Land of Black Gold

Not to put too fine a point on it..

2009-10-11T09:05:00.003-04:00

Re: my last point about there being enough natural gas to help mitigate the most serious impacts from oil peaking. There are issues with this (see bottom), but I'm confident we won't be suffering a "die off", to quote one of the more extreme peak oil sites.

BP sees possibility of 100 more years of natural gas.

Reserve estimates are rising sharply as technology unlocks unconventional resources,” Hayward said in a Buenos Aires speech posted on the London-based company's Web site. “Estimates vary, but the U.S. may now be sitting on between 50 and 100 years worth of recoverable natural gas.”

New Way to Tap Gas May Expand Global Supplies.

Because so little drilling has been done in shale fields outside of the United States and Canada, gas analysts have made a wide array of estimates for how much shale gas could be tapped globally. Even the most conservative estimates are enormous, projecting at least a 20 percent increase in the world’s known reserves of natural gas.

ANALYSIS-Natgas giants still reeling from U.S. shale shock.

And big gas exporters noted that shale gas comes with its own problems, including massive water use and other environmental complaints, as well as the need for constant investment that could limit its impact.

"There's a lot of myths about shale production," said Gazprom Deputy Chief Executive Alexander Medvedev.

"We should not forget what the shale gas production profile looks like. If you stop drilling, production will fall by up to 80 percent in the next year."

Dr Strangelove, or How I learned to stop worrying and love peak oil.

2009-08-02T19:58:00.002-04:00

Okay, I'm totally kidding. Peak oil is a serious problem, and one that I believe looms in front of us in the near future.

However, through a combination of conservation, lifestyle adjustments, and the increased use of alternatives, I think humanity will figure out a way to cope with this problem. Natural gas looks promising as something to help mitigate the problem. I worry there's a bit of overpromise here, but we'll see.

In the meanwhile, personally, I've put other items on my front burner.

So, as Douglas Adams once put it.. "So long.. and thanks for all the fish."

Penn Energy: Questar President: Natural Gas is Abundant

The Oil Drum: How Much Natural Gas Do We Have to Replace Gasoline?

Charles Nenner says long term cycle bottoms soon.

2009-02-04T08:22:00.003-05:00

CNBC: Nenner Cycle Signals Entry Point.

You must also watch the Bloomberg video at his site to understand his full picture though.

See top video link here:

http://www.charlesnenner.com

Charles Nenner on Deflation, Commodity Stocks, and THE Market Bottom.

2008-10-31T06:04:00.004-04:00

Bloomberg: Charles Nenner Sees Opportunity in Commodity Stocks: Video.

Note: To view the video, click on the link towards the right side, under the heading "Related Video and Graphics".

Fear and Loathing in Closed End Funds.

2008-10-26T08:22:00.005-04:00

Closed end funds are like ETFs (exchange traded funds) in that they are traded on an exchange like stocks, and are made up of a bundle of other securities. Closed ends funds are unlike ETFs in that ETF shares are created and de-created (for lack of a better term) each day dynamically as demand warrants. Closed end fund shares do not have this dynamic creation/de-creation aspect. The other big difference is that closed end funds often trade at discounts or premiums to their underlying asset value, depending on how the market feels. When everybody wants in, they tend to trade at premiums, and when there is less or no demand, they tend to trade at discounts, sometimes severe.

It's interesting to look at the premiums/discounts that closed end funds have traded at over time. Sometimes it can identify an extreme in market emotion that could signal a panic bottom.

Below I show a few closed end funds and their premium (+) or discount (-) from their net asset value. The data is from Barron's. Notice the extreme swings and readings on the week ending October 13, 2008. It's too early to call the exact bottom in the market, but based on these readings, and the way we traded on Friday (futures limit down, lots of talk of a crash, but a day turned out less feverish than anticipated) suggests the extreme panic point may be behind us.

Premium/Discount from Net Asset Value on Selected Closed End Funds.

