Peak Oil is You
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Page added on October 1, 2014
What Happens if Oil Soars to US$150 a Barrel?
Anyone who thinks today’s markets are boring is an imbecile.
Anyone who thinks there aren’t any investing opportunities just isn’t looking hard enough.
There are plenty of investment opportunities.
Some of them are obvious. Others are less obvious.
One of the biggest opportunities is in the ‘Dying Empire’. The death of which may still be some years off.
We are of course talking about the US and its re-emergence as an energy giant…
We recently released a special report. It highlighted the growth of Asia’s emerging markets.
To be precise, it highlighted the growth of one key market — China.
Our point was that a big change is taking place in the world economy. China looks set to take over as the world’s biggest economy within the next 12 years…perhaps sooner.
That may seem like a long time. But it’s not. The time will soon fly. If you want to make the most of China’s coming global economic supremacy, the time to do it is now.
But while we’re big on the huge growth opportunity in emerging markets, don’t think for a moment that we’ve given up on America’s ‘Dying Empire’. There are still opportunities in it yet.
Bigger than Saudi
One sign that the US isn’t in a hurry to give up the status of world’s biggest economy is this report from the Financial Times:
‘The US is overtaking Saudi Arabia to become the world’s largest producer of liquid petroleum, in a sign of how its booming oil production has reshaped the energy sector.
‘US production of oil and related liquids such as ethane and propane was neck-and-neck with Saudi Arabia in June and again in August at about 11.5m barrels a day, according to the International Energy Agency, the watchdog backed by rich countries.’
More than three years ago, energy giant BP predicted that the US would become energy independent within 20 years.
The US is already a net exporter, so it’s on the way to energy independence. This has been a boon for US energy stocks. Companies involved in this sector have seen their share prices soar.
And if the sector continues to boom, there will be plenty more opportunities ripe for the picking.
The shale energy boom in the US has helped revolutionise the economy. Access to a new energy resource means the US is no longer dependent on Middle East oil.
The issue is whether it will still be economical to drill for shale oil and gas if the price falls much lower.
Already over the past few months, the price of crude oil has fallen from around US$107 to around US$95.
It’s still profitable to drill for and produce shale oil and gas at those prices. But will it still be profitable if the price falls to US$70, US$50, or even back to US$20 per barrel?
It probably won’t. But if you ask resources analyst Jason Stevenson, there’s no need to worry about a falling oil price; the price is going the other way. Perhaps as soon as next year…
Oil to hit US$150?
Jason has kept close tabs on the oil story. Big things are happening.
It seems that at last the world has gotten over the fear of ‘peak oil’. That was the idea that ran for much of the 20th century that oil was about to run out.
And while there’s no doubt that it had become harder to find gigantic new reserves, reserves did continue to grow, and so did production.
Now, all talk of peak oil is history. The discovery and production of shale resources is a big reason for that change in attitude.
But if that’s true, why does Jason suggest that the oil price is about to take off? What justification does he give for the oil price potentially hitting US$150 next year?
Jason explains in his latest report, released just yesterday:
‘The risk is that crude production could be significantly cut by disruption or blowing up refineries. In fact, two months ago ISIS took control of the Baiji refinery in Iraq. This is Iraq’s largest oil refinery and produces a third of Iraq’s oil output. You may recall that this was when crude oil hit US$116 per barrel.
‘Now, I’m tipping the Middle East conflict to affect both the demand AND the supply side. That’s why I’m so convinced the price of oil is about to skyrocket to $150 per barrel.
‘Just as an army marches on its stomach, an air force combat wing flies on its gas tank. This will ramp up demand. But in the case of the Middle East, any major conflict is going to squeeze supply extremely hard as well.
‘After all, it’s hard to transport fuel when bombs are raining down from the sky and militants are blowing up refineries. That’s already happening in the Middle East today…but there’s a very real possibility it could get a lot worse.’
You can find out how to get hold of Jason’s in-depth research here.
High oil price now good news for the US
Has Jason got this one right?
Who knows? But if you read the full report, as we did yesterday, you’ll find he makes a compelling argument.
Our personal view is that the oil price is more likely to fall as other countries follow the US lead on shale exploration.
And, like all other technologies, the more widespread it becomes, the more it encourages competition, and that will cause the cost of shale oil production to fall.
Add to that further mammoth oil finds such as that by the Russians recently, and potential monster resources in Southeast Asia’s coastal waters, and you could see a huge glut in oil over the next 10 years.
