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 Prices

The Rise of “Saudi America”

This article first appeared at The McAlvany Intelligence Advisor on Friday, December 6th, 2013:

 

Back in early February Citigroup apologized for missing the huge explosion of oil and natural gas occurring in Texas, North Dakota, and elsewhere. Its report, entitled “Energy 2020: Independence Day” began:

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Even Lower Gas Prices are Coming, says CNBC

On Friday Anthony Grisanti was jubilant. Writing for CNBC, he predicted that gas prices, down significantly from where they were in April, would continue to slide by at least another 10 cents per gallon, perhaps more. That would bring the average price, currently at $3.29 a gallon, closer to

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CFR expert calls for elimination of Laws restricting Crude Oil Exports

Sounding more like a free market economist than the thoroughly establishment analyst that he is, Blake Clayton, writing for the Council on Foreign Relations (CFR) in a paper published last week, built a carefully crafted case for the elimination of all federal controls on exporting crude oil. Clayton, who received two master’s degrees from the University of Chicago and Cambridge University along with a doctorate from Oxford, was blunt:

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When will the argument over Peak Oil end?

When it’s clear that we’re running out of oil, as predicted by M. King Hubbert in what’s known as the Peak Oil theory. The theory, roughly stated, is that there will come a point in time when

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Cheap Abundant Natural Gas is a Game Changer, Says the IMF

Expressing surprise at the enormous increase in US production of oil and natural gas by unconventional means, Thomas Helbling, a division chief in the IMF’s (International Monetary Fund) Research Department, was forced to admit that it was free enterprise that was responsible for it after all. In his March 2013 article he wrote:

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Does the Fed have a Plan B if inflation gets out of hand?

Two smart people from Cato don’t think so, and it makes them nervous. Henry Manne and Richard Rahn have a crystal ball but it’s cloudy. They stayed awake nights dreaming up scenarios that would trigger hyperinflation – a roaring escalation of prices at the retail level – and then ask

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Gasoline Prices Set to Decline, says the Energy Information Administration

Noting that gasoline prices have risen by 45 cents per gallon since the first of the year, the U.S. Energy Information Administration (EIA) said it’s seeing signs of easing in those prices in the near future. It reiterated various causes of the rise in prices (currently $3.75 per gallon at the pump nationwide), such as

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Davos’ Theme of “Resilient Dynamism” Hides Real Agenda

The World Economic Forum (WEF) in Davos, Switzerland, opened on Wednesday with the theme “Resilient Dynamism” and an agenda that is the polar opposite. That theme, promoted by the WEF’s founder, Klaus Schwab, began with an accurate assessment of how the push for global government is increasingly being resisted, and

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Saudi America

I love Mark Perry’s expression, “Saudi America”, as he continues to survey the virtual explosion taking place in the oil industry in the US. It continues to illustrate what happens when free enterprise, private capital, and opportunity intersect without government intervention. Here’s a graph from his article:

Perry writes:

The increases in US crude oil output are accelerating, and the 23% annual increase through the second week of January  this year [compared to a year ago] was the highest yearly gain in domestic oil production in the last 20 years…

At the current pace of increase, US oil output could reach 7.5 million bpd by May of this year, which would bring domestic production to the highest level since January 1990.

Peak what?

Bottom Line: “Carpe oleum” (seize the oil)

Nothing I’ve seen better expresses how the free market works than this.

Huge Shale Oil Deposits Found (Too Bad They’re in California)

Hippie bug!

Hippie bug! (Photo credit: Wikipedia)

This is one of those good new/bad news stories, like seeing your mother-in-law drive off a cliff in your brand new Lexus. IHS Cambridge Energy Research has discovered 400 billion barrels of oil in California, an amount equal to half of the oil under the sands of Saudi Arabia, and far larger than the Bakken Formation in North Dakota or the Eagle Ford Formation in Texas.

