longoil

The End of the Oil Age? Not Quite

I recently read some interesting data on the "Cash for Clunkers" program. Over 16,000 people that bought new Ford F150 trucks qualified for the CARS program. Similarly another 16000 people bought Chevy Silverados and also got the CARS rebates. What did these people trade in ? Hummers, Sherman tanks ???

The most interesting fact was that more people bought new Ford F150 trucks than new Toyota Prius Hybrids with the CARS program. So much for encouraging fuel efficent vehicles.

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.

Why Exxon Should Significantly Increase its Dividend

Check out the news headlines this morning:

"Cnooc challenging Exxon over Ghana oil""

www.marketwatch.com/st...

This is exactly why it is good that Exxon is hoarding cash. The Chinese have trillions in USD. Only totally solvent companies with cash surpluses like XOM or CVX can challenge the Chinese majors like PTR and CNOOC and guarnatee the US access to what-ever little oil is left in the world.

Why Exxon Should Significantly Increase its Dividend

long_on_oil

I have XOM and CVX as my main US holdings, but I agree having several foreign oil companies in your portfolio as a hedge against a falling USD and future windfall taxes.

In Canada, COSWF and ERF are great income picks that pay good dividends as well as ECA for growth as natural gas picks up.

In Europe I think BP, TOT, RDS and STO are all good bets.

PTR (China) and PBR (Brazil) are probably safe bets and have great potential.

The only region I would not touch is Russia. You probably know all too well about the forced renegotiations on BP with its TNK venture, I would avoid Gazprom and Lukoil like the plague. I can see Putin and gang screw foreign investors again once oil and gas prices pick up.

Why Exxon Should Significantly Increase its Dividend

MJE_PDX:

Buying the Kosmos stake in Ghana at $4 billion is chump change for Exxon. Exxon earns $40 billion profit per year and the Ghana stake would take them only 5 weeks to pay off in full.

I can see the "seven sisters" reunited as well in the near future. Already Exxon has swallowed up Mobil and Chevron has had Texaco and Gulf under their banner for a while. Exxon + Chevron is a definitely possibility. The non-US seven sister members like BP, Shell and the eighth sister Total (former CFP) might form a European super oil company. A XOM/CVX plus BP/RDS/TOT merger might be a bit trickier because of all the potential anti-trust issues. But then again American Lucent (former ATT) merged with French company Alcatel.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I agree the CEO at Exxon is overpaid, but Exxonmobil's finances are completely in order. Now, compare this to the CEO salaries in the following banking and investment firms in 2008.

1) Lloyd Blankfein, Goldman Sachs Group Inc., $42.9 million
2) Kenneth Chenault, American Express Co., $42.9 million
3) Vikram Pandit, Citigroup Inc., $38.2 million
4) Jamie Dimon, JPMorgan Chase & Co., $35.7 million

As a shareholder of Exxon, I say I got my money's worth. If I were a shareholder of bank or investment firm I would say I was cheated.

Why Exxon Should Significantly Increase its Dividend

long_on_oil,

I have to disagree with you that investments in oil companies are all going to zero for several reasons:

1) All major oil companies are continuously buying up their competitors or new reserves (Exxon in Ghana, Shell in Australia, and everyone is a player in the Canadian oil sands), but I agree this is a losing game that ends in 10 to 20 yrs.

2) All major oil companies are buying back their shares. They are shrinking their share base. Exxon spends half its money (30 billion / yr) on share buybacks. At the current rate, Exxon will be a private company before 2020. Every buyback campaign cranks up the share value.

3) I am a believer that significant advances in alternative energy will come from big oil companies. They all know peak oil is real. CEO's from Total, BP, Chevron, etc. have all publicly admitted this. Their current spending on alternative technology is small at the moment, but they have they have money to scale up production when the time comes. You have Exxon investing algae, Chevron in biobutanol, Shell in biofuels &hydrogen, Total in biomass, GTL & hydrogen and BP in wind, solar & biofuels. Unlike the internet revolution where quantum leaps came from two guys working in their garage, alternative energy technology needs big money to advance.

Why Exxon Should Significantly Increase its Dividend

Fitz,

I would like to see Exxon increase its dividend as well. But I would prefer Exxon keeps its immaculate balance sheet over a higher dividend payment. Exxon has a higher credit rating than the US government at the moment. I think the best investments in big oil are Exxon, Chevron, BP, Shell and Total.

