Hi all,Unthinkable just a year or two ago. This could mean great things for our economy and our way of life:http://www.marketwatch.com/story/us-set-to-overtake-saudi-in..."By around 2020, the United States is projected to become the largest global oil producer" and overtake Saudi Arabia for a time, the agency said. "The result is a continued fall in U.S. oil imports (currently at 20% of its needs) to the extent that North America becomes a net oil exporter around 2030."This major shift will be driven by the faster-than-expected development of hydrocarbon resources locked in shale and other tight rock that have just started to be unlocked by a new combination of technologies called hydraulic fracturing.According to Washington's Energy Information Administration, U.S. oil production has increased 7% to 10.76 million barrels a day since the IEA's last outlook a year ago. The agency's conclusions are partly backed by the Organization of the Petroleum Exporting Countries, which last week acknowledged for the first time that shale oil would significantly diminish its share of the U.S. market.Rich
I, for one, welcome that the USA will become energy independent. Strange as it may seem, it might be good for my oil exporting country as well. SeeDecember 29, 2002Why Oil Rich Countries Are Poorhttp://softwaretimes.com/files/why%20oil%20rich%20countries%...What Value Hounds want to know is "Where is the money in energy independence?" Increasing supply should lower prices and oil company stocks generally rise and fall with crude prices. Where are the opportunities with shale oil? The difficulty with shale oil is that it requires fracking, the breaking up of impervious shale formation to allow the oil and gas to flow but fracking requires lots of water, a scarce resource, and one that must be cleaned up before returning it to nature. One alternative to using water is to use petroleum gases instead. This solves one problem, water pollution, but creates another, it seems that it can be quite dangerous, the gas is explosive after all.Fossil fuel based energy independence does not bode well for costly green alternatives. Wind, solar, and biofuels might get hard hit as well as coal. I originally bought into OriginOil for the algae based biofuel (diesel and jet fuel) but that is probably a dead end. On the other hand, the same process that separates the algae culture into oil, water and biomass can be used to clean up frack-water. This is the reason I'm holding on to OOIL.Denny Schlesinger
hey RichThere are some changes working their way through energy. Anecdotally, living in the oil patch, I hear a lot of comments on natural gas, coal and oil. Lots of coal and gas production in these parts and the word is coal as a source of energy for electricity is losing its first place status and natural gas is taking hold. Coal can't compete effectively when the costs of compliance for emissions are factored in. The coal around here goes overseas. Half of the coal fired boilers in two power plants in the area will be shut down soon--can't afford to clean them up. Most of that energy goes out of state. I would be looking for natural gas to begin recovering.Fracking has been banned in Vermont(so what--no gas in VT) and in Longmont CO. It will be contested. It's here to stay. Looking for ways to invest in the process and the clean up would include Clean Harbors and Carbo both of which are excellent companies but maybe have run up a bit too far since I last visited them. I would be looking for weakness if oil drops a lot more. The price of crude is a factor for both. Also Core Labs is looking interesting again after a big decline this year. And there are the usual suspects--natural gas producers. SWN maybe? Or Devon. God forbid maybe even CHK?BTW US Ecology has done really well--kudos and thanks!
Once again we see that all resource constraints are temporary. There are essentially infinite resources in the universe. We are only limited by are knowledge on how to use them.sw
For the more adventurous there is also Pason Systems:http://seekingalpha.com/article/318519-pason-a-hidden-gem-in...As of now you need to buy this on the Toronto Exchange or the pink sheets. I think when this company gets NASDAQ listing at some point, it will get much more recognition and a higher valuation.sw
I believe it. It is truly amazing what is happening. In 2007 or so, the Bakken formation produced about 3,000 bpd of oil. This year it should be ~700,000 bpd. By 2015, it should be 1 million bpd. (those numbers and years might be off a bit, but order of magnitude are correct within a year or two).It is like we found Norway in North Dakota. That is just one formation.Meanwhile, the Utica shale has so much gas that Shell is building a world-scale petrochemical complex. In Pittsburgh!Who is going to win? Any industry which is still based in the U.S. which relies upon cheap power or natural gas as a base stock: aluminum producers and petrochemical companies are two that spring to mind.On the oil side, refineries which have access to the crude coming out of the middle of the country will have a structural advantage for the next several years until the pipeline infrastructure catches up.