It’ll be harder to extract because of how the shale oil is caught between folds of the earth’s crust, rather than sandwiched in layers in North Dakota and Texas. But several oil companies are investing in the possibilities and if they are successful (and left alone by environmentalists in Sacramento) the revenues could “solve the state’s budget crisis” all by itself, according to Katie Potter, a recruiter for oil field personnel at NES Global Talent. And just last month, 18,000 acres were offered to be leased out for initial drilling and “they were all snapped up” right away.

But the real problem will be, inevitably, Sacramento, the capitol city in the land of sunshine, fruits and nuts, especially enviros who never saw a drilling rig they liked. They especially won’t like how the oil will need to extracted because of the folds in the earth’s crust: instead of using fracking which involves water and sand and some chemicals, the process in California will involve hydrofluoric acid.

Omigod! Acid?

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Wolfcamp May Dwarf Eagle Ford and Bakken

English: Location of the Spraberry Trend in Te...

Location of the Spraberry Trend in Texas, with major and nearby cities. All data on this map is in the public domain; created by me in ArcGIS 9.3. (Photo credit: Wikipedia)

The Eagle Ford formation in Texas is estimated to hold 3 billion barrels of recoverable oil, thanks to fracking and the free market. North Dakota‘s Bakken formation is estimated to hold 18 billion barrels of recoverable oil, thanks to fracking and the free market. But, as noted at mysanantonio.com,

Get ready for what’s happening in West Texas, where oil and gas production is  ramping up in shale layers such as the Wolfcamp in and around Midland.

Remember that name: Wolfcamp. For the record, it’s also called the Spraberry Trend, but Wolfcamp is the name that’s catching on. Ken Morgan, director of the Texas Christian University Energy Institute, said, “We’re getting thousands and thousands of feet of pay zone [there]. It’s like the Eagle Ford on steroids. [We] haven’t even begun. We’re just in the toe of this thing.”

Just how big is Wolfcamp?

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Oil Prices to Hit $100 a Barrel Then Drop Like a Stone

Forrest Jones: Crude to Hit $100 a Barrel, But Sell the Rally

“This potential disruption is coming at a time where prices are already in the higher end. Unless we get a significant amount of oil capacity taken off the market, the chances are this sort of event [Tropical Storm Isaac] won’t have a significant impact from a medium-term point of view.” —Ric Spooner, chief market analyst at CMC Markets

Steel drums used as shipping containers for ch...

Steel drums used as shipping containers for chemicals and other liquids. (Photo credit: Wikipedia)

There are always “events” that, from day to day, impact oil prices: hurricanes, political unrest, Middle East tensions and threats, explosions (like the one in Venezuela last week), and so forth. But underlying these events is something much more predictable: the supply of oil coming to market is inexorably increasing, mostly from the US.

Here’s a quick summary:

According to Wikipedia, the US has 21 billion barrels of proven oil reserves. The Energy Information Administration (EIA) estimates that “technically recoverable oil reserves” are about 198 billion barrels.

But that doesn’t include the Bakken Formation in North Dakota. There, according to the EIA, there are another 503 billion barrels. And in Colorado and adjoining Rocky Mountain states there are another—ready?—2 trillion barrels of oil!

And this doesn’t include other finds around the world. This is just in the US.

Here are the official estimates: The US has

  • Eight times as much oil as Saudi Arabia
  • Eighteen times as much oil as Iraq
  • Twenty-one times as much oil as Kuwait
  • Twenty-two times as much oil as Iran
  • Five-hundred times as much oil as Yemen

Oil expert Spooner added:

The global demand outlook (for oil) is for moderate growth at best and is well covered by supply capacity. (My emphasis)

I’m looking for opportunities to sell into the current strength anywhere from here on up to about $102 a barrel (for U.S. crude) and $120 a barrel for Brent.

It’ll be fun to watch as oil prices peak at $100 a barrel and then drop like a stone.

Harvard Senior Fellow: Peak Oil Is History

Abu Dhabi skyline

With the publication of his careful study, “Oil: The Next Revolution,” internationally respected economist and senior fellow at Harvard University Leonardo Maugeri has persuasively buried the theory of “peak oil” beneath 75 pages of evidence to the contrary. He wrote:

Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices….