Stock
BDV = Blackrock Dividend Achievers
BGR = Blackrock Global Energy
GUT = Gabelli Utility
APB = Asia Pacific Fund

Bond
WIA = Western Asset Inflation Linked
HIS = Blackrock High Income (High Yield)
BFK = Blackrock Muni Income

Date BDV BGR GUT APB WIA HIS BFK

04-02-07 -6.3 -10.2 +18.6 -11.7 -10.3 -4.0 +16.4

06-30-08 -12.2 -15.7 +31.1 -9.6 -9.0 -12.1 +3.5

09-22-08 -17.6 -16.1 +44.8 -4.3 -14.0 -25.0 -7.2

10-13-08 -17.7 -23.4 -0.4 -22.2 -23.2 -38.1 -28.3 <-- Fear Itself

10-20-08 -12.0 -11.9 +41.8 -3.3 -14.5 -19.3 -6.1

10-27-08 -9.2 -13.8 +37.6 -13.4 -10.9 -19.6 -4.5

Unfortunately, it's difficult to make those line up very well.

The Panic of 2008 bottoms on Oct 14-15?

2008-10-06T12:48:00.000-04:00

I see that Barry Ritholtz has come up with the moniker of "The Great Financial Crisis of 2008", but I personally like "The Panic of 2008" a bit better.

While there are certainly legitimate roots for some of the selling, it is now extending well beyond that into a pure financial panic that is spreading into many corners of the market and around the globe.

I highlight here a recent video from Charles Nenner, who makes market predictions based on history and studying various cycles. Why highlight Charles Nenner? Well, he has a pretty good track record of making market calls, including a call that 2008 was going to be a bad year and one that it would be very difficult to make money in.

Mr. Nenner is now suggesting that we may hit a cycle low around October 14 or 15th, but it's also very important that we hold the lows we made recently. Unfortunately, October 14/15 (i.e. next week) seems a very long way off right now, and it doesn't appear that we will hold the market lows. His work also suggests that oil will go back to new highs sometime in mid-2009. And if next week seems a long way off...

Charles Nenner.com see Fox News video at the top for his latest views.

When good (lefty) papers go bad.

2008-10-03T08:19:00.006-04:00

When the New York Times starts bringing up the possibility of global cooling, you know it's about to get interesting. Note the oblique reference to global cooling, "would more than offset the warming effect".

New York Times: Sunspots Are Fewest Since 1954, but Significance Is Unclear.

Quotes:

Scientists are not sure why this minimum has been especially minimal, and the episode is even playing into the global warming debate. Some wonder if this could be the start of an extended period of solar indolence that would more than offset the warming effect of human-made carbon dioxide emissions. From the middle of the 17th century to the early 18th, a period known as the Maunder Minimum, sunspots were extremely rare, and the reduced activity coincided with lower temperatures in what is known as the Little Ice Age.

Compared to the Maunder Minimum, the current pace of sunspots “makes it look like we’re having a feast, not a famine,” Dr. Hathaway said.

Scientists expect that sunspot activity will pick up in the coming months, but exactly what will happen next is open to debate. Dr. Hathaway had predicted two years ago, based on the Sun’s behavior near the end of the last cycle, that the maximum this time would be ferocious.

“I’m getting worried about that prediction now,” he said. “Normally, big cycles start early, and by doing that, they cut short the previous cycle. This one hasn’t done that.”

But many of the other competing predictions — more than 50 over all — pointed to a quieter-than-average cycle. “They do kind of go all over the map,” said Douglas Biesecker, a physicist at the Space Weather Prediction Center who led an international panel that reviewed predictions.

Warren Buffett invests in Chinese electric car maker.

2008-09-28T07:41:00.007-04:00

$230 million is sort of chump change for Warren Buffett, but it's interesting nonetheless. He also recently bought Constellation Energy Group, a US electric provider that got itself in a bit of a financial crunch.

MarketWatch: Buffett powers into electric cars, buying 10% of BYD.