This could mean great things for our economy and our way of lifeIt could. But, then again it probably won't. It will likely mean tainted drinking water and a blight on the landscape in many regions. It's rarely the general population that benefits from abundant resources, though very occasionally there are exceptions to the rule. Most Angolans don't, after all, benefit from Angola's diamond mines.kelbon
refineries which have access to the crude coming out of the middle of the country Holly
I think this time in the US and Canada it will benefit the communities and the country although as always benefits will be uneven. I personally know many middle class people in PA who have received significant income from selling drilling rights on their property. One of my regional banks (FNB) has been citing the Marcellus shale factor as something that will significantly improve their business.The issue of effects on drinking water is clearly highly controversial, but the current administration appears to be pretty aggressive in watching this. The economy in North Dakota is clearly booming (and it is not because of the great weather). It is said that if you show up in ND you can find a job in half an hour.Low cost energy is also clearly beneficial for many US companies. Power plants are switching from coal to natural gas. Since Nat gas produces less carbon dioxide when burned than coal (in addition to other undesirable emissions) this is a positive for those concerned about greenhouse gas emissions etc. There are a number of interesting companies looking to expand use of natural gas to more vehicles (Westport is one, interesting co., somewhat speculative investment).sw
Look at Canada (one example) and price of petrol there...don't believe the average man will ever see relief at the pump!For fun check out Donald Sadoway at Ted.com. Fuel cells(Liquid Metal battery) makes way too much sense.As he states we will never conserve,drill or bomb our way out of the energy crisis!
Unthinkable just a year or two ago.______________________________________Unthinkable? Yes. Could mean great things? That would be nice! Realistic? Well, ... recent thread listing links to six subsequent articles: Subject: Definitions: 'Shakespearean Tragedy'http://boards.fool.com/definitions-shakespearean-tragedy-302...Cheers, ...
... bonus:...U.S. crude oil production is averaging 6.2 million barrels per day (mbpd) so far this year compared to Saudi Arabia's 9.9 mbpd. So, how did the reporter and his sources end up with a production number of 10.9 mbpd for the United States?The problem results from the deceptive redefinition of oil supply by the oil industry itself, one designed to obscure the true oil supply picture and one that, unfortunately, has been adopted by some government agencies. Within the last decade the industry began to count something called natural gas plant liquids (NGPL) as part of oil supply. ....Why the U.S. is NOT the new Saudi Arabiahttp://resourceinsights.blogspot.ca/2012/10/why-us-is-not-ne...
"By around 2020, the United States is projected to become the largest global oil producer" and overtake Saudi Arabia for a time, the agency said. Personalty, I wouldn't invest a nickle based on what these guys predict. They can't predict prices 6 months out and if you can't predict price then you can't predict consumption or production numbers effectively either.I understand the need for these studies (well sort of) but for an individual investor to make investment decisions based on what they predict is shear lunacy IMO.A better strategy IMO is to simply put your faith in continued volatility and fade the market (with producers not the commodity) as it goes through it's gyrations based (often times) on what the *predictors* are telling us.That combined with a little patience can often trump even your best efforts at DD IMO.This could mean great things for our economy and our way of life:This I agree with, it's already happening.B
I would be looking for natural gas to begin recovering.Hi KitKat,Just curious; what price in your mind constitutes a recovery for ng?With the Marcellus still ramping up production sharply, the Utica looking more like the best results and most drilling will be directed towards the liquids/gas fairway you have to wonder if production levels will be the cause of a recovery at least for a while yet.This would leave consumption and from what I understand the $3.50 level is pretty much the cut off line where voluntary switching from coal to ng is taking place which we are already at.God forbid maybe even CHK?He already forbade me, in fact he sent me a new commandment.11. "Do not invest in CHK"B
On the oil side, refineries which have access to the crude coming out of the middle of the country will have a structural advantage for the next several years until the pipeline infrastructure catches up.Until they don't that is. When the market decides that day is coming it could get real ugly for the Midwest refiners IMO. Like they say timing is everything. :<)You might be interested in this blog article.Midwest and Rockies: refiners here stand to lose the most as lower priced crude advantages move to their coastal refinery competitors. High refining margins will be reduced as the Midwest crude surplus subsides. Gasoline margins are likely to be tighter because domestic demand is stagnant and these refiners do not have easy access to export markets.http://www.rbnenergy.com/coast-to-coast-paradigm-shift-how-s...B
The economy in North Dakota is clearly booming (and it is not because of the great weather). It is said that if you show up in ND you can find a job in half an hour.I think you need to keep this in perspective given the entire state of ND has the population of only one modestly sized city. B
