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$200 Oil Is Coming While We Waste a Perfectly Good Crisis (Part 3)

Excellent article, well researched James !!!

I have read the Hirsch report, Simmons's book, and Colin Campbell's numerous articles. I have come to the same conclusion as you, that we will be in a lot on trouble by the middle of next decade if no comprehensive energy plan is implemented.

Your Oil Stocks Aren't Coming Back

Comparing oil services stocks and internet stocks is like comparing apples and oranges. The world can live without eBay or Amazon, but cannot live without oil and gas.

Conventional oil production has peaked. This is why major oil companies are investing heavily in non-conventional projects like the oil sands, deep sea drilling and tight gas extraction. The current economic malaise has hidden the fact that peak oil is happening. The services companies RIG, DO, and NOV as well as producers CHK and COP are excellent long term plays when the economy (and oil demand) recovers.

Alternative energy sources (solar, wind, hydro) currently makes up less than 5% of the world's energy mix. It will take at least 50 years to get off of oil and gas. Oil and gas is king till the middle of this century.

The Escalator of Life Is Going Down (Part 2)

>>>In the bully pulpit was our first Harvard MBA President George Bush, proclaiming the benefits of free market capitalism while not being able to pronounce or spell derivative, let alone understand them. <<<

>>>Their models, created by overly confident MBAs, assured them that nothing could go wrong. <<<

Let's see we have George W Bush and Henry Paulson with Harvard MBA's. But, Warren Buffet was refused admission to Harvard business school in 1950.

There is the problem. The admission committee at HBS is essentially determining the future leaders of the US based on an applicant's connections and not their capability or potential.

Why Is Oil Trading at $53 When Supply and Demand Is So Bearish?

$145 oil will look like a bargain by the middle of the next decade.
Oil demand is ramping slowly around the world.

In India, the Tata car (priced at $2050) was officially launched today. The target market in India for this car is the middle class (currently numbering at 50 million people). This number is expecting to hit 583 million by 2025 according to McKinsey & Company. That is equivalent to adding two more United States size consumer groups in competition for the dwindling world's oil supply.

Next to India, China is taking advantage of the drop in resource prices and buying up everything from copper to oil. They have been signing long term deals with Russia, Brazil, Venezuela, Iran, etc. The loading up their SPR's feverishly with cheap oil. The Chinese are thinking long term.

On the homefront, the USA has put energy independence on the back burner and instead is investing trillions in bailouts. Obama has allocated a measly 43 billion on alternative energy and related infrastructure. The opportunity to make the USA the world leader (and exporter) in alternative energy technology is being squandered to help Obama's Wall street and UAW buddies instead.

Oil Stocks: Where Can You Find Black Gold?

Michael66,

I agree with you all on the new oil sources mentioned in your list, but you cannot lump them all in one basket.

Conventional oil (Sweet crude) has a marginal production cost (MPC) of production below $30/barrel.

Non conventional sources like the Canadian oil sand have MPC of $50/barrel and deep sea oil (Brazil Tupi fields) has an MPC of $70-90/barrel.

Same comment on gas production. Conventional loose gas is much cheaper to produce than tight shale gas.

As oil prices drop, investment in non-conventional drops off and more of the cheaper and easier to produce conventional stuff is used up faster.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

The stock market was artificially inflated in the late 1990's thanks to the internet boom. Normally stock market indexes appreciate anywhere from 10 to 12% per year on average. In the short period of 1995-2000 we saw the DJIA shoot up 150% and NASDAQ go up 500%. Anything over 15% gain per year is unsustainable over the long term. The current DJIA = 10000 is actually the value it should have grown to since 1995.

Although gold is a good hedge. I can live without gold.

I cannot live without oil, which is used in thousands of applications (besides transportation). I think my money will appreciate the most over the long run invested in oil and gas.

The 95% of the world's energy mix (according to the BP statistical survey and the EIA) comes from oil, gas, coal & nuclear. Oil and Gas will be the key energy sources from the next 40 years. Alternative energy is still in its infancy. Solar and wind account for only 1% of the world's energy mix. Natural gas would be a good transitory solution, since existing cars can be modified to run on it for only a few thousands dollars. This is a much cheaper alternative than hybrid, hydrogen or electric cars.

$200 Oil Is Coming While We Waste a Perfectly Good Crisis (Part 3)

The irony of crisis facing the United States is that Bush 43 actually brought on board the right people on board to address the energy dilemma.

Matthew Simmons served as energy adviser to U.S. President George W. Bush.

Robert Hirsch was commissioned to write the report "Peaking of World Oil Production: Impacts, Mitigation, and Risk Management", for the United States Department of Energy in 2005.

The problem is Bush totally ignored what these two brilliant individuals advocated which is a comprehensive energy plan.

The hiring of Steven Chu as Energy Czar by Obama does not inspired any confidence in me. He is an academic with no actual industrial experience in conventional oil and gas technology nor alternative energy technology.

High Gold Prices: It's the Oil, Stupid

It looks like you can't even trust gold bullion in 400 ounce bars anymore either. Several gold bars shipped to Hong Kong from the Bank of London were not really gold but gold plated tungsten (which has same density as gold)

www.marketoracle.co.uk...

eBay: Growth at the Right Bid

The bottom line that is eBay's lack of customer service will kill it in the end. Sellers do not like paying ever increasing exorbitant fees and get zero customer service and get their rights striped away (i.e. no seller feedback mechanism).

Ever try to contact Ebay customer service? They make it so excruciating painful that most people give up. When you do find the link, and your service request you will never get an answer.