However, oil exploration and production isn’t as easy as sticking a straw in the ground and sucking the stuff up. It takes years and hundreds of millions, if not billions, of dollars to develop a bumper field.
Right now, until more bumper conventional oil fields come into production, the current oil price looks set to be a great support for the shale oil industry.
And if Jason is right about an impending blow-up in the Middle East, it would have a dramatic impact on the oil price. If the oil price surges higher, it will be even better news for US shale.
The US ‘Dying Empire’ may be on the ropes, but it’s not dead yet.
25 Comments on "What Happens if Oil Soars to US$150 a Barrel?"
Nony on Wed, 1st Oct 2014 2:59 pm
We could be 150 (or 50). People are way to sanguine about the commodity markets.
It doesn’t take much extra (or the opposite) oil to drive prices up/down. [Or small changes in the demand curve.] This is because it is a relatively inelastic demand (and supply).
Northwest Resident on Wed, 1st Oct 2014 3:20 pm
“Now, all talk of peak oil is history.”
Millions of delighted happy faces brightly light up around the world at this fantastic news. Life will go on as before. No need to feel guilty about buying that gas-guzzler that the car dealership down the road is selling at a huge discount for some reason. Big Macs and plastic goodies and unlimited recreational driving are guaranteed well into the future. There is NOTHING to worry about. Life is good, life is blissful — for the ignorant. Meanwhile, the buzzards begin to gather and circle overhead while all around the perimeter the wolves of resource depletion lurk and creep ever closer, just waiting for their moment.
Davy on Wed, 1st Oct 2014 3:22 pm
Simple simon Noo, do you reAlly think you can use worn out supply and demand curves to sum up the most dynamic of our vital resources. Inelasticity is until it ain’t. Noo what that means is that’s all she wrote. The curve evaporates into the ether and BAU fails. Noo in a very narrow sense your Econ 101 makes sense but not at or near the inflection. Behavior goes asymmetric and yields atypical results.
Davy on Wed, 1st Oct 2014 3:28 pm
Noo, calling you names in fun cause you know I like your jovial fun loving attitude. Your just a Corn. You can’t help yourself.
Hugh Culliton on Wed, 1st Oct 2014 3:32 pm
NW: Buzzards? Wolves? Don’t be such a Debbie-downer. If you close your eyes and believe really, really hard that everything’s turning up roses, it will! It’s true because that’s what the TV keeps telling me! Just go and keep buying shit at Wal-Mart – it’s patriotic.
Northwest Resident on Wed, 1st Oct 2014 3:41 pm
Hugh — Sorry man, I tried closing my eyes and wishing it all away but for some reason that just doesn’t work for me. Yeah — buzzards and wolves. Did I forget to mention carrion eaters of all types? Them too…
Northwest Resident on Wed, 1st Oct 2014 3:42 pm
Davy — If Nony didn’t enjoy the abuse, he wouldn’t be here. Take it easy on the poor guy, we don’t want to kill him, just rough him up a little from time to time when he really deserves it, which is most of the time.
Davy on Wed, 1st Oct 2014 3:55 pm
NR, I like sparing with Marm, he is an uptight Corn. He bites back with hard hitting criticism. Noo is our corn mascot here. If we all agreed here it would be like North Korea well I am not sure which one would be the dear leader but you get the point everyone standing and clapping but no one has a clue why. Ha.
Nony on Wed, 1st Oct 2014 4:02 pm
I’m your favorite enemy? Or you love (to hate) marm more?
🙂 🙂
P.s. Go Skins, beat Seahags.
JuanP on Wed, 1st Oct 2014 4:10 pm
Out of subject. This is the website of the farm in Uruguay my wife and I would go to in a worst case scenario. It belongs to our best friends. An old couple we helped out when they were dirt poor recently arrived immigrants in the USA. My wife and I helped them get started. They lived in my living room for some months. The farm is worth a few times the money originally invested in it. I invested for awhile providing a no interest loan to help buy the land. It is a beautiful place, a little piece of my country, check it out. http://www.pinosdelaquebrada.com/en
Northwest Resident on Wed, 1st Oct 2014 4:13 pm
Nony — Just keep those Cornie POVs coming. Line them up like a string of ducks and march them out into the open where we can a good clean shot at them.
