Alamo

World Series of Crude Oil: Winner Decides Winter Gasoline Prices

The author's premise as well as the commentary by the responders all offer further rationale for effectively ending our dependency on crude oil refined products, gasoline and diesel, which the average American has little, if any, control over. "Any" control is reduced to paying for or not paying for the posted pump price. Fat choice that situation represents---either pay or park!

On the other hand there's the real possibility that utilizing our abundant natural gas reserves in the transportation sector could provide a measure of control through "demand" constraints. At the very least, transportation expenditures ought to be reduced in that scenario due to the complete disconnect in the equivalent heat value of the fuels: 8 gallons of gas or diesel at about $3.60 per gallon ($28.80) versus the current cost of a mcf of natural gas at $4.75. (I am aware that the gas and diesel price quoted are retail prices and the natural gas price is the comodity cost, but it illustrates an extreme unbalanced phenomenon in the two energy sources).

More demand---almost any additional demand can be expected to increase natural gas prices, but regardless it can double in cost and still be far cheaper than foreign sourced---and foreign priced crude. Include the adverse health and environmental aspects, the cost of keeping the Straits of Hormuz open, the Somalian pirates off the tankers and the shaky excuse of a democracy in Iraq and the cost of crude clearly becomes prohibitively expensive. Good for a bunch of terrorist-supporting sheiks and their Wall Street manipulating Buddies, but not so good for the average American driver and tax payer. Somewhere in this equation he ought to be considered.

Natural Gas: America's Energy Salvation

If you have any doubts whatsoever about our national vulnerability to continued reliance on a crude oil based economy flash back to 1973 and the Arab oil embargo. They curtailed crude exports for the US' backing the Israelis in the 1968 Arab/Israeli War. One day we were importing crude and the next day we were not. What a tremendous blow to the US economy. Our national mobility slowly ground to a halt and a national pre-occupation with where you could "fill up"--or at least get a few gallons of gasoline or diesel took pre-eminence almost immediately. Talk about an economic "hit". This truly was one. Finally, coincidental with the doubling of gasoline and diesel prices, the export limitations were lifted and the red and green flags used to signal fuel availability or worse--much worse---non-availability, were relegated to history.

That was a very painful episode and one that you couldn't imagine would not have spurred the nation to devise a plan to do whatever it required to make certain that it would never ever be repeated. We talked volumes but effectively did nothing. The Reagan Doctrine decreed that we spend billions building a military sufficient to "take" whatever oil we might need and use that threat to keep crude supplies flowing our way---an idiotic and utterly mindless approach that engenders world wide hatred, Islamic terrorism and "oil wars". There are monstrous costs for American tax payers in such a "plan" if you can call it such.

Now, almost 40 years later we are still strangled by the same dependency that we "enjoyed" at the time of that 1973 embargo despite the many warnings of the dire consequences it represented. The simple fact remains that "Big Oil" is not and has never been America's friend. They bought control of Congress and dictated through that body what our fuel "choices" will be and at what cost---they pull the strings and we dance. Now, at long last it appears that the natural gas industry is awakening to the fact that their worst enemy is in fact the Big Oil boys. The farther the gas industry gets from the crude oil people the better they will be. With the tremendous pressures generated by environmental activism the natural gas industry has much to gain from their much cleaner, domestic and superior product. Both coal and crude are vastly more polluting and less desirable than American natural gas.

While virtually no one believes that natural gas is the long term solution to the nation's energy dilemma, we must have mobility if our economy is to function and short term it represents far and away the best solution. Truly renewable energy sources are under development and it will take time before those energy sources have widespread application. As one commenter noted, the industry is "demand constrained" at present and that impediment can be remedied fairly quickly if the Congress acts in the interest of the American people (and not in the interest of the current American politician).

The Congress needs to pass legislation compelling the transition to a natural gas fueled transportation sector---and the President is waiting to sign it. The sooner the better

Betting on Natural Gas, Part II: Investing Ideas

Continuing our reliance on foreign national oil companies is absurd in view of the fact that we presently have proven reserves of natural gas to offset our "crude mania".

There appears to be overwhelming support in congress to transition this nation to one using compressed natural gas (CNG) in the national transportation sector although that body has been woefully slow to act. Quite possibly, at the end of the healthcare debate congress will get behind the CNG fueled transition issue.