Quotes:

MidAmerican Energy Holdings Co. said in a statement that it would buy 225 million shares of Shenzen-based BYD for HK$1.8 billion.

BYD's Website says the company's 130,000 workers produce information-technology products including nickel-cadmium and lithium-ion rechargeable batteries, mobile-phone displays, keypads and housings; laptop-computer keypads, and more.

On the vehicle side, the company produces electric cars, ranging from economy to luxury models, as well as car molds and car parts.

CNBC: Warren Buffett Invests In Chinese Company Developing 'Green' Cars.

Quote:

BYD chairman Wang Chuanfu is quoted in the release as saying, "We are extremely pleased and grateful that Berkshire Hathaway and MidAmerican will be our long-term investor and partner, as we bring our electric vehicles and other environmental protection measures to the global space."

Links:

http://www.cnbc.com/id/26916857
http://www.baltimoresun.com/business/bal-te.bz.buffett19sep19,0,4547417.story
http://www.marketwatch.com/news/story/berkshire-powers-electric-cars-buy/story.aspx?guid=%7BA0737406%2D0BEC%2D4527%2D84CB%2D8EEA08BD1792%7D&tool=1&dist=bigcharts&

Warren Buffett: Thespian

2008-09-23T22:23:00.005-04:00

Just as things are getting shaky again, and on a day that Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and SEC Chairman Christopher Cox endure the slings and arrows (not to mention helpful guidance) of the Senate Banking Committee [Thank you Founding Fathers for ensuring the separation of powers!] to defend their bailout plan, Warren Buffett, with the dramatic flair of JP Morgan a hundred and one years ago, steps into the breach and invests $5 billion in investment banking firm Goldman Sachs. But he made this deal not without his pound of flesh, as the Goldman preferred shares he is buying yield a juicy 10%, and the warrants he gets are already in the money.

Nice deal Warren, and nice timing too. [Ya big ham - you know they're gonna be talking about this one for a while.]

Does the Financial Panic of 2008 now morph into the Financial Buying Panic of 2008?

Tough call - I'd guess yes, mainly based on observations of an orgy of negativity.

And there are probably a number of people short who have now overstayed their welcome.

Bloomberg: Goldman Gets Buffett's Backing in $7.5 Billion Fundraising Plan.

Links:

http://en.wikipedia.org/wiki/Panic_of_1907
http://www.bloomberg.com/apps/news?pid=20601087&sid=aM69.BQoLCbk&refer=home

Videos of the Week.

2008-09-20T15:38:00.004-04:00

CNBC: S&P Head on Downgrades.

Alternative title: Dylan Ratigan Goes Postal!

Dylan Ratigan lets a guy from ratings company Standard & Poor's have it in this first video, and justifiably so. The ratings agencies overrated (**way** overrated, judging by the crisis) debt instruments, and then, in a pure "There's gambling going on in here!" moment, pulled the rug out from companies that dealt and/or now hold them with downgrades based on the toxicity of these instruments. While many people are to blame here, the ratings agencies were supposed to stand above it all as impartial judges, an obligation they completely abrogated.

The quote of the year: "The ratings agencies were directly complicit in the creation of the securities that you now are, like a two year old with a bazooka, blowing people's heads off with."

CNBC: Making Sense of the Market.

Alternative title: Kenneth Heebner Goes Financial!

Perhaps even wilder than the first video, Kenneth Heebner reveals he's got an over 30% allocation to financials (mainly strong banks) in his CGM Focus Fund. And while it sounds nuts, Heebner has a knack for sector calls. I don't know if he's right or early (or WAY early), but gut wise, I like this call.

Links:

http://www.cnbc.com/id/15840232?video=859038023
http://www.cnbc.com/id/15840232?video=860916353

The global cooling debate.

2008-09-02T09:16:00.001-04:00

Daily Tech: Sun Makes History: First Spotless Month in a Century.

Quote:

The event is significant as many climatologists now believe solar magnetic activity – which determines the number of sunspots -- is an influencing factor for climate on earth.