Contrast this with Amazon. On several occasion where I wanted to make changes to existing orders, I sent and received responses (and completed actions) within 2 hrs. My expectation was 24 to 48 hrs reply time.

Canadian Energy Trusts: The Best Long Term Income and Dollar Hedge?

notagoldbug,

A few comments:

1) The 2011 legislation has already been factored into the current pricing of income trusts.

2) In 2011, most income trusts will convert to a standard corporate structure and the income will be distributed as dividends. Corporations will pay taxes on the income before distribution, but since dividends have a more favorable tax treatment, you can recoup this tax paid by the corporation as a tax credit provided your income trust is held in outside a retirement account (i.e RRSP, LIRA, IRA, etc).

3) ) I have no problem with distribution cuts when the price of oil and gas drops or if the redirected cash is used for paying down debt faster (a good idea in this low interest environment) or acquiring new reserves.

4) Canroy and MLPs are not the same thing. MLPs distribute cash from depleting assets. Canroys are permitted to acquire new properties and replenish their assets, which MLPs are not permitted to do.

12 Reasons I'm Still Buying Oil

Oil is a good investment for the next 40 to 50 years for the simple reason that there is no substitute(s) that can replace all of oil's thousands of current applications.

NG powered, hybrid, PHEV and fully electric cars are feasible solutions but are currently deployed on a very small scale.

Wind and solar power for generating electricty also has great potential, but accounts for less than 5% of the world's electric power.

On the other hand, there are no substitutes for oil in the following applications:

1) Petrochemicals are used in thousands of goods like plastics, pesticides, medicines, etc. There is no substitute for the petrochemcial industry. Derivatves from coal and sugar can only be used in a handful of applications..

2) Lubrication is another key use of oil and no viable substitute exists.

3) Shipping is dominated by diesel powered vessels. The alternatives are sails, coal and nuclear. Each has its own major drawbacks.

4) Aircraft can only be powered by kerosine. Yes, Richard Branson promoted a trial flight with kerosine thinned with biofuels. This is more of a publicity stunt rather than a realistic solution. Biofuels on their own cannot be used in aviation.

The End of the Oil Age? Not Quite

Hybrids (gasoline/electric) have a long way to go , besides the $50,000 price tag. TV commercials claim hybrids have saved 1 billions gallons of gasoline since they were introduced. Assuming a 40% yield (17 gallons) of gasoline from 1 barrel of oil and factoring in that the US consumes 22.5 mbls/ day, we get the following result: 1 billion gallons of gasoline translates to an insignificant 59 million barrels of oil (2.5 days worth) saved in the United States over a 10 years period. Conclusion, hybrids technology is over-hyped.

I agree with you that natural gas transportation will help, but to a point.

But remember three things:
1) Natural gas will also exhibit "Peak Gas" one or two decades after "Peak Oil".
2) Conventional natural gas reserve declines are much steeper than oil reserves.
3) Non-conventional gas fields exhibit an even faster decline, up to 50% to 80% reserve decline after only one year. Larry Bellehumeur's SA article of August 18, 2009 had an interesting discussion around this point.

Fisking Scientific American on Peak Oil

Scientific American supported Peak Oil theory when they published an article called ""The End of Cheap Oil" by Colin Campbell & Jean Laherre in March 1998.

www.dhushara.com/book/...

I guess American Scientific now prefers to be in the Peak Oil denial camp with lunatics like Yergin, Lynch, Morse, and Jaffe.

I have more faith myself in Simmons, Campbell, Laherre, Hirsch, Deffeyes, GoodStein, Rubin, Skrebowski and Bakhtiari.

What's the U.S.'s Energy Policy?

The problem with politicians is they are always in the dark about what has been done before in their own backyards.

The Pickens Plan is definitely a great idea: simple, but far reaching its impact of reducing foreign oil imports.

Bush 43 had a top notch energy expert working for him (i.e. Matthew Simmons) and totally disregarded his reommendations. He puts out excellent presentations:
www.simmonsco-intl.com...

A comprehesive energy plan was commisioned by the DOE and produced in 2005 by Robert Hirsch and of course totally ignored.
www.hilltoplancers.org...

My recommendation to Obama is fire Steve Chu and speak to Simmons, Hirsch and Pickens.

Climate Change: How to Invest for the Possibility

Joseph,

I would NOT take Al Gore opinions very seriously. His record speaks for itself. I have to question Al Gore's real motives.

His global warming crusade is making a lot of green for him. He gets a minimum of $100,000 for every 90 minute talk his gives on global warming. No wonder he did not want to run again for president in 2004 nor in 2008 and get only a measly $200,000 / year salary.

thesmokinggun.com/...

You would think someone worth $100 million would do these talks for free, especially if he really believes in climate change.

A report by the Nashville Electric Service that showed Gore used an average 16,000 kilowatt hours a month for an average monthly bill of $1,206 in 2006. The typical Nashville home uses about 1,300 kilowatt hours. So much for leading by example !

Furthermore, look at Gore’s accomplishments with Clinton from 1993-2001. The CAFE standard was in good hands with Ford, Carter, Reagan and Bush 41. It rose from 15 to 27 mpg during 1975-1992. Clinton and Gore (Mr. "Earth in the Balance") were pandering for UAW votes in the 1990's and they expanded the light truck exemption to include Hummers, SUV, Jeep and Minivans and that essentially killed CAFE and it is now been flat at 27 mpg.

The real motive for Gore’s climate change crusade is to make more green for himself. He stands to gain the most from cap-n-trade and may become the first carbon billionaire, if the legislation goes through.

network.nationalpost.c...