Keeping the present 250 billion dollars currently being "exported" each year here in our economy has to be a powerful economic stimulous plan.

With 60 million homes in the US already served with natural gas and an increased availability of the home re-fueling units (Phill units) America could be driving on CNG relatively soon. Presently, those Phill compressors are too expensive to find widespread use, but I could see a situation where economy of manufacturing scale could make them more reasonably priced as well as more efficient. That potential 60 million market base should be a strong motivator.

Additional pertinent details on the positives of natural gas use in America can be found at :
America's New Natural Gas.com website

Natural Gas ETF Surges While Real Estate Drops

Many Texas school districts are running on compressed natural gas (CNG) or are in the process/planning stage of converting their fleets to CNG. Many municipal and state vehicles are following suit.

With Texas' air the most polluted in the nation that process has become a mandatory public policy and I look for it to continue and expand. With Texas' natural gas production at 25-30 percent of the national production there is no rational basis for doing otherwise.

It appears that the natural gas industry is finally beginning to realize that its worst enemy is "Big Oil". The adverse public opinion that that industry has had for years has been an anchor around the natural gas industry's much cleaner neck. OPEC is going to have to consider the competition that US natural gas reserves represent relative to the world pricing of crude. Going forward, the invariable transition to a US national transportation industry transition to CNG can and will put a serious dent in the current 25 percent of world crude demand that we currently account for.

Bottom line: as more and more school children ride to and from school on CNG powered busses, its just a matter of time before they begin driving CNG cars. Young people, well versed in environmental issues, will readily lead this certain coming change.

Natural gas' future looks bright indeed.

How Much Natural Gas Remains in the USA?

The US Energy Information Agency as well as the much credited Colorado School of Mines study pegged the US natural gas reserves at approximately 2,000 Tcf (trillion cubic feet).

These reserve figures place the US as the world's number 1 nation in the world gas reserves game.

Of course it's reasonable to suggest that higher gas prices will likely result in additional reserves. As several commentators have stated, natural gas exploration is a highly technical endeavor and hardly the willy nilly, hit or miss "wild catting" many people seem to believe it is. E and P companies---CHK, XTO, COG, DVN, ECA, etc have publicly stated that their drilling success rates aproximate 100 percent; ie,100 wells drilled and 100 wells commercially successful. This is a direct reflection of very sophisticated technology. With 3 D seismic surveys those operators KNOW what is down there prior to committing the 3.5 to 7 or 8 million dollars of BORROWED money on a gas well. In the oil/gas "patch" a true adage is: "If I drill, I hit". If anyone doubts this they might want to check the Texas Railroad Commission's website that recently noted 0 dry holes during the most recent reporting year. Fathom that. Not a single dry hole in the thousands of wells drilled in Texas.

The primary limiting factor in the exploration and production game is the cost and availability of capital in this capital-intensive industry. Like many say, "It takes money to make money". That is especially true in the exploration and production industry.

No one that has seriously studied the natural gas industry thinks that it represents a long term solution to our energy dilemma. However, it does afford us the opportunity to maintain our national mobility while solar, wind, wave, geothermal, hydrogen, etc overcome the problems that make those technologies available and economical. The inescapable fact is that natural gas is far and away the most superior fossil fuel we have.Whether we have 50 or 100 years reserves either way this ought to give our scientists and engineers the time they need to develop true renewable energy sources.

This nation can halve the tons of toxic pollutants belched into the atmosphere each day simply and quickly by transitioning the country to compressed natural gas. Natural gas is truly a national treasure.

Exxon Mobil Is a Buy

What XOM has done over the past 20-50 years is make a bundle of money and use it to make more. That is historical. Today, they are continuing to champion a resource that is quickly disappearing regardless of what their vast propoganda machine spiel sets forth.

XOM's proven reserves are decreasing at around 5 percent annually over the past 3 years and it is doubtful that that trend will not continue. What does their future hold in 15-20 years? Presently, their "strategic" thinking seems to be chasing around the far corners of the globe looking for increasingly difficult to find reserves and cutting deals with increasingly difficult to "negotiate with" foreign government bureaucrats. Both endeavors---finding reserves and then "enticing concessions from the controlling powers" is very expensive as well as extremely risky.