Delta Farm Press: Global cooling gains momentum among scientists.

Quotes:

“Carbon dioxide is not to blame for global climate change, Sorokhtin said. “Solar activity is many times more powerful than the energy produced by the whole of humankind. Man’s influence on nature is a drop in the ocean.”

Canadian climatologist Timothy Ball said, “If we are facing (a crisis) at all, I think it is that we are preparing for warming when it is looking like we are cooling. We are preparing for the wrong thing.”

wattsupwiththat: Livingston and Penn paper: “Sunspots may vanish by 2015″.

Belfast Telegraph: Is there a cold future just lying in wait for us?

On-Line Opinion: Activity is quiet on the sunspot front.

Quotes:

At the time of writing the sun is still spot free. NASA solar physicist David Hathaway points out, quite rightly, that the sun’s behaviour is within major statistical limits - just. The average solar cycle lasts 131 months plus or minus 14 months and the current cycle - the quiet period counts as part of the old cycle - has lasted nearly 143 months. The solar cycle went quiet for years at the beginning of last century before restarting, Hathaway notes, so nothing out of the ordinary has happened - at least, not yet.

Another group at the US National Solar Observatory in Tucson, Arizona, William Livingston and Matthew Penn, believe that there may be a deeper process at work. Sunspots are highly magnetic regions that are somewhat cooler than the rest of the sun’s surface (they appear dark compared to the rest of the sun, but if seen separately would appear very bright) and the two researchers have been tracking both the temperature and magnetic strength of the spots. They found that the spots have been warming up and becoming less magnetic. An average of the trend is a straight line going down which hits the bottom of the graph at 2014. They have concluded that, although sun spots may appear briefly from time to time in the next few years, they will disappear by 2014.

This conclusion is in a paper submitted to the journal Science three years ago but rejected in peer review. With the sun now so quiet the paper has been resurrected from a filing cabinet in the observatory and circulated informally. Dr Livingston told me (by phone from his office in Tucson) that the paper had been rejected on the grounds that it was a purely statistical argument so it would be better to wait and see what happened, and he considered that a fair point. They are now waiting “for the right moment” to resubmit.

But what happens after 2014? Dr Livingston says that as they are using a purely statistical argument, without any theory to back it, they do not know. All they know is that the trend reaches zero in 2014. Conventional theory on the sun’s inner workings never forecast anything like this - in fact, forecast the exact opposite - but has been revised to say that the sun will restart some time next year.

Links:

http://www.dailytech.com/Sun+Makes+History+First+Spotless+Month+in+a+Century/article12823.htm
http://deltafarmpress.com/news/robinson-column-0825/
http://wattsupwiththat.wordpress.com/2008/06/02/livingston-and-penn-paper-sunspots-may-vanish-by-2015/
http://www.belfasttelegraph.co.uk/opinion/letters/is-there-a-cold-future-just-lying-in-wait-for-us-13938036.html
http://www.onlineopinion.com.au/view.asp?article=7824

Buffett: Oil Sands Visit for Info Only.

2008-08-23T08:56:00.002-04:00

Warren Buffett is nothing if not a disciplined investor, and he explains that his visit to the Alberta region was for information gathering only, something that he will file away and may use a few years from now. As he explains near the end of the interview, he's now gained knowledge on cost aspects of the business, but the biggest wildcard remains the longer term price of oil.

Note that he already holds $1.5 billion worth of ConocoPhillips stock, which claims to have the "largest position in Canadian oil sands".

It's mentioned that they visited CNQ's new project as well as an unnamed SAGD (steam assisted gravity drainage) site. Since COP has a joint venture with Encana (ECA), and since Encana has SAGD sites in production, my guess would be that they visited an Encana site.

CNBC: Buffett/Gates Energy Tour.

Link:

http://www.cnbc.com/id/15840232?video=829077555
http://www.conocophillips.com/NR/rdonlyres/31989B77-23F9-40A7-BB42-3D56B4A01420/0/UBSAustinMay22wnotesupdatedfor1Q08BPReseg.pdf

As the World Cools.