Northwest Resident on Wed, 1st Oct 2014 4:17 pm
JuanP — That is an awesome place! But what’s with that funny looking chicken — how did it get such long legs? I didn’t see any raised planters — when do those get installed? And you’re going to need a lot of worms to compost all that horse manure — check out Uncle Jim’s Worm Farm online — he’ll get you going. All kidding aside, that place looks incredible! Worthy of an aristocrat even…
steve on Wed, 1st Oct 2014 4:24 pm
this same fucking story was run this time last year…and with about the same responses…am I an idiot for keep coming here!!!
JuanP on Wed, 1st Oct 2014 4:24 pm
NWR, they are called Ñandu, and they are like ostriches. An egg from that sucker makes a meal for eight people. There is a herbs and veggies garden with beds, no picture, sorry, and a fruit orchard and vineyard in the private family farm ten miles away.
Northwest Resident on Wed, 1st Oct 2014 4:38 pm
JuanP — Seriously, that place looks awesome. How many acres — or I guess hectares? Have you considered converting it into a Doomer Dude Ranch? Is it in a location that is likely to be overrun by desperate people in the event of global financial meltdown?
Davy on Wed, 1st Oct 2014 4:56 pm
Juan, I have been on many a Spanish finca. That reminds me of them. Awesome place. Looks like some good grass too. What the hell are you doing in this neck of the woods? Get back to paradice.
JuanP on Wed, 1st Oct 2014 5:01 pm
NWR, I don’t own it and I have never been there. I am going there for the first time, probably, around Christmas. But the place was my dream, and after listening to me for more than ten years, it became theirs, too, and my friends made it happen for them.
They saved a million dollars from their Realtor commissions over a decade, they worked from sunrise till sunset without taking one day off in more than 10 years during the boom.
The place has been designed as a post collapse place for a large extended family of 20 or more. It is an 1,100 acres historical tourist farm with a commercial pine monoculture plantation on most of the land. The pines, historical designation, and tourist hosting are mostly for tax reasons. The family also owns a 1,300 acre vineyard ten miles away.
The family is only four people with no other relatives, other than one cousin. We were always supposed to go with them, but I am hardheaded like that sometimes and didn’t want to go, and I sold my interest at no profit. But we are closer than family.
JuanP on Wed, 1st Oct 2014 5:13 pm
Davy, Yes, it is classic Spanish Colonial arquitecture with Roman arches, typical of Uruguay’s farms. Because of the historical designation it has a lot of antique furnishings, tools, and farm machinery and looks very old and traditional. The oldest structure is a Spanish Colonial chapel from 1780. There is also a restored Ford T. There are free range Aberdeen Angus cattle, Merino sheep, and goats, all organic. There are some bad droughts there sometimes, though.
Kenz300 on Wed, 1st Oct 2014 6:23 pm
Every increase in the price of fossil fuels makes any alternative that much more competitive.
Makati1 on Wed, 1st Oct 2014 8:26 pm
Back and forth and the reality is … ALL of the stupendous, gigantic, huge, great, etc. ‘finds’ in the future will not even be able to keep the flow of real oil level, let alone grow.
Real oil. Petroleum. Black Gold.
Not, condensates and other liquids.
The oil pimps have had to goose their numbers with moonshine and cooking oil to keep the numbers up. About like Italy having to add the estimated income from hookers, to their GDP numbers, to keep reality from smacking them in the face with that 2X4.
But, that 2X4 is on it’s way and you will not be able to duck it for very long. Bring on $200 oil and save the ecology we will need to go on with human existance.
Perk Earl on Wed, 1st Oct 2014 10:42 pm
http://www.bloomberg.com/energy/
150? Who knows, but right now it is http://www.bloomberg.com/energy/
at 90.82 for WTI & 94.19 for Brent.
Could WTI drop below 90?
meld on Thu, 2nd Oct 2014 7:39 am
Economic death slurps dead ahead
Newfie on Thu, 2nd Oct 2014 5:13 pm
“The US is already a net exporter”
The US burns 18 million barrels a day and produces 11 million. How can it export a deficit of 7 million barrels a day ?
ghung on Thu, 2nd Oct 2014 6:18 pm
Yeah, Newf, I left a comment to the article addressing their error. I doubt it will get through moderation, though I was as diplomatic as possible in light of such bullsh@t.
Kenz300 on Thu, 2nd Oct 2014 7:16 pm
When the oil price increases to $150 more people will be walking, riding their bicycles or taking mass transit.
It will speed up the transition to alternative energy sources and will end the oil monopoly on transportation fuels.
———————-
Top 10 Cycling-Friendly Cities – YouTube
https://www.youtube.com/watch?v=ycKXeKfu4lo