Price Spike Open Thread...
Posted by Prof. Goose on January 3, 2006 - 1:35pm
Topic: Supply/Production
Tags: energy, oil, peak oil, prices [list all tags]
let's discuss...
Posted by Prof. Goose on January 3, 2006 - 1:35pm
Topic: Supply/Production
Tags: energy, oil, peak oil, prices [list all tags]
http://www.rigzone.com/news/article.asp?a_id=28214
Those of us who are in favor of windfarms and other types of alternative energy generation might send comments to the MMS to show that we care about making it easy for alternate energy providers to obtain the permits they need to begin operations.
In the U.S., many people will be getting their first real heating bills of winter this month. They'll also be facing up to a quadrupling of their minimum credit card payments, and many of those who signed adjustable ARM mortgages will see their minimum payments rise. We'll find out how strong the economy really is...
Good luck to all in the next six months. May your families be safe.
C
and head to $80/bbl as the driving season
starts in April - May. Until then we will
likely see it range bound $55 - $70.
The strategic reserve will need to be refilled.
European gasoline shipments are over.
Special Canadian natural gas shipments are
also over (1/1/6). The weather is the
big factor for nat gas. If it gets real cold
we will see $20/mmbtu nat gas!
The FED is pumping the economy full of liquidity.
the credit card problem will be quite manageable.
the housing bubble will slowly deflate.
prices will be soft for years, but no crash.
GM and Ford will file for bankrupcty, but
continue to operate. This will still be a big
negative, but not a crash.
Delphi employee liability aprox 7 billion
Burn rate with Delphi strike 1.5 billion/month
and they're already loosing billions/year on continuing operations.
I also don't think Toyota would want them...
Someone should call me a waaahmbulance; now I have to get gas payment cards from my credit card rewards rather than best buy gift cards ;-)
In the past 6 months the average daily move is over a dollar with about a $1 standard deviation, meaning $2 moves will happen almost 1 day in 3.
For you trivia curious, last 6 months of nat gas have an average 32 cent move with 21 cent standard deviation.
So Crude oil daily moves last 6 months are 1.6% with 1.55% sd and Nat gas daily moves average 2.48% with 1.6% sd. Nat gas is about 50% more volatile than CL.
U.S. consumers recovering from record high gasoline costs last summer may now face a nearly 60-cent price surge next year because of stricter environmental regulations, an industry expert said.
http://www.msnbc.msn.com/id/10533856/
Will this be the next public outcry? I'm dealing with one here in North Carolina as the gas tax gets a great big $0.03 increase and people are all bent out of shape. Nevermind the 23% increase in the price of gasoline this year here...
Unless I lose money. Kidding.
Gold is still a very good safe investment in my book. Rail, alternative energy, oil/natural gas exploration companies, and commodities businesses are good buys still in my humble opinion.
Perhaps we could have more discussion of financial issues here. I'll list off my favorite tickers here, some of which I own, some of which I would like to get at a lower price:
CSX, ESLR, GLD, LNG, PBW, RAIL, SNG, SU, TGA, TXCO
What's everyone else's portfolio look like?
Have been long since Dec o6 contracts where $20.00 (2000) used the profits to set up a low energy imput farm. Farm land prices are going crazey and in my region. Bucking the slow down trend in realestate.
Long gold, Long wheat july 07.
Stocks/ETFs: ERF, PVX, XLE, GG
Funds: ICENX
Looking at the new Euro-backed ETF, FXE, as a possible add in the not too distant future. Definitely a great new tool for small investors.
I figure that we Peak Oilers have about 7 years left to use our insight into what's coming. We should be able to leverage that insight into enough money to get us through a few years of the decline. I expect that as oil/gas supplies get tight a lot of money is going to pour in from other sectors to support Hail Mary drilling programs. Those who are already invested stand to make a lot.
As for investment advice right now, I don't have any except for the really basic rules I used for myself. Diversify within the energy sector, pick a range of company sizes and niches, check out their track records and fundamentals, do their charts, but plan to stay invested for a few years. For me the energy sector is too volatile to make it comfortable for day trading, though people who can stand the bumpy ride will make more money than I will.
I found that a portfolio of around 15 companies was the right size. It's big enough to diversify somewhat, but small enough to manage and also small enough not to dilute out from averaging if you make good picks. To ensure that last point, I rebalanced it a couple of times over the first three months to get rid of the dogs. Now that I'm happy with my picks I'm just going to let her ride.
