Peak Oil is You
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Page added on December 2, 2013
Crude Prices Plummet! How to Play the End of Peak Oil
For years it’s been taken as a given that the world will “run out” of crude oil at some point in our lifetimes. Once the rate at which it could be extracted peaked, and assuming the growth in demand remained constant, the sacrcity of oil would lead to nightmare shortages, price ramps and general Malthusian chaos would ensue.
In the attached clip, David Kotok of Cumberland Advisors makes the case that the so-called Peak Oil crisis has been delayed, if not entirely debunked, as far as the United States is concerned.
“Peak oil caught a lot of attention. There’s a book about it. There are studies about it…I’m old enough to remember when we had two oil shocks and oil went to $30 a barrel and Exxon (XOM) had this famous chart that the world was going to come to an end. Guess what? It hasn’t ended.”
While conceding geopolitical risk in Europe could justify sustainably high prices for Brent Crude in Europe, Kotok says in the US, where WTI is the benchmark, prices are drifting lower. That’s good news for the American economy as it benefits the cost of industrial production as a whole, and consumers in the form of lower prices at the pump.
Economically speaking, crude production companies get less revenue but the benefits to chemical companies overall will largely outweigh whatever profit hit results. For investors, Kotok says a little portfolio shifting may be in order given this new supply vs. demand outlook.
Oil and energy stocks make up about 11% of the stock market according to Kotok. He’s underweight those names in favor of being extra-long transportation, consumer and other areas that will benefit from lower than expected crude oil consumption costs in the US over the next decade or more.
11 Comments on "Crude Prices Plummet! How to Play the End of Peak Oil"
rockman on Mon, 2nd Dec 2013 9:52 pm
“For years it’s been taken as a given that the world will “run out” of crude oil at some point in our lifetimes.” Well, at least upfront he admits an almost childlike ignorance of natural resources…especially oil. The funniest point he makes IMHO:
”I’m old enough to remember when we had two oil shocks and oil went to $30 a barrel…”. Heck…I can remember when oil went down to almost $10/bbl in ’86. Nothing like a major global recession to make oil cheap. And plentiful…if you had the money to buy it. Then he should be able to remember when oil was $30/bbl just 10 years ago compared to $95/bbl oil today. Hell no we ain’t running out of oil! We got all the expensive oil you can afford to buy.
eugeni on Mon, 2nd Dec 2013 10:13 pm
“someday we’ll run out of oil, you and I we’ll be a lot older when that happens”… at least he admits it’s going to be in his lifetime, cannot be faraway so.
andya on Tue, 3rd Dec 2013 12:35 am
See the chart, now look at the gap between ‘supply’ aka discoveries, and ‘demand’ aka production. Now explain to me why peak oil is ending?
rockman the funniest point IMO: going EXTRA-long transportation and consumers for the next decade or more.
BillC on Tue, 3rd Dec 2013 12:36 am
I guess plumment is defind as a 12% drop. This guy knows as much of PO as my dog knows of quantum physics. He must have looked into it at least 15 minutes.
ted on Tue, 3rd Dec 2013 1:16 am
you have to have stories like these! If people knew the truth about things the price of oil would plummet to less than $40 a barrel and we would be in a deep depression…..the scary thing for these guys is this video will be out there for a long time….keep shopping people!!!! Experts agree everything is fine!!!
MrEnergyCzar on Tue, 3rd Dec 2013 4:18 am
The cure for low oil prices is low oil prices….
rockman on Tue, 3rd Dec 2013 12:15 pm
andya – Yep…it’s too easy, eh? LOL. It’s almost as if this guy is a plant to intentionally make the denial position look foolish. The only thing worse would be to have him argue on our PO side of the issue.
Bob Inget on Tue, 3rd Dec 2013 1:04 pm
Without government subsidies we couldn’t
force oil to any surface @ $70.
When we compare Alberta or North Dakota
say, with Saudi Arabia we always forget to mention, Aramco pays its own ‘security’, one hundred Billion each year. Suncor or Whiting Petroleum needn’t budget for cruise missiles or drones.
rollin on Tue, 3rd Dec 2013 7:28 pm
It’s amazing how Chevron pulled out of it’s African shale exploration after spending millions in sonic exploration.
The big companies don’t seem to be interested in shale oil, I guess they don’t see large long term profits.
Plus not all shale is the same.
These commenters are taking the business line, looking at rise and fall in prices. They also can’t readily admit that a major industry is headed into decline. I love the US glut line they keep spouting. With a glut of oil we should stop importing so much :-0
rockman on Tue, 3rd Dec 2013 8:29 pm
rollin – I’ve mentioned before a very limiting factor Big Oil is faced with regarding the shales: it a huge manpower drain. Big Oil often just doesn’t have the bodies to handle a major effort. They actually keep a tally of how much oil/NG they can go after per manpower days. From the land acquisition through the production phase it’s typically very difficult for Chevron et al to allocate the personnel to such projects. It doesn’t matter how much oil is in the ground if they don’t have enough boots on the ground to get it out in a timely fashion. Thus it’s much easier for Chevron to spend $4 billion developing a Deep Water oil field that requires less manpower than the equivalent thousands of shale wells onshore.
GregT on Tue, 3rd Dec 2013 11:14 pm
This interview reminds me of the run-up to the global financial crisis, minus the input from Peter Schiff.