Michael Fitzsimmons

Fadel Gheit: Oil Prices to Remain Inflated but Don't Pass on Gas

to say that oil isn't trading on fundamentals after 2008's supply/demand thin margin, an oil war in iraq that took millions off the margin (and added a geopolitical risk that has not gone away), the current iranian crisis, and the fact that china is circling the globe locking up oil deliveries well into the future, is simply putting one's head in the sand. with all due respect to mr. gheit, he is overstated the role of financial manipulation. the fact is, all the issues i listed above will continue to firm foundation under oil, and if the world economy ever begins to function "normally" again, you'll see oil prices zoom higher and eclipse the $147/barrel high very easily - especially when you consider that oil is priced in U.S. dollars, and we've all witnessed where that is going. at the same time, the U.S. is awash in natural gas, and as pickens said on CNBC the other day, we're *stupid* not to use natural gas in the transportation sector.

Oil Supplies Confound Analysts and Industry Monitors

longer term, you can call it peak oil, or, as i prefer "worldwide oil supply will not keep up with worldwide oil demand". therefore, long term, the trend for oil is permanant contango. meanwhile, the world is simply flush with abundant, clean, and cheap natural gas. so, why is the US still burning coal and foreign oil? if only obama, chu, and bernanke understood what is so clear to so many: natural gas and the U.S. nat gas pipeline grid is our strongest economic and strategic advantage over every other nation on earth. we should be moving toward NGVs and CNG refueling stations as fast as we can!

Peak Oil for Dummies

to the author: on "alternative energy" you didn't mention natural gas powered transportation. please read my articles on this subject. here is the best transportation solution for the US:

www.autoblog.com/2008/...

think a prius running on US produced nat gas as opposed to foreign oil. that said toyota won't manufacture the car in volume because the US government won't support NGV's or the refueling infrastructure to support them. think of the NG infrastructure the money blown on "cash for clunkers" would have bought. instead, we simply have more (and newer) cars running on gasoline (foreign oil). the US gov knows that it will have ultimate control of the american people if it can control their gasoline supply and thus their mobility. so, congress is instituting executive branch martial law legislation, and building up the military for internal use purposes. meanwhile, the american electorate is watching american idol and sports thinking everything is fine and the american dream is still alive...

Peak Oil for Dummies

the question really isn't if peak oil has been reached or will be reached in the next few years. as 2008 showed us, the earth has reached a point where oil supply cannot keep pace with oil demand in a fully functioning oil based world economy. i have been searching for a solution to a future which dr campbell, whom you quote, so accurately described. there is only one solution: natural gas and natural gas based transportation. yet for all the logical arguments i can and have presented on seeking alpha, still the naysayers want to stay addicted to oil, despite the scary writings on the wall of 2008 and the subsequent economic fallout. the US in particular is in denial - its media, its government, and its citizens. since the US is 5% worlds population and consumes 25% of the world's oil, it doesnt take a rocket scientist to figure out the US will be the hardest hit country when the realities of oil supply and demand strike again (and it won't be long). thanks for the aricle, but i think the only way out of the mess for the US is for the 50 states to band together, call for a constitutional convention, disolve the present congress, and start over with governmental and energy reform as the top 2 priorities. otherwise, the US is going to lose its wealth, freedoms, and democracy much faster than it gained them.

How High Will the Price of Oil Go?

coal is a superb feedstock to create oil equivalents?? i will pull a john mcenroe: "you cannot be serious!" nothing can be "superb" if it destroys the environment. and i am not just talking CO2, i am talking about all the toxic heavy metal waste and particulates that comes along with coal. why on earth people want to take coal and make oil equivalents out of it when we can run transportation solutions on cleaner, cheaper, and abundant US natural gas reserves is simply beyond my comprehension.

Why Is Oil Creeping Back Up?

"creeping" up? i say more like galloping higher. to the comment above:

"oil prices up ...dollar going down...simple" (34 thumbs up...)

it actually isn't that simple. since march, oil is up over 50% and yet the dollar is only down what, 9% or so? the reason oil is going up is not only a falling dollar, but supply and demand fundamentals and traders' understanding that despite near 20 year high US inventories, a functioning world economy will burn that off very quickly (a few months). china just set a record for monthly car sales. india is selling cars and motorcycles as well. meanwhile, on the supply side, not only is OPEC cutting production but oil company E&P budgets around the world have been cut back due to the economic contraction. this sets up the next oil price spike. now, i am not saying oil prices won't retreat in the short term - i would not be surprised. that said, if the world economy begins to function "normally" again, you'll continue to see higher and higher oil prices. if the US (which consumes about 25% of total world oil supplies and imports 65% of that) continues to bank on gasoline for its main transportation fuel (instead of domestic natural gas, to my dismay...), the long term picture holds points to ever rising oil prices, an ever declining US dollar, and a declining standard of living for US citizens.

Oil Rises Again: What Does it Mean?

current low oil prices are not the result of some new large supply source but rather from the severe worldwide economic contraction in oil demand, in part caused by $145/barrel oil in 2008. despite that high oil price last year, worldwide oil production never got higher than 65,000,000 barrels/day and production at the three largest US oil companies (XOM, CVX, and COP) was down year over year. the era of peak oil is here: worldwide oil supply will simply not keep up with worldwide oil demand (assuming a functioning world economy, present day withstanding). the only US fuel source that can be scaled up to solve the US's 65% addiction to foreign oil is natural gas:
seekingalpha.com/artic...

US natural gas resources are abundant, it's clean, and it's cheap.

we also need a strategic, long-term, comprehensive energy policy:
thefitzman.blogspot.co...

if the US doesn't get serious about our oil crisis, we will continue to be on an economic yo-yo while our energy capital flows out of the country at an alarming rate.