I do not like Chesapeake or ConocoPhilips that are over extended in debt. I am quite surprised to see COP and CHK rising every day while XOM and CVX stay dormant.

H.R. 1835: Legislation for Natural Gas Transportation

Fitzman,

That is great news, finally less talk and more action in Washington on the NGV front.

Another good investment would of course be Exxon-Mobil who is pioneering many new technologies in tight gas and shale gas extraction. Here is a blurb from the XOM website.

"ExxonMobil technology has opened up so-called “unconventional” energy resources such as tight gas, heavy oil and oil sands — which previously were considered inaccessible or too costly to recover. For example, in Colorado’s Piceance Basin, ExxonMobil’s Multi-Zone Stimulation Technology (MZST) has opened up tight gas resources by allowing operators to create fractures in reservoir rock at a more rapid rate than conventional technology so gas can flow more easily. Using MZST and our Fast Drill Process, ExxonMobil is increasing recovery and production rates at Piceance while reducing development costs and our environmental footprint. Breakthroughs such as these have contributed to a recent increase in U.S. natural gas production"

Open Letter to Boone Pickens

La Marque,

Fitzman has been on a relentless crusade ever since I have been following his articles and has sent his comprehensive energy plan (which includes NGVs) to countless politicians (including the Obama team) with no responses or solicitations requesting campaign donations in return. Michael can expand further on this .

It is a very futile battle, even with determined politicians leading the charge in Washington. Roscoe Bartlett, Congressman from Maryland, is aware of Peak Oil. He gave a speech in April of 2005 entitled "Our Dependence on Foreign Oil." The speech was also an open letter to the president signed by many prominent people including 12 retired generals and admirals, five Secretaries of Defense, and several retired Senators and Representatives. In his speech he ruefully admits that had he given his speech a few years earlier, he would have been consigned to the same loony bin reserved for wackos.

For more information on Bartlett bartlett.house.gov/

Open Letter to Boone Pickens

Alexs,

Clinton's buddy Al Gore is all for alternative energy. And there is a good reason behind it, he stands to profit greatly from it.

Check out the following article:
"Al Gore Purchases Carbon Credits From A Company He Himself Owns"

www.digitaljournal.com...

Open Letter to Boone Pickens

Belseware,

Don't forget these other subsides as well.

Clean Coal ==> $29.81 /MWh
Ethanol and biofuels ==> $5.72 /MBTU

The Honeymoon Is Over: Gauging the Market with an Obama Presidency

I don't think we'll see energy independence with Obama's presidency. He has too many political debts to repay now. His energy policy is very fragmented and full of pander to special interest groups (i.e. Coal, Corn Ethanol, UAW, etc.). A complete energy policy would include: finding new reserves (until the 40-50 yr transition to renewables is complete), conservation and alternative energy. So far Obama's policy barely addresses any of these categories and his energy plan is full of sub-optimal proposals:

1) Gap and trade of emissions solves nothing and how do you police
compliance.
2) How does swapping sweet crude with sour crude in the SPR solve anything?
3) Raise CAFE standards 4% per year. A good idea, but remember it was
Clinton and Gore (Mr. Climate change) that introduced the light truck exemption clause that made CAFE impotent in the first place.
4) Windfall taxes for oil companies. This is brilliant, oil exploration and production is very capital intensive. Why would oil companies invest in new infrastructure to find new reserves if they will be penalized for making a profit on a risky venture ?
5) His pandering to UAW includes unions opening up the NAFTA agreement with Canada. What he fails to see is that Canada has the upper hand this time around. If his negotiations include cutting Canadian jobs, Canada can turn around kill the energy clause which guarantees that 60% of Canada's oil and gas production output is sold to the USA. Canada has plenty of other suitors like China and India that would gladly step in and buy from the 60% allotment. This would leave USA being even more susceptible and at the mercy of nations hostile to the USA (Venezuala, Saudi Arabia, Russia, etc.)

I hope I am wrong, but with oil prices hovering at the $60 mark complacency has returned and energy independence is on the back burner. It will only take center stage when it is too late and oil has surpassed the $200 mark.