After adjusting for risk factors…net additional production capacity by 2020 could be 17.6 mbd [million barrels per day], yielding a world oil production of 110.6 mbd by that date….

This would represent the most significant increase in any decade since the 1980s.

At present total world production of oil is estimated at 73 mbd, and so if Maugeri is correct, that 110 mbd production will be 50 percent higher than today. That will confirm Maugeri’s prediction this “could be a paradigm-shifter for the oil world.”

Maugeri’s credentials are impressive. For 10 years he was the senior economic advisor to

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The Oil Bubble is Good for U.S. Manufacturing

A bubble.

The rising oil production from North Dakota’s Bakken Formation now equals that of Alaska’s Prudhoe Bay for the first time, according to the Wall Street Journal, due to technological breakthroughs such as fracking.

The recent surge in oil prices from under $80 a barrel last summer to over $110 per barrel in February has prompted a flurry of activity by oil producers to get in on the action. The price of leasing properties thought to hold millions of barrels of reserves has exploded, in some cases tenfold, in Pennyslvania, Texas and elsewhere. These are prices not seen since before the onset of the Great Recession in 2007, with Chinese, French and Japanese explorers committing $8 billion just in the last two weeks to secure oil leases.

Marubeni Corporation, a Japanese commodity trader, agreed to pay $25,000 an acre for a piece of Hunt Oil Company’s Eagle Ford shale property in Texas, while Marathon Oil closed on a lease nearby at $21,000 an acre. Leases in Utica shale in Ohio and Pennsylvania jumped ten-fold in just five weeks to $15,000 an acre.

Others, such as Exxon Mobil and Royal Dutch Shell are reconsidering deep-water discoveries in West Africa and in the Gulf of Mexico now that

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Budget Deadlock, Despite House Passage of Ryan Plan

Ron Paul's blimp

The budget plan of Wisconsin GOP Rep. Paul Ryan passed the House on Thursday 228 to 191, mostly along party lines. In fact, not a single Democrat voted for it, signaling that it won’t see the light of day in the Democrat-controlled Senate as predicted here. The previous day, the House overwhelmingly rejected 382-38 the Simpson-Bowles deficit reduction proposal, which incudes tax increases as well as spending cuts. Last week, the administration-supported budget bill was also voted down, 414-0, which leaves the legislative branch of the U.S. government in limbo.

Supporters of the Paul Ryan budget trumpet that his bill would simplify the tax code and modify Medicare, putting more control into the hands of the states. White House spokesman Jay Carney disagrees, saying the changes proposed to Medicare would “burden seniors and end the program as we know it,” while giving tax breaks to millionaires and cutting critical jobs programs.

Speaker of the House John Boehner lost 10 Republican votes, including several who said Ryan’s bill was too weak. Rep. Ed Whitfield (R-Ky.) declared, “I’m not going to vote for a budget that takes more than 20 years to be in balance.”

Each of the bills voted on, including Ryan’s, continues deficit spending for years into the future. Ryan’s plan spills red ink of $1.3 trillion over the next 10 years, while the White House budget projects deficits of $6 trillion, with the Bowles-Simpson proposal coming in at $4.5 trillion. But none of them addresses the real issue, according to Texas Congressman Ron Paul. In a statement issued after the vote on the Ryan plan, Paul said

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Gas Prices Up, Obama Poll Numbers Down

$4.06 Gas Prices, Lewiston, Maine, Cumberland ...

As gasoline prices approach (and in some places exceed) $4 a gallon nationally, the president appears to be taking much of the blame with two recent polls showing sharp declines in support for his handling of the issue.

The latest Washington Post/ABC News poll now shows a record number of Americans giving the president “strongly” negative reviews on his handling of the economy. Nearly two-thirds of those polled say they disapprove of how he is handling gas prices compared to just 26 percent approving—his lowest rating by the poll. Specifically, 59 percent of those polled disapprove of his handling of the economy in general, a jump of 9 points in just one month and this despite the appearance of some signs of an improving economy. Most of the damage being done to Obama is among independents with 57 percent now disapproving, along with 66 percent of white non-college graduates disapproving as well.

