toobad41

Expect Oil Prices to Rise: Three Major Oil Exporters Warn About Production

There will come a point when the countries that export will be in the same boat as the U.S.A....and there lies the problem. Not enough for everyone. Imports will decline even faster than domestic production can be found or maintained. With the decline in imports there will be an even faster decline in domestic availablity. Who will get the pieces of the world pie that are getting smaller and smaller everywhere?

By-the-way, 3 billion barrels of oil is an estimate nor a given. It is a media sound bite. Even if it were true it is also true that you can recover only about 25% at best. And at what rate can you get it to market? Don't get too excited about that future estimate. It is a pie-in-the-sky estimate.

Oil to National Gas Ratio Highest Ever

This ratio is stupid. It has no significance at all in the market place. Gas is and will continue to be the major play in the United States and Canada for years to come. It is much cheaper to produce and sell than oil. Oil has a lot of cost issues, environmental issues, depletion issues, litigation issues.

Will Oil Be the Last Asset Standing?

People generally don't know why oil should be in the $70 per barrel range. Let me explain why oil should be $70 and as an independent oil operator. Drilling a well 4,800 feet, running casing and putting it on production (assuming it is not a dry hole) costs me about $1,000,000. Let's say the well is pretty good and produces at a daily rate of 250 barrels per day. And it continues to produce for 60 days at that rate. Conventional thinking is you just multiply $70 x 60 days x 250 barrels and you get $1,050,000. Thus you have $50,000 profit, right. Wrong. You forgot to deduct royalties(as much as 25%!), lease operating costs, employee salaries, production taxes, general and adminstrative costs, transportation costs, tangible and intangible costs, rentals of equipment, etc. The list is very long and the amount of time needed to payout the $1,000,000 well usually runs into 2 to 3 years. Not only that the well is declining in production and may only be making a few barrels a day after 3 years. Lease operating costs can run as much as $3000 a month. So now you have a well that produces say 2 barrels per day and you get $70 (again assuming it stays at $70) that would be $140 per day or $4200 per month. But you have to deduct the $3000 lease operating expense and you are left with $1200. But that is not correct either because 25% royalty is taken off the top. You are left with $52.50 not $70. So $52.50 x 2 barrels x 30 days is now $3,150 not $4200. So you are left with $150 to pay employees, pay taxes, transportation costs, etc. Now do you see where this is going? The well is no longer profitable. Maybe I should spend $250,000 to re-stimulate the well to get production back up to 35 barrels per day. The killer, of course, is the overhead expenses that eat you alive. In order to be in the oil business you have to have a lot of production and a lot of nerve to stay afloat. And you have to have oil above $70 per barrel to make it worth the trouble of getting it out of the ground and into the market.

The Disconnect Between Oil and Natural Gas Prices

The oil / natural gas disconnect is more related to the fact that most of the drilling was ( and still is) for natural gas and less for oil. And that trend continues unabated. Just look at where all the major plays are in the USA....all are gas plays. In addition, oil is rarely a bi-product of a pure natural gas play. That is where the real disconnect comes in.

Oil Rallies, But We Prefer Gold

Did I miss something? I did not see anything that mentioned why you prefer gold except in the last sentence. No graphs, no recommendations, nothing.

Will Oil Break Out, Or Fail at Resistance?

Looks like you missed the boat. The boat left the dock way back in February or March when oil was in the $30 range. The upside potential from where we are now is not too exciting to me.

Oil Inventory Report Fuels a Market Rally

Congress will not and cannot set prices for petroleum products. 75% of the oil we use is imported. Give me a break.

In addition, all companies involved in oil production also produce natural gas. Likewise, companies that are primarily gas producers also produce oil. By-the-way, natural gas is not the cure-all for the energy crisis. Natural gas is also a resource that is following the downward trend of oil.