2008-08-21T09:09:00.003-04:00

In spite of the hub-bub about greenhouse gas linked warming, there are a number of scientists who are convinced that solar activity is a much larger factor. [Some scientists even suggest carbon levels rise after the earth heats up as a consequence, not before/as a cause.] Sunspots are one measure of solar activity, and there is a roughly 11 year cycle in sunspots, as well as some longer ones that we have not nailed down exactly. The current sunspot cycle is delayed, and it's possible this is linked to the bout of cooler weather we are experiencing.

There are scientists who are raising questions about the longer term solar cycle, suggesting that perhaps we are in for a lull in sunspots, and a bout of long term cooler weather. Some have pointed to the example of the Maunder minimum, which was a long period with little sunspot activity where the earth cooled fairly dramatically for those living through it.

While it's too early to draw conclusions, I'm keeping an eye on this story and on the sun's sunspot activity at Spaceweather. According to NASA, it should be picking up this fall. Note that longer than average cycles (above 11 years) are apparently associated with short periods of cooling. I also note that today we have a sunspot appearing, after a lull.

If you really want to go out on a limb, there are some (I think Charles Nenner, though I could be mistaken) who link sunspots with general human activity, and further stock market performance, I'd assume due to some geo-magnetic connection. A new sunspot perks up and it looks like the primary bull market in the investing world (commodities) might be pulling out of it's tailspin. A connection? Who knows.

Link:

http://en.wikipedia.org/wiki/Maunder_minimum
http://www.spaceweather.com/

Yahoo: This year so far coolest for at least 5 years: WMO.

Link:

http://uk.news.yahoo.com/rtrs/20080820/twl-environment-climate-2008-dc-1202b49.html

Maine Today: Brrr! Farmers' Almanac says cold winter ahead.

Link:

http://news.mainetoday.com/updates/031815.html

Milenio: Auguring brief era of ice in 2010.

Quotes:

An expert from the National Autonomous University of Mexico predicted that in about ten years the Earth will enter a "little ice age" which will last from 60 to 80 years and may be caused by the decrease in solar activity.

Link:

http://translate.google.com/translate?u=http%3A%2F%2Fwww.milenio.com%2Fmexico%2Fmilenio%2Fnota.asp%3Fid%3D651680&hl=en&ie=UTF8&sl=es&tl=en

I have more on this topic here, here, and here.

Link:

http://lobg2.blogspot.com/2008/06/theres-little-black-spot-on-sun-today.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun-ii.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun.html

Note: This blog is distributed through some media that doesn't handle links properly, therefore I will list the link address also for people to cut and paste if they wish.

MAN BITES DOG - er, POLITICIAN.

2008-08-21T07:40:00.003-04:00

Perhaps I should say "Man bites pandering politicians."

This is great, and amazing. A new poll showing that Americans are smart enough to figure out that windfall profits taxes on oil companies, SPR releases, and gas tax holidays are not going to fix the energy problem. Who'd have thunk it?

Coming soon: Obama on an offshore drilling platform, and Pelosi air kissing Rex Tillerson. (Maybe she ought to kiss-kiss the guy from Devon, he's actually better at finding resources.)

The Wall Street Journal: Voters Want Everything on Energy.

Quotes:

"Voters are telling us they want everything," said Neil Newhouse, a Republican who conducts the poll with Democrat Peter D. Hart. Mr. Hart said the results indicate that the current energy debate between Republican presidential candidate John McCain and his Democratic rival, Barack Obama, "is not the fight that the American public cares about."

The poll found greater levels of skepticism among voters about releasing oil from the Strategic Petroleum Reserve -- an idea advocated by Sen. Obama and many congressional Democrats -- and suspending the federal gas tax, an idea championed by Sen. McCain. Less than half of those polled thought those ideas were a step in the right direction.

