back up their loans. This could imperil more than $17 billion in debt held by banks.

The most important revelation at the conference came from Saudi Arabia’s oil minister, Ali Al-Naimi, when he said that his country — despite rumors to the contrary that had driven crude oil prices temporarily higher — had absolutely no plans whatsoever to cut production in order to support higher prices. On that news alone, NYMEX crude oil fell $2 a barrel on Friday.

One of the problems facing these executives is the fact that frackers continue to produce in the face of falling rig counts and smaller workforces. Peak oil production touched 9.6 million barrels a day last year and remains at 9.1 million bpd. Daniel Yergin, the founder of Cambridge Energy Research Associates (CERA), now a subsidiary of IHS Inc., expects things to get worse — perhaps much worse — before they begin to get better:

This year is going to be very rough on the industry, very turbulent. We think that the decline in U.S. production is going to get more serious — another 600,000 to 800,000 barrels a day in this kind of price environment.

Globally the energy industry cut capex spending in 2015 by nearly 30 percent compared to 2014, while those in the United States have cut even further: an estimated 40 percent. For 2016, IHS CERA expects several large U.S. producers to cut spending by 50 percent compared to last year.

In the meantime, there’s another problem: where to store the surplus crude oil, estimated to be piling up at the rate of 1.5 to two million barrels every day. Empty tankers are being leased to store the surplus, called “floating storage,” waiting for demand to pick up (or supplies to dwindle). Now there is “rolling storage,” with 20,000 empty railroad tank cars sitting in sidings and storage yards across the country. Salt caverns and tankers are almost at capacity, and companies such as the Musket Corporation are taking advantage. Musket is a privately-held shipping company in Houston that built its business shipping crude oil by rail. But now it is in the storage business, finding and leasing empty tank cars to store the surplus until that “turnaround” day arrives, when demand exceeds production, and the surplus can be sopped up.

Since there is little evidence on the horizon to support higher crude oil prices, oil industry executives are running out of options and optimism. It will take more than a stiff upper lip to jawbone higher oil prices. In the meantime, for many it’s a matter of survival until that happy day arrives.

Pollyanna in Houston: False Optimism Pervades Oil Conference

This article was published by The McAlvany Intelligence Advisor on Monday, February 29, 2016:

Cover of "Pollyanna"

Cover of Pollyanna

Author Eleanor Porter would be proud. Not only did her 1913 children’s book Pollyanna establish the “Pollyanna Principle” (someone with an excessively optimistic outlook despite facing all manner of difficulties), it set in motion eleven sequels by Elizabeth Borton or Harriet Lammis Smith. There were movies starting Mary Pickford and Hayley Mills.

All three authors were present in Houston last week, at least in spirit. First,

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Vulture Funds are Saving American oil

This article was published by The McAlvany Intelligence Advisor on Wednesday, January 13, 2016:  

Over time vultures have gotten a bad rap. Some refuse even to admit that the American Bald Eagle is a vulture, preferring to think of it as a magnificent example of strong individualism and pride. In fact they are birds of prey, scavenging the carcasses of dead animals or, in the case of the Bald eagle, swooping down to snatch an unsuspecting fish from the water with its powerful talons.

Vulture funds work in somewhat the same way. To put it crudely, they

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Oil Prices Down, Oil Bankruptcies Up, Industry Safe

This article appeared online at TheNewAmerican.com on Tuesday, January 12, 2016:  

Just before Christmas Bruce Richards, CEO of Marathon Asset Management, predicted that not only would the price of a barrel of crude oil drop into the $20s but that it would take a third of America’s energy companies with it. As head of a vulture capitalist fund, described as “focused on opportunistic investing,” he was expressing more hope than despair.

