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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • Depletion Curves: What Oil Depletion Teaches Us In Predicting The Silver Price 2 comments
    May 4, 2014 12:59 PM | about stocks: SLV

    Crude oil depletion can be a good indicator of what can happen to the price of something that gets depleted.

    The following is a extraction/depletion curve for U.S. crude oil. The blue area represents the U.S. crude oil reserve. As you can see, the U.S. has already peaked in oil extraction in 1970 as their reserves are diminishing.

    Now let's look at the world crude oil depletion curve. Almost the same, but the peak is delayed from 1970 to 2000. It's this curve that we need to monitor to guess what will happen to the crude oil price.

    When we look at the crude oil price, we can see that the 1970 U.S. crude oil extraction peak had spurred the OPEC crisis and a spike in the crude oil price occurred from $2/bbl to $30/bbl.

    Then, when world crude oil extraction peaked in 2000, we got a second spike in crude oil price from $33/bbl to $110/bbl.

    That's what I call the "price effect" of extraction peaks. Namely, that when the peak occurs, the price will move significantly higher the next few years.

    Now, what I find interesting is that we can easily use this little "theory" on other things and most particular on silver, because I believe we are nearing a depletion stage now on silver in a few years.

    So this is the current world silver extraction curve. We see that the peak will occur in 2020.

    The extraction curve can be seen below. You can see that silver extraction will rise the fastest in 2020. After that, we will only have lower and lower production going forward. And that's the time when the silver price will start to surge.

    Learning from the oil depletion curve is a good way to predict what will happen for silver a few years from now. And it will be rosy.

    Stocks: SLV
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  • WaveRider007
    , contributor
    Comments (650) | Send Message
    Lower/more difficult resource extraction and monetary easing/ base increase leads to inflation. Starting at base commodities like oil and the correlated PM's. Until funds stop shorting,begin to cover and then people see the prices jump at the pump, the first domino has not yet been dropped. Inflation is the invisible tax supplement collected by the government. Most people do not realize an extra dime on a dollar is 10% profit while the bank gives you less than 2% (two pennies, or a penny every year for each dollar) for you giving them your money for two years (and of course on top, you pay taxes on your windfall). At near zero/negative interest the money machine only goes one way now. Only a matter of time now before the Zeppelin lifts off.
    4 May 2014, 07:36 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » This little oil boom in the U.S. has delayed the oil price move, but the extraction of oil will dramatically drop in the next few years. Prepare for it.
    5 May 2014, 05:16 AM Reply Like
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