A far less risky and less expensive course would be to scrap XOM's wild goose approach and concentrate their money and energy toward buying a Chesapeake or XTO or other principle player in the domestic natural gas exploration and production game. At this time when low natural gas prices have depressed market caps throughout the E and P sector, when the US begins driving on CNG the value of those principle-player companies will quickly double at least.

Regardless, XOM's future is bleak if it continues its current direction. Are there any XOM share holders reading SA?

Oil / Natural Gas Ratio Still Extreme

I completely agree that the crude/natural gas ratio is far "out of balance".

That imbalance will likely tighten in the reasonably near future due to pending federal legislation currently winding its way through Congress.

Another major impact will come from the significant environmental advantage that natural gas has over the vastly more polluting gasoline and diesel fuels derived from crude oil.

As gasoline pump prices continue their upward climb, Americans will demand Congressional action and natural gas wins that battle. Barack Obama has indicated that he favors utilization of natural gas in the transportation sector. With re-fueling facilities in place and Detroit's head still vibrating from their recent melt down, I look for them to begin building NGVs by the millions. Corporate truck fleets are either converting to CNG (ie, AT&T) or seriously studying the conversion process (ie, Wal-Mart,etc). Municipal bus fleets in progressive cities across America are fueled with CNG as a ready means to cleaner air quality. I see the pressure to clean up the air in all cities to continue the move toward CNG vehicles (taxicabs, city delivery vehicles, sanitation depts, fire and police depts, ambulances, etc) materially increasing in the near term.

Virtually every American considers himself to be an environmentalist---so long as it doesn't cost much. CNG vehicles are environmentally positive and won't cost much more with the subsidies likely to be available.

The gas to oil price disparity seems certain to equalize in the next 24 to 36 months and the sooner, the better.

Is Natural Gas a Long-Term Investment?

Based on equivalent heat energy, a million BTUs (MBTU) of natural gas currently costs about $4.12 while crude costs $12.59 for the same MBTU.

This 1:3 ratio cost discrepancy, would clearly seem to favor an escalation in natural gas prices even if crude costs come down a bit.

At 1:3, there's considerable leeway for heat purchasers to buy more gas and less crude. Throw in the environmental benefits inherent in natural gas combustion and something has to give. It should rather clearly result in an increasing demand for gas. With the glut in gas supply the adjustment expected won't be 1:1 ($12.00) but it is unrealistic to think prices will remain at $4.00.

The natural gas industry has to re-invent itself sufficiently to enable gas to be available wherever crude oil is. When that conundrum is solved ----and it's primarily in the transportation sector that crude is the king pin---natural gas will be the clear winner and $4.00 natural gas will be a distant memory.

Loss of Manufacturing Jobs Prevents Normal Recovery

Supporting and paying atteention to the legislative progress that US Rep. Dan Boren (D-OK)'s HR 1835 makes after its introduction on April 1 could help the bleak situation described in the article.

HR 1835 is the NAT GAS Act that materially supports a national transition to natural gas as CNG for transportation fuel. Implementing the infrastrustural changes such a transition would/will require will create millions of American jobs that likely will be singularly American. No outsourcing, or little if any, will be involved. Such a monumental shift will change things up considerably, effectively and positively.and indoing so put millions of Americans back to work.

Saudi Khurais Field: Looks Like Easy Oil May Be Gone from Arabia, Too

Leave the Saudis, the rest of the OPEC producers and the integrated oil giants to chase ever declining crude reserves at ever rising finding and development costs. That's their business and if they choose to hunt for a rapidly diminishing treasure, wish them well.

But one of these days though, the collective wisdom of the coporate giants' share holders will as rapidly begin to wake up and ask, "Why such a program"? Especially at a time that they have found the "fruit" of their chase--both the low hanging as well at that higher up in the tree. With the enormous profits realized over the past 100 years its past time to turn their attention toward a longer term solution to the world's energy problems. So far their "solution" has been to manipulate supplies, prices and propaganda as the situation requires.

While crude oil reserves continue to decline which translates into ultimate higher consumer costs those profits mentioned above should be used to develop new solutions to the world's absolute need for reliable, clean and affordable energy. Cut the obsfucation and get to the task of providing that energy. Wind, solar and natural gas are ready solutions for both the short and long term.