Non-Opec Oil Production Has Peaked

just another in a plethora of reasons the US needs a strategic, long-term, comprehensive energy policy:

thefitzman.blogspot.co...

a key tenant of this policy is an industrial recovery program centered on a transition to abundant, cheap, and clean natural gas powered transportation. read:

www.the-get.com/

the US should become the leader in NGV manufacturing, CNG refueling infrastructure, and natural gas power generation. this would create millions of jobs, reduce foreign oil imports, reduce CO2 and particulate emissions, and protect us from the peak oil bullet that is aimed right between our eyes.

Watch for Yourself: 60 Minutes Oil Story Was Spot On

worldwide oil demand has dropped by over 5 million barrels a day due to the economic contraction. at 5 million barrels a DAY, it does not take long to fill all the storage tanks around the world. oil is now being stored on tankers on the high seas. the reason for low oil prices is not due to new huge supplies coming online, they are due merely to demand falling off a cliff.

similarly, the high oil prices in 2008 were due to the inability of worldwide oil supply to keep up with worldwide oil demand. despite $145/barrel oil and $4.50/gallon gasoline, production at XOM, COP, and CVX was down year over year as it was at many other international oil companies. did speculation and the falling dollar have something to do with $145/barrel? of course. was it the main cause? absolutely not. commodities still trade on fundamentals, especially a commodity like oil, which has many private and governmental players, and is a very liquid worldwide market.

Crudomania Is Over

longoil: well, there have been a few elephant discoveries in the last few years: tengiz in the caspian, chevrons jack find in the GOM, and the huge finds by petrobras off the coast of brazil. that said, all of these new finds are either very deep (brazil, GOM) or technically challenging (high sulfer in the caspian)...i.e. *expensive*. regardless, your point is well taken because despite these finds, the depletion rates of current mature fields swamp this new production (which except for tengiz, aren't even online yet).

Crudomania Is Over

To suggest crude oil is similar to tulip bulb mania, and to suggest 2009 crude oil prices were due to speculation, is ridiculous.

Despite crude oil prices of $145/barrel and gasoline at $4.50/gallon, worldwide oil supply never got much over 86 million barrels a day.

The only reason crude oil prices have fallen as much as they have is because demand has fallen off a cliff due to the deep economic crisis which was due, in part, to the sky high oil prices to begin with.

The US federal reserve and treasury are printing money as fast as they can to reflate the economy. As long as the US government continues to try to fix a commodity crisis (oil supply) with financial tom-foolery, the US economy will continue to suffer as everytime it begins to recover, oil prices will rise and nip it off in the bud. The *only* structural fix is a strategic long-term comprehensive energy policy (see my website). Instead, the US sticks with its oil centric policy and it's military imperialism in order to gain access to middle eastern and caspian sea oil assets. This will be a failed strategy as, at some point in the next 5-10 years, worldwide oil supply will simply not keep up with worldwide oil demand and the price of oil will skyrocket again. Not a good scenario for a country that uses 25% of the world's oil, imports 70% of that oil, and is bankrupt after the last 8 years of financial mismanagement.

Is Cheap Oil Compatible with Growth?

the only way to save the US economy in the long term is adoption of a strategic long-term comprehensive energy policy:

thefitzman.blogspot.co...

we are entering an era in which worldwide oil supply will simply not keep up with worldwide oil demand. the current low prices of oil and gasoline are simply due to the drastic demand destruction as a result of the financial crisis, the US, which imports 70% of its oil from foreign sources, is the most exposed economy on earth to the realities of future oil supply/demand realities. yet, our politicians, media, and the public in general just keep ignoring the magnitude and challenge of this oil crisis. you'd think $145/barrel and $4.50/gallon gasoline would have taught them something. on the other hand, i think obama "gets it", but his windfall profits tax comment and lack of focus on domestic natural gas and NGV's as a great way to reduce oil imports still leave me with lingering doubts.

Peak Oil - Are We There Yet?

Great article. Not only are you correct in that worldwide oil supply will not keep pace with worldwide oil demand, your investment conclusions are also correct (assume the bush administration's economic team doesnt completely implode the US financial system, in which case nothing but gold, chickens, cows, and a garden will work...and perhaps a few rifles and shotguns). however, in the big picture, your statement about energy policy is the big idea. the US needs a strategic, long-term, comprehensive energy policy like this:
thefitzman.blogspot.co...

the clock is ticking, the US political "leadership" is a joke (and borders on criminality), and the US is even in a weaker economic position than we were before, yet NO progress on the energy front. we'll slowly decline into economic and social chaos unless something changes very very soon.

Why $200 Oil Is Good for US Markets

$200 will probably be the only thing that will prod the government and citizens of the US to understand the danger of worldwide oil supply not keeping up with worldwide oil demand. The only solution is a strategic, long-term, comprehensive energy policy:

thefitzman.blogspot.co...

apparently, $145/barrel and $4.50/gallon gasoline was not enough of a kick-in-the-ass. perhaps $200 will do it...but i won't hold my breath.

Oil, Gas, Electric Cars, the Market and the Economy

well written article Jim. you seem to have a good grasp on the fact that energy is the main driver behind economic prosperity and thus the markets. as you say, energy has gotten beaten down badly. however, if the 1970's can be used as a guide, even as the US economy went into a deep energy driven recession, the oil and oil services companies had steller financial results and their stocks followed the earnings. currently, the talking heads on CNBC are celebrating "oil's big fall" as though it's a victory. it wasn't too long ago that $120/barrel oil would have been thought a catastrophe...but now they are celebrating? energy company stocks will come back with a vengence when the street and investors realize that they will be printing cash as long as the US has no energy policy and as Pickens says "no plan". here are the basic tenants of a long-term comprehensive energy plan:

thefitzman.blogspot.co...