NYSE/NASDAQ: EWZ, CEE, BNI, NSC, EWC, IGE, CCJ, SUNW
Paris: Areva Group
Frankfurt: EasyETF GSCI (commodity etf)
gagex - Guiness Energy
umesx - another energy fund I recently dumped; was consistently underperforming gagex
pcrdx - Pimco Commodity Futures - Isn't as heavily energy weighted as Oppenheimer QRAYX but pcrdx is no-load
PBW - Powershares Alt Energy
bni - Burlington Northern
cmc - Commercial Metals Corp - metal recycling
can't bring myself to buy a coal company directly
With the yield curve inverting; the beginnings of a bear market are likely upon us. These might be the best for a while
bearx - bear market/gold
dodix - intermediate bonds
Some traditional no-loads that I've done well with:
brsix - ultra small cap
braix - aggressive
brlvx - large value
brsvx - small value
RISIX - international
Think 1% of your money in physically possessed silver and gold as temporary emergency funds, 4% in actual cash, both in your home where they can't get grabbed by the government (as happened in Argentina and Russia recently), and one third each left in the stock market (diversified), residential property, and bonds (diversified maturity).
Don't buy commercial, forest, or royalty real estate. You don't know enough to pay a sensible price unless that's your business.
I wouldn't mind buying land that has just been lumbered, though. It's value is very low so it's hard to go wrong.
Gasoline prices over the last 6 months for Canada (Red), NY State (Blue) and USA Average (Green)
Look for some movement here in the weeks to come.
Matt Simmons makes a key point regarding the North Sea. He predicted that North Sea production would peak between 1998 and 2000; however, the 10 major oil companies operating in the North Sea were confident that the North Sea would not peak until 2010. The North Sea peaked in 1999, and production is crashing--down about 25% from its peak.
This is analogous to the major oil companies' response to Hubbert's prediction that Lower 48 oil production would peak around 1970--by and large they thought that Hubbert was nuts.
Based on the Hubbert/Deffeyes P/Q versus Q method, the Lower 48 peaked at 48% of Qt (total estimated cumulative production). Conventional wisdom was wrong. Hubbert was right.
The North Sea peaked at 52% of Qt. Conventional wisdom was wrong. The Hubbert/Deffeyes method was right.
The world is at 50% of Qt. Conventional wisdom says that we are not anywhere close to the peak. The Hubbert/Deffeyes method says we are at, or very close to the peak. We do know that world oil production is flat year over year.
We also know that conventional wisdom regarding the Lower 48 and the North Sea was flagrantly, 100% and absolutely wrong, while the Hubbert Linearization method was right.
He has long maintained that oil prices will spike to new highs this Winter, and they will never again be as low as between Labor Day and Thanksgiving 2005. This is due mainly to his theory that Saudi Arabia has peaked, though.
UKOOA - the United Kingdom Offshore Operators Association - insists there is still 20 or 25 billion bbl to recover. It won't happen.
For us, it will be a matter of years.
"Q:Why does ExxonMobil have a different view of where the oil price is headed?
A:I don't have the vaguest idea why they could ever think we are going back to $25 oil other than their business model desperately needs that to happen to have their long-term strategy work. High oil prices are very bad news for big oil. The higher the price, the more proven reserves they've already booked they lose in these foreign concessions, because once their projects hit their payout targets, then the host government's share rises. I think the major oil companies are lost in the wilderness right now."
Can anyone one elaborate on these foreign concessions agreements and how they are typically structured?
Given ExxonMobil's record profits last year, can high oil prices truly be "bad news" for Big Oil?
With high oil prices the countires that own the resources ask for larger share of profits and reconsider old concessions.
I have no idea how many contracts are structured this way, but Simmons' comment implies that it is common. Of course, the majors have other reasons to want to see oil prices stay low. They don't want public outrage and the resulting Congressional scrutiny. Also they want to be able to use their huge cash reserves to buy the most oil they can on the stock market - either their own stock or an acquisition. But Simmon's comment is a new wrinkle and a brilliant insight, IMO.
If I understand you correctly, even as XOM's and the rest of Big Oil's profits rise, their booked reserves decrease. So they will be missing out on any future (probable) increases in price.
Simmons seems to be suggesting that their "long term strategy" miscalculated the date of Peak Oil; (They) thinking they had several more years to buy up reserves before the inexorable climb in price.
This also explains sekiyu's point: "The Japanese state has encouraged its oil firms to amalgamate and go after supply (a reverse of the previous policy of relying on the power of the yen to bring forth sufficient imports)." Which is to say: the govt. realizes - because of scarcity -- that purchasing power can no longer assure supply.
This is a different hook in the industry and would be something that the major oil companies would want to keep under wraps. Not only are prices spiking, April 2007 contracts closed at $66.22 a barrel, but if major oil companies start reducing their recoverable reserves, stock prices will plummet.
Things are only going to get worse.
Time to switch to a Clean, Safe and Unlimted source of Energy, Hemp. A resource that is competely untapped.