"What these voters are saying is that there needs to be a whole new way of looking at our problems, and that they don't want the same old fights and the same old divisions," Mr. Hart said.

After weeks of criticizing expanded drilling, Sen. Obama has said he could support an expansion of offshore drilling, as long as it is part of a "genuine bipartisan compromise" that includes other measures to reduce the country's oil dependence.

Similarly, House Speaker Nancy Pelosi (D., Calif.) announced last week that her party is drafting legislation that "will consider opening portions of the Outer Continental Shelf for drilling, with appropriate safeguards, and without taxpayer subsidies to Big Oil."

Bill and Warren's Excellent Alberta Adventure.

2008-08-21T07:01:00.006-04:00

It's been a long time since I've done an Canadian oil sands post. These stocks have been clobbered along with everything else, but these are huge resources that will be producing for a long time. These projects aren't without issues, as it's carbon intensive, needs natural gas input as well as a large amount of water, and makes apparently one hell of a mess, so they need to get the environmental stuff done right.

The classic oil sands stock is Suncor, SU, but Bill Gates and Warren Buffett took a tour of the latest oil sands project, the Horizon project by Canadian Natural Resources, CNQ.

Other oil sands names include:

Canadian Oil Sands COSWF
Imperial Oil IMO
Nexen NXY
Encana ECA
ConocoPhillips COP
Husky HUSKF
ExxonMobil XOM
Shell RDSA
Devon DVN
Marathon MRO
Opti-Canada OPCDF

Because of the size and longevity of these resources, combined with the long term questions about reliable oil supply and peak oil, I have seen Suncor referred to as the "Microsoft of oil", with potentially 50 years of earnings growth ahead of it, as well as comments about oil sands stocks being "stocks to pass on to your grandchildren".

I'm looking forward to see what Warren Buffett has to say in his CNBC interview on Friday.

Financial Post: Buffett and Gates tour Alberta oil sands.

CNBC: Oilsands Stock Soars After Warren Buffett and Bill Gates Visit Alberta Project.

Insider buying in energy stocks.

2008-08-19T22:29:00.004-04:00

I started looking at this yesterday. Among names that are seeing some buying:

MMR
HK
GDP
CLR
HERO

It's nice to see insiders jumping in here, though sometimes they are a bit early. It looks like energy stocks may finally be finding a floor, after a solid month+ of a thorough thrashing.

Wall Street Journal: Oil, Gas Insiders Bet Energy-Stock Bull Is Primed to Resume Run.

Quotes:

Oil and gas insiders are betting big that the historic run-up in energy stocks isn't over.

Since energy stocks crested and retreated in early July, an unusually large number of directors, officers and large stakeholders have pumped money back into their own companies -- a sign, analysts say, that the boom is primed to resume.

Pickens: Not too long under $100.

2008-08-19T20:48:00.004-04:00

Using wind for electrical energy generation, shifting natural gas to a transportation fuel, reducing oil imports 50% in 10 years, yada yada yada. Ok, kidding about the yada yada yada, I've just featured Mr Picken's ideas a number of times now.

It's an extremely important issue, this is one guy with a decently sized plan that seems worth shooting for, so I'm personally for it.

Without any kind of plan (say, like the situation we find ourselves in right now..), we're liable to be as *&^%$# as the peak oil doomsters think.

On the oil price prediction of a roughly $100 floor for oil prices, he believes OPEC will actively try to support a floor around that price, which sounds correct to me.

Bloomberg: Pickens Says Crude Oil Isn't Likely to Drop Below $100.

Where is the oil price floor?

2008-08-18T21:47:00.003-04:00

I think Tom Petrie might be right - a natural floor might be around $80 to $90 for oil. But I think we don't get there because of the winter (which I suspect will be cold) and because the market is still going to leave a bit of a premium in the mix for the vagaries of the world.

Note the interesting headline flashed, but not discussed:

"Practical peak oil becoming broadly recognized as looming issue"

CNBC: Crude Heading Down to $80 a Barrel: Merrill Executive.

