User 283977

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

Hi Fitz! Given the current energy situation Oil is a must in every investors portfolio. With respect to the title of the article, I believe one of the reasons oil is currently moving up even with bearish demand is due to the actions of the US Treasury in printing vast sums of new US dollars. This action devalues the dollar (inflation). When that happens, people are likely to move out of cash positions and purchase gold or oil. You may think the "value" of oil or gold are going up because of their dollar price, but part of what is happening is that their (oil / gold) intrinsic valuations are remaining somewhat constant while the valuation of the dollar is going down. Net result, it takes more dollars to purchase a unit of gold or oil. I suspect this is one of the reasons oil popped the other day when Geithner announced his plan. It was not supply or demand, it was currency devaluation that caused the pop.

Book Review: Robert Hefner's 'The Grand Energy Transition'

I did indeed purchase the book based on your recommendation Fitz. I was looking for a primer on large scale energy systems, trends and such and when I saw your initial recommendation a few weeks ago I bought a copy.

The book contains a good deal of references at the end of each chapter, so its not just a journalistic "opinion" piece, it represents a good beginning framework for understanding the large scale utilization of energy over time from a systems perspective. Hefner's section on the amount of natural gas available in the US is a must read, and the author should send a copy directly to Obama.

The book mentions the ITER - the International Thermonuclear Experimental Reactor project sponsored by Russia, Japan, the United States, the European Union, China, and South Korea that is expected to cost up to $13 billion to develop. Its located in Cadarache in southern France. It seems that 13 billion is chicken feed given the money being thrown at these large financial institutions today. Imagine what could be done with a 50 - 100 billion dollar R&D Manhattan style project directed towards removing this countries dependence on foreign energy resources with the development of clean, green energy. Now that is a worthy goal, and with resources at that level, the probability of success in a shorter time frame is more likely. It would also provide a big shot in the arm to making this country a world leader in energy systems and the long train of related technology and developed products.

I have a background in Physics, and Hydrogen fusion power is absolutely possible. The primary barriers are economic, technological and understanding that large scale power generation does not necessarily have to be continuous when linked with large scale methods for storing power. Yes, fusion power has been under examination for some time now, but the resources provided for research in this area have been tiny. I think we can all agree that that you can't extrapolate rates of progress from a minimally funded research area to the rate of progress in a well funded research area.

I think allowing existent economic forces to drive country level energy policies is intellectually bankrupt because making an energy transition requires long lead times, planning and R&D investments. The first step is recognising that such a change is absolutely necessary for our countries survival as a world power. This book provides a good starting point to that realization. The key to making a change of this magnitude happen is through education by out of the box visionary thinkers who have the ability to see further into the future then most of us.

I think FitzSimions and Petersen's articles are highly informative, and represent must reads in their subject areas. I also highly value the back and forth between these authors and their readers which surfaces more information in these subject areas.

Book Review: Robert Hefner's 'The Grand Energy Transition'

Alex, the book describes Hydrogen as the ultimate goal. You could use solar and wind to generate the hydrogen with the obvious questions concerning scale/ cost. The book does not say we are ready for hydrogen right now, just that Hydrogen is likely the ultimate goal.


There is something else about Hydrogen that the book discusses 137-140, Hydrogen based nuclear fusion reactors, which are being researched in many countries today... Apparently these types of nuclear reactors produce no nuclear waste!

The Fitz is right, the book is a great read.

The Current Stagnation of Natural Gas Vehicles in America

Fitz
I agree, US produced natural gas is the key to removing this countries dependence on foreign oil. John Gordon's comment also makes an important point concerning energy density. People are used to the travel range associated with Gasoline powered vehicles. To make it practical, we need to match that range of travel, and I think the way to do that is with a liquid approach. Alternatively, perhaps a hybrid of natural gas and electric might meet the range requirement. But to make it practical, I think you need a liquid approach.

Your approach is dependent on the existence of consumer demand. In other words, the conversion is voluntary. I know that is NOT going to work, and I think the key goal is too important to trust to consumer demand. The key goal is not Green and its not Economic, it’s a national security issue. No country is safe if a major component of its Energy supply is foreign based where it can be interdicted, or used as political leverage.

Consumers will vote with their pocket books. So you need to include a "hammer" that forces the conversion within a limited time window. Yes, we need the OEM conversion kits, but we also need to requires an escalating proportion of all NEW passenger vehicles SOLD in this country to be alternatively fuelled in that time window mentioned above. For example, 25% increments every four years. After the time window, no more gasoline vehicles are offered for sale in this country, and they can't be imported either.