Managing more than $13 billion, Richards is waiting for

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Oil Price Rebound Not Likely to Last, Says the IEA

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 14, 2015: 

Since early August the price of crude has jumped almost 20 percent, moving some, including those in OPEC’s cartel, to conclude that its strategy is working: Flood the market to force prices so low that marginal producers, especially in the United States, will go out of business. With the resultant decrease in supply, prices will rebound, hopefully to levels where the cartel’s countries can continue to fund their welfare/warfare states.

Said the cartel last week:

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OPEC’s Strategy Appears to be Working: U.S. Layoffs Slowing Oil Production

This article appeared online at TheNewAmerican.com on Tuesday, October 13, 2015:  

On the surface, OPEC’s gamble appears to be paying off. As the oil cartel continues to pump at near maximum capacity, American energy producers are stacking rigs and laying off workers.

According to the U.S. Energy Information Administration (EIA), there were an estimated 700,000 workers involved in oil and gas development and production prior to the decline in oil prices. Since then, some 200,000 of those jobs no longer exist, rig count is down to record lows, and, if the EIA is correct, U.S. oil output next year will decline for the first time in eight years.

OPEC itself has estimated that

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Little Old Lady About to Make History in the Oil Patch

This article first appeared at The McAlvany Intelligence Advisor on Thursday, April 2, 2015:

Cover of "Well-Behaved Women Seldom Make ...

Historians like people who make history. People like Rosa Parks (the “first lady of civil rights”), and Suzette Kelo (see Kelo v. City of New London). So much so that Laurel Thatcher Ulrich made herself known by writing “Well-Behaved Women Seldom Make History,” in which she said:

Some history-making is intentional; much of it is accidental. People make history when they scale a mountain, ignite a bomb, or refuse to move to the back of the bus.

It may be that historians will someday add Sandra Ladra to that list.

Sandra Ladra was sitting in her recliner in her home in Prague, Oklahoma, on the evening of November 5, 2011, when

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Oil Production Still Increasing — Confounding Experts

This article first appeared online at TheNewAmerican.com on Monday, March 16, 2015: 

Logo of International Energy Agency

A month ago the International Energy Agency (IEA) began hedging its bet that declining oil prices would cut production: “U.S. supply [of crude oil] so far shows precious little sign of slowing down. Quite to the contrary, it continues to defy expectations.” 

This is how economists say “Oops!” 

On Friday the IEA was still astonished at the resilience of the oil industry as it continued to produce at record levels, despite predictions that declining rig counts would force production cuts. Instead, total U.S. crude oil production hit a high of 9.4 million barrels a day during the week ending March 6. 

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Will this be OPEC’s Final Failed Gamble?

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, February 18, 2015: 

Cover of "The Prize: The Epic Quest for O...

Six years ago historian Daniel Yergin wrote in The Prize about OPEC’s failed gamble in 1986. The cartel tried to secure its preeminent place among the world’s oil producers by forcing crude oil prices down:

Was the price now poised for a great fall? Most of the exporters [primarily OPEC] thought so, but they expected no more than a drop [from more than $30 a barrel] to $18 or $20 a barrel, below which, they thought, production … would not be economical….

 

Actually, operating costs – the cash costs to extract oil – were only $6 per barrel [at the time], so there would be no reason to shut down production at any price above that.

The cartel was hoping to squeeze out marginal producers, which would result in cuts in supply, allowing it to raise prices at will. It didn’t work then, and it isn’t working now. The Saudis apparently suffer from an appalling lack of understanding about how the free market works.

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Re-fracking Old Wells Is Extending the Fracking Revolution

This article first appeared online at TheNewAmerican.com on Tuesday, February 17, 2015:

English: A natural gas well (produces gas only...

A natural gas well

News that the oil industry is importing many of the new technologies developed by natural-gas producers, which led to steadily declining natural-gas prices, was greeted with great disappointment by at least one green group. Upon learning that fracking was not only a long way from disappearing in the face of declining oil prices but was actually on the verge of a resurgence, Sharon Wilson, a Texas organizer for Earthworks, told Bloomberg, “It’s terribly disappointing.”

It might be disappointing to Wilson, but

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.