Quotes:

"I think it's pretty clear demand elasticities have been triggered in a way that will take prices lower," Petrie said. "I do think $80 to $90 is probably where the floor is."

Got shale?

2008-08-03T16:37:00.006-04:00

Alternative title: Taking the edge off peak oil.

Oil is unlikely to go back to $30, even with this potential boom in shale gas production in the US, but it's looking like we actually have something workable here, mid-term.

The peak oil doomsters are really not going to be happy about this development.

The answer, as always, was somewhere in the middle.

CNBC: Nat Gas Plays.

Star Telegram: Natural gas stocks take big drops since July 1.

Quotes:

XTO Chairman Bob Simpson told the paper that the shale-gas fields popping up across the country are proving to be "discoveries the size of which you haven’t seen for 50 years in our business."

He called the Barnett Shale "one of the greatest gas fields ever found" and suggested that the huge natural gas finds could boost demand because they suggest that there will be ample supply.

The actual reserves from the nation’s shale-gas fields are mostly speculative because the formations are relatively new and haven’t been fully explored.

The Barnett, discovered in 1981, is relatively mature, but others, like Louisiana’s Haynesville Shale and Appalachia’s Marcellus, are sparsely drilled.

That didn’t stop Friedman, Billings Ramsey analyst Rehan Rashid from working up his own estimates of the fields’ reserves, which he presented Wednesday in Houston. Rashid told Oil and Gas Investor magazine that he figures that the Barnett Shale holds 55 trillion cubic feet of recoverable gas.

But he pegs the Haynesville at more than twice that, or 120 trillion cubic feet, and the Marcellus at 68 trillion. Arkansas’ Fayetteville Shale follows the Barnett at 25 trillion, and Oklahoma’s Woodford Shale weighs in at 14 trillion.

He said he expects those fields to greatly boost the values of the companies that have staked holdings there.

CNBC: Peak Oil Theory.

CNBC: Drilling for Profit.

CNBC: Peak Performance?

Pickens Plan.

How do you spell relief?

2008-07-30T09:10:00.003-04:00

Apparently, S-H-A-L-E.

CNBC: Relief for America's Energy Crisis.

BRIC BRAC.

2008-07-20T14:12:00.002-04:00

Stephen Leeb makes the interesting suggestion that we re-think "BRIC" - Brazil, Russia, India and China and substitute "BRAC" - Brazil, Russia, Australia and Canada, i.e. substitute emerging countries with resource rich countries.

I like the idea for diversification as well. You never can tell who's about to nationalize, seize, go carbon-bonkers, or drink themselves silly (that would be the Australians, though come to think of it the Russians also qualify).

There are some well run, resource rich stocks in BRAC, among them Petrobras, Lukoil, Woodside Petroleum, Santos, Suncor, Canadian Natural Resources, Imperial Oil, or, as the article highlights, the country ETFs: EWZ, RSX, EWA and EWC.

istockanalyst: Changing BRIC for BRAC.

Quotes:

"The currencies of countries rich in essential resources—oil and other fuels, metals, agricultural products—are in strong demand," says long-standing market expert Stephen Leeb.

The editor of The Complete Investor explains, "Brazil, Russia, Australia, and Canada are awash in natural resources. And in a world of growing shortages, these countries can't miss."

"The acronym 'BRIC—standing for Brazil, Russia, India, and China—is in vogue as shorthand for the emergence of the developing world.

"But we’re herewith proposing an emended version: 'BRAC'—standing for Brazil, Russia, Australia, and Canada.

"That’s because these four countries are the ones most brimming over with essential natural resource, with each one a net exporter of fuels and other natural products. In a world where resource shortages will only get worse, these countries will stand out from the pack.

"Don’t get us wrong. China and India remain the largest and fastest growing emerging economies and still face exceptional futures.

"But their major resources are cheap labor, which will become less cheap as their economies keep growing. Indeed, labor costs in these countries already have begun to rise relative to the rest of the world.