Oil as a Deflationary Investment

They don't call oil "black gold" for nothing. It is a great hedge against inflation and deflation. I am not sure about its effect on stagflation. Whether one invests in oil or natural gas as commodities or as common stock or energy select mutual funds you can't go wrong. The petroleum industry has been, as everyone knows, very cyclic. With that said it is not too difficult to buy the lows and sell the highs. The cycles, however, are broader than what day traders like but they are there. You just have to have patience. Oil and Natural gas service companies are another area to look into. They are all in the business together and generally move in the same direction.

$90 a Barrel Oil Is the Floor for Cellulosic Ethanol, Says Study

Cellulosic ethanol is still old, limited, technology. What we need is a replacement for fossil fuel. It is a fact that all alternative fuels are not new and not ubiquitious. In my mind, what will happen is this...oil will soon reach a point where it is very hard to get. Slowly we will revert back to how civilization was just before the introduction of oil. For most people owning several cars will be a memory and a few wealthy people will drive electric cars. Mass transportation will become the norm. People will move back to the cities where goods and services can be readily obtained. Others will stay on farms or communes trying to raise a few crops for a living. Coal and nuclear will rule for the next 200 years and then total collapse of all civilizations. Most of us won't be around for that happening but it will.

The Market Bubble Is About to Pop

As usual Dr. Leeb you have an interesting perspective on what might happen in the not too distant future. However, I don't see how some of the stocks you mentioned above are considered commodity plays. Nabors, Varco nor Transocean don't produce any commodity. They are very remotely and indirectly related to oil and natural gas. And they are service companies. I would rank USO as a commodity play don't you think?

The Truth About Fossil Fuels and Renewable Energy (Part II)

Thanks Joseph for the two fine articles. You told it as it is and how it will be. I don't think people realize how very important fossil fuels have been in their lives and to civilization. I dare say I won't be around in twenty years but I can tell you this...the world will be a lot different than it is today and those that are still here won't like it. People born today will not inherit the world of today but will only read about it in history books. That is if we have enough trees left to make history books. Most of my life as been dedicated to the fossil fuel industry and that won't change. We are running out of fossil fuels and that too won't change. With that said we have absolutely nothing else to fall back on. Nothing else will replace what will be gone. Nothing.

Schlumberger: Get 'Oily' for Good Total Returns

Let me clarify one thing and it is this. SLB is not dependent on oil pricing as much as you think. Nor is it dependent on gas pricing as much as you think. SLB derives its income on services rendered to repair sick wells, to enhance production, to stimulate wells to greater production, to evaluate behind pipe reservoir potential,etc. They derive no income from production. None. They do balance their income from services rendered as far as a companies ability to pay. Thus Schlumberger gives discounts during bad (recessions) times and increase their pricing in good times (boom times). Halliburton does the same but often will take a working interest in projects. SLB does not. In conclusion, SLB is really not as dependent on oil or gas pricing as you might think. Their money is made from a company or independents ability to pay or even use the service they render. When a company decides not to repair a well or stops drilling it does hurt SLB. Sure SLB wants better product pricing but it is not the driving force. I would be careful about your thoughts on this one.

Warren Buffett Portfolio: Going Beyond the Folksy Stereotypes to Find All-Star Stocks

Nice article...thanks.

Buffett's Betrayal

I guess Mr. Buffett is no longer your idol. Too bad I think. The difference between you and Mr. Buffett is that he buys into companies (invests) whereas you purchase shares of companies (speculate). When and if you reach a point in your ownership of a company where you can influence what it does by your words and deeds then you can rightfully say you are an investor. Mr. Buffett has a much bigger stake in each of the companies shown in your graph than any one person in the grand scheme of things. So why should he not pony up to where the money is? I think if you were in his shoes you would do the same thing. His move in taking bailout money was the politically correct thing to do. When republicans again control the government and corporate oligarcy is back in vogue Mr. Buffett will again be a capitalist. For the time being he will look like a socialist and go with the flow.

Jobless Recovery: Fasten Your Seatbelts

Don't forget the political aspect. The "Blue" states (Democratic) are the ones that have been hit the hardest by unemployment. California, Florida, the Rust Belt States and East Coast are obviously democratically controlled.