The New York Times/CBS poll also showed the president losing 9 percentage points of approval during the past month, with 47 percent of those polled voicing their disapproval.

In a third poll by the Christian Science Monitor two-thirds of those polled say that the government should allow increased production from offshore wells and from shale deposits on federal lands as a way to increase supply to bring down prices. 54 percent favor drilling in the Arctic National Wildlife Refuge (ANWR) in Alaska, while 47 percent favor rolling back some environmental restrictions to help increase energy production. That poll also reflected expectations that the price of gas will exceed $4 a gallon nationally within the next three months and one-third of those polled are expecting $5 a gallon gas by summer.

The president’s response has been, as it has been since his election, to push for alternative energy resources such as renewables and wind. His recent decision to stop the Keystone XL Pipeline project reflects his commitment to raising prices on oil in order to make alternatives more attractive. His comment on Saturday’s weekly address that “We can’t just drill our way to lower gas prices,” reflects that ideology.

In North Dakota, however, that is precisely what is being done to increase oil production, with North Dakota on track to overtake

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Solyndra Just the Tip of the Alternative Energy Iceberg

Solar Panels

In late October White House Chief of Staff William Daley ordered a complete review of all loan guarantees the Department of Energy has made to various energy projects. The review “is a tacit acknowledgement that the loan program [that supported the now-bankrupt energy company Solyndra]…has raised enough internal concern that an outside assessment is necessary…”, according the Washington Post.

While the review is supposed to take 60 days and will no doubt be an attempt to whitewash failed efforts by the government to jumpstart the economy through its support of the green industry, a look at past efforts is more than sufficient to conclude that such “investments” are more properly labeled “boondoggles” and an enormous waste of taxpayer money.

The spin on the review is already in. When Daley named Herbert Allison, a former assistant Treasury secretary, to head it up, he said:

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American Oil Development Undermines Green Movement, OPEC

Oil Derrick

The September 15 report from the National Petroleum Council expressed surprise at how much has changed just since their “Hard Truths” report of 2007 that domestic energy development was falling behind escalating demand.

The “Hard Truths” report stated that although “the world is not running out of energy resources…there are accumulating risks to continuing expansion of oil and natural gas production…[which] create significant challenges to meeting projected total energy demand.” As a result, the concept of “Energy Independence” is “not realistic in the foreseeable future” and therefore “the United States must moderate the growing demand for energy.”

In NPC’s letter to Secretary of Energy Steven Chu introducing the latest study, chairman James Hackett said

Extraordinary events have affected energy markets in the years since the NPC reported on the “Hard Truths” about energy in 2007. That study concluded that the world would need increased energy efficiency and all economic forms of energy supply.

This is still true today, but since then,

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The Oil Map of the World Is Shifting to the West

Trans-Alaska Oil Pipeline

Writing in the Washington Post on Friday, Daniel Yergin, author of The Prize: The Epic Quest for Oil, Money and Power (which was adapted into a mini-series by PBS in 1992) explored the shift of oil’s epicenter from the Middle East to the Western Hemisphere, expressing his surprise that “what appeared to be irreversible is being reversed.” He explains:

The new energy axis runs from Alberta, Canada, down through North Dakota and South Texas, past a major new discovery off the coast of French Guyana to huge offshore deposits found off Brazil.

The transformation is happening not as part of some grand design or major policy effort, but almost accidentally. This shift was not planned—it is a product of

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Ending Ethanol Subsidies Won’t Reduce Food Costs After All

summer sweet corn

Image by Robert Couse-Baker via Flickr

The recent attempt to terminate both the ethanol subsidies of $.45 a gallon and the $.54-per-gallon import tariff on Brazilian sugar-based ethanol by the Senate failed because it was an amendment attached to a bill that was doomed to failure anyway. Both will cease on December 31 automatically, ending 33 years of subsidizing the ethanol industry; however, food prices are likely to stay high anyway. The main reason is neither the subsidy nor the tariff, but the mandate by the government requiring

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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.