"Meanwhile, continued gains in commodities mean that Australia and Canada are gaining relative to the rest of the world. It’s hard to overstate just how important relative resource independence is in a world where resources are becoming ever more scarce and expensive.

Is the oil bull market dead?

2008-07-17T20:11:00.004-04:00

CNBC: Oil's Biggest 3-Day Drop In 5 years.

I'm surprised there was little mention in this video of the supply and demand factor. Yesterday we saw a big build in crude and today a decent build in natural gas. The huge move in oil and natural gas that started early this year was about supply and demand, as a colder than average winter cut into natural gas supplies and pulled on heating oil supplies, which, combined with demand for diesel, pulled up crude prices.

We are now facing the other side of the supply demand equation, the one where supply is starting to build instead of declining. And price wise, neither natural gas nor crude looks like it's ready to make a stand today, they look like they have further to drop. Chart wise, I'm guessing natural gas could pull back to $9.50 and oil to $120, though crude at $110 wouldn't shock me at all. On the other hand, looking ahead further, if we get another cold winter, I think we revisit the highs.

This summer feels like a mild one, and I think back to this quote from a few posts ago:

The question Coxe raises, and one we cannot answer, is whether the lack of sunspot activity in this cycle portends a trend to cooler weather, shorter growing seasons, and increased space heating demands – or is it just a statistical fluke?

Investment Implications

Coxe argues that if the lack of solar activity is not a statistical fluke natural gas would be a ‘pure play' on this event due to the huge amount of natural gas used for space heating in North America . Natural gas is a very efficient and non-polluting heating fuel.

We would tend to agree with his assessment, but note that the incremental use of natural gas as a summer electrical generation ‘peaker plant' fuel may decline if air conditioner loads are significantly reduced.

Pure play natural gas and oil E&Ps are bearing the brunt right now, while big oil (XOM, CVX, COP) and big service (SLB, HAL, WFT) have paused. That suggests people are shedding excess exposure, but holding the core.

SLB reports tomorrow, apparently. How the market trades it will probably be a significant tell.

To answer the title question, while I don't think the bull market is dead, I do think that the huge move this year ate up a lot of our bull's "energy", and was a little too "easy". When it's that easy, it's often a sign that you're about to encounter trouble. Lesson learned.

Roque: Own commodities instead of stocks.

2008-07-14T21:13:00.005-04:00

I'm a bit of an agonistic on gold, but you can't bury your head in the sand and ignore it. Compounding financial crisis, inflation, printing money... gold is in.

CNBC: Commodities Explosion.

Haynesville Shale.

2008-07-06T09:43:00.006-04:00

shreveporttimes.com: CEO: Haynesville Shale is fourth largest in the world.

Quotes:

The Haynesville Shale is likely to become America's largest natural gas field and perhaps the fourth largest in the world, Chesapeake Energy Chairman and CEO Aubrey McClendon disclosed Wednesday in a conference call with its newest partner, Plains Exploration and Production Co.

See, among others:

CHK & PXP

Encana & Royal Dutch Shell

Petrohawk

and..

GDP
PVA & GMXR
CRK
STR
EP
SM
XCO
FST
DVN
APC
HP (driller)
XTO & Hunt
BRY & O'Brien
COG & undisclosed

Did I forget anybody? Probably.

The consequences of higher oil prices.

2008-06-28T11:52:00.002-04:00

This is an interesting discussion of the impact of higher oil prices from the newspaper of record in the heart of car country, the Los Angeles Times.

While I don't feel sorry for Ms. Carver and her Palmdale to Commerce commute (that was a bad idea even with cheap gas), lots of other assumptions from a world of cheap oil are going to be turned on their heads. India and China's stock markets have both been clobbered this year as being oil short (and generally food and resource tight) and manufacturing, export, and remote service long maybe doesn't look so good. Russia and Brazil, on the other hand, are holding up pretty well. As, until recently, was the US.

Los Angeles Times: Envisioning a world of $200-a-barrel oil.