Open Letter to Boone Pickens

Fitz,
There is no doubt whatsoever in my mind that we should be doing everything we can as a nation to develop natural gas as our primary transportation fuel.

The dollar drain on our economy; the negative foreign policy entanglements; the national security issues all represent crises that must be addressed and utilizing natural gas is a doable and available solution to solving those problems.

No one believes that natural gas is the ultimate energy solution, but we need to have a functioning mobile nation while we transition to solar, wind, geothermal and other sources of energy. If we have as the experts have stated, something like 50 to a 100 years' worth of natural gas reserves, that should give us a sufficient time to perfect future energy technology. (And install the infrastructure that will be required to support the new technolgy) Added exploration is INCREASING American gas reserves--not so for crude oil.

Continuation of the "policy" (?) of importing 12 million barrels of crude every day is endangering and ultimately bankrupting America not to mention the disastrous foreign policy catastrophies we have witnessed in support of such idiocy.

Congress must be forced or threatened into action as their inaction since the Arab oil embargo of 1973 rather proves they won't do a damn thing without holding their collective feet to the fire.

Thanks for the excellent post.

Why We Need Higher Gas Prices

Some, rather many of these comments read as if there is a huge hang over prevalent in our land.

We are facing a real energy crisis. Too many of these "comments" strongly suggest otherwise. If and when the too likely scenario of a significant disruption of the primary supply of crude in the middle east occurs, last summer's prices will look like the "good old days".

We don't need to wait on OPEC to get a workable production reduction agreement to double the present price to $70-$80 per barrell. They will get it sooner than later, and that success might well entice them to keep driving the price higher. If the world economy was not in the state of collapse that it now is OPEC would already have turned the screws on us. Their intent is to wring every last penney out of us, pure and simple. We beat them (along with the rest of the industrialized world0 to the punch by all falling into an economic black hole and ultimately reducing demand. Some consolation.

Geopolitical wars and environmental destruction coupled with economic ruin are the apocalyptic brothers of "cheap oil"

America needs to do better, and sooner than later.

Chesapeake Energy Unable to Rally Even After Positive News

Natural gas has a bright future.

Texas A&M's Chemical Engineering Dept has developed an economical technology to produce high octane gasoline and sulfurless diesel directly from natural gas. This process has been licensed to Synfuels Corp. in Dallas. (Apparently, Marathon is in the start-up phase of a similar facility for converting nat gas into gasoline in San Antonio)Synfuels currently is building a nat gas to gasoline plant in Qatar.
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If the new congress and the Obama administration actively push CNG and subsidize CNG re-fueling facilities along the Interstate highway system, we will be driving (and trucking) on it sooner than later.

Subsidizing residential CNG "Phill" units to an affordable degree can also drive the demand factor.

Since all of these will create job opportunities for Americans and utilize an American fuel resource in line with the Obama administration's avowed intention to end our dependence on foreign oil and create millions of jobs, natural gas will likely be favored.

$35 Oil: Steve Forbes Was Off by Two Years

You talked the talk Stevie Forbes, but did you walk the talk?

How right, Sir Winston's quoted comment above except we haven't heard from Stevie yet, explaining what intervening factor(s) caused his erroneous pontification.. or so)It's always those damn intervening factors that cause an otherwise dead on prediction to miss the target by a mile or 'er 2 years0

Why do these pompous asses comment with absolute certainty and then rarely, if ever, get called back to explain, "wha' happened"?
If they did ---and Forbes is only one of hundreds--that gives us non-stop spiels about what is certain to occur going forward do you think they would tell anyone? If there was an honest bone in their body the only cerain prediction they would make is, " I have no idea what the future holds".

I predict $86.23 oil in 6 months. Why? this is an amount my fingers typed on this key board and my fingers won't tell me what their rationale is. If the future proves otherwise blame my fingers. Right, Steve Forbes?

6 Natural Investments in Natural Gas

The comment by Imagasser above is worrisome as well as enlightening.and begs the question why a CHK dividend check was AT ANY TIME INSUFFICIENT?

At best it reflects very poorly on CHK's business practices assuming it was due to simply a clerical ommission. At worst, it suggests a very serious state of financial affairs. I am long CHK and would "like" to think the company is solvent. What IS the explanation Mr McClendon?