We also need to protect our refining companies who are going to see a major part of their production of refined passenger car fuel business evaporate. If liquid versions of natural gas are required, then this is the replacement business. They will need economic help to make that conversion. The price of foreign imported oil needs to be taxed so lower prices can not undercut our emerging energy independence solution. That tax should help pay for the refinery conversions.

Of course, this is all writing on the back of an envelope levels of detail. A few key points have been outlined, but a comprehensive plan needs to be developed by people with more knowledge about our energy system. Providing a vision is a whole different thing that designing the resultant system.

Top 10 Energy Stocks and an Overlooked Power Fund

Thank you very much for the highly useful information!

In Favor of a Slicker Currency

Yes, BP is basically a cash machine. I try to acquire BP when its price drops below 41. For example, right now its price is at 40.9, where its dividend yield is about 8.2%.

Geopolitical Energy: Centered on the Caspian Sea (Part 2 of 2)

I got the book. I was hoping for more of a synthesis approach. Anything like that out there?

OPEC and Production Cuts: Why Now's the Time to Buy

Lots of great discussion points...

However, the final arbitrator is the market, and the market appears to have spoken. Kapoor's call was correct with respect to the direction the market would be going based on anticipated hefty supply cuts by OPEC. Good call Kapoor.

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Crude oil for January delivery surged 8.1% to $50.05 a barrel in early electronic trading, topping the $50 mark for the first time since Dec. 1. It was last up $2.92, or 6.3%, at $49.20 a barrel on the New York Mercantile Exchange.

Monday's gain followed oil's 13.4% gain last week, the biggest weekly rally in four years.

Oil prices surged "on hopes of hefty supply cuts by OPEC," said Nimit Khamar, an analyst at Sucden Financial, in a note.

BP: Strong Earnings Growth Through Dividends

Good analysis... buy at 45 and get a 7.4% yield from a solid company.

Chesapeake: When Gas Prices Will Recover

I think trusting McClendon is a mistake… In their recent call transcript, McClendon took umbrage with Joe Allman - J.P. Morgan Securities who apparently had, in the past, referred to CHK management as a bunch of "drunken sailors". You know what, on thinking about it, that is close to the perception I have about CHK management… I think McClendon is more like a buccaneer than a CEO. I don't care that he lost all of his own CHK shares by playing the market, but I do care that he acts like a buccaneer as CEO of a company I owned stock in. For example here is how he explained the disaster of that recent stock offering made late in the day before Thanksgiving…

"Another set of questions has arisen surrounding the universal shelf
and other stock pilings we made the day before Thanksgiving. In retrospect these filings were a mistake and we greatly underestimated how the market would react. I apologize for that and ask your forgiveness for it"

The timing of that move provides a sneaky impression. Second, the associated filing said the offering was necessary to increase liquidity. Yet later in the same call transcript, McClendon says they have plenty of liquidity without the universal shelf offering.

McClendon: "Late last week I noticed we had $1.5 billion of cash on hand and we are still managing to have between $2 billion and $2.5 billion of cash by year end"

It sounds like he was surprised that they had plenty of liquidity on hand. However, given the way he tosses numbers around, he is clearly quite familiar with the companies cash position.

So what was that universal shelf offering about? Lets see, he lost all his CHK stock playing the market, now he comes out with a major stock offering when CHK stock is priced low… perhaps gambling that the stock holders are not going to get upset and sell…

Well this is one former CHK stock owner that got upset and sold. I don't think McClendon and his board understand the concept of Company / Share Holders Trust. McClendon appears to be more like an old style oil well drilling wild cat kind of guy. A real entrepreneur used to running his company his way. He sounds like a fun guy, but now he is CEO of a PUBLIC company, and he is playing with other peoples money. Of course, the real problem here is CHKs board of directors that are not exerting sufficient control over a mercurial CEO.

OPEC and Production Cuts: Why Now's the Time to Buy

I agree, OPEC will reduce production and this has to increase prices.

As to why BP, its yield at $46 is over 7%. So you get paid 7% while you wait. Even if BP were to go lower, 7% is a pretty good. So BP is a potential growth stock and a value investor stock.

For example, Exxon (XOM) is priced at 76 and change, but its yield is 2.1%. So BP's yield is over 3 times higher.

This is why I am long on BP.