Just curious; what price in your mind constitutes a recovery for ng?Higher than it is now :)I don't have numbers at hand but should update my research that is over a year old on gas vs coal and how much is being used now. A couple of years ago it was clearly coal. My only numbers now are anecdotal from guys that work in energy around these parts.There are few if any new plants built to run on coal that the guys here are getting work for. If gas gets too high will they retrofit back to coal? Seems unlikely but I don't know for sure. If they don't or can't NG has a captive audience and can start to raise the prices. It's already off its lows at $2. Still a long way from 2008 and $13. I remember energy guru Kurt Wulff from McDep predicting $11-$12 gas would be the new normal price. Most producers would be ecstatic to get $7-$8. At those prices. electricity would not be feasible. Don't know where the breaking point is. Thou shalt not buy CHK--has a nice ring to it as the 11th commandment
Until they don't that is. When the market decides that day is coming it could get real ugly for the Midwest refiners IMO. Like they say timing is everything. :<) I've looked for an accessable internet link to a Mauldin article about six months ago. He, or whomever was writing in his Newsletter, discussed the opportunity that Mindwest nat gas could provide to repatriate businesses back from overseas.His point was that the #2 cost for most manufacturers is energy, and that even wages (#1) had both declined significantly here and increased significantly where outsourced. I believe that he also mentioned that automation made labor needs less extensive. The trick seemed to be to locate a plant on top of cheap energy AND cheap labor (in most case rural). As you say "timing is everything" and this could come at a time when pipelines to the Midwest and Pennsylvania are less critical.Sorry I can't find it. I've googled references to it, but not the article. Maybe one of you better organized folks can find it.bobRYR Home Fool
There are few if any new plants built to run on coal that the guys here are getting work for. If gas gets too high will they retrofit back to coal?No of course not but that is not the switching that saved even further carnage for the ng producers this year. If you are waiting for the new plants to fix the supply demand imbalance then you could be waiting awhile longer. The big demand spike came this summer due to the hot weather which combined with the low ng price allowed some utilities to juggle their "generation stack". That's where the majority of incresed consumption came from this past year and it was driven exclusively by low ng prices.Here is (another) great blog series from RBN on the subject of the switching decision processhttp://www.rbnenergy.com/talkin-bout-my-generation-coal-to-g...http://www.rbnenergy.com/talkin-bout-my-generation-coal-to-g...Another on the pivot point where price was causing producers to switch back.http://www.rbnenergy.com/power-burn-sensation-continues-afte...If I haven't said it before I'd highly recommend anyone interested in anything involving energy to sign up for this blog. Check out the archives and you will quickly understand why. Best energy blog on the planet if you ask me.B
Hi all,As was pointed out, there are many reasons to be skeptical of the prediction that the US would someday soon become energy independent. But, for today, let’s assume that it will in deed happen. Then, what would it mean?My first thought is that it would produce much needed employment for many now looking for work. Then, there’s the multiplier effect for support businesses that would need to grow in order to provide food, shelter, entertainment and ancillary needs of those workers with money in their pockets to spend.A side benefit would be that the oil “risk premium” that causes the price of oil to spike every time Iran or some other Middle East country sneezes would evaporate and be forgotten. Something that has been taking a back seat to the other more pressing crises of today - our trade deficit - would be greatly reduced. Who remembers this Buffett article circa 2003:http://money.cnn.com/magazines/fortune/fortune_archive/2003/...Our trade deficit has been running at about $50B per month and oil imports make up around 50 or 60 percent of that figure. See: http://www.census.gov/foreign-trade/statistics/graphs/Petrol...http://www.census.gov/indicator/www/ustrade.htmlhttp://www.economicpopulist.org/content/2011-annual-trade-de...So if we become a net exporter of oil and ng then our trade deficit would be cut by more than half. If we are a net exporter of oil and ng then that will mean that the price of oil and ng produced in the US is also the lowest cost to produce of any in the entire world (after factoring in transportation costs). Armed with cheap and dependable energy that will in turn give US manufacturing a competitive advantage over other parts of the world and that could be sufficient to erase our trade deficit entirely and perhaps even create a surplus, erasing unemployment and pumping $$$ into government coffers by the boat load as a result.Denny asks: “What Value Hounds want to know is "Where is the money in energy independence?" To which I say, nearly EVERYONE will benefit. Some more than others and finding those is where the fun is.Drill, baby, drillRich
Hi Kit,I'm afraid coal has been moved to the back burner and that it will be a long time before it comes back in favor. Someday far in the future, it will return.I tend to think that the way to profit from this prediction will be safest outside the oil patch. Picking winners inside the oil patch will be tough because what will be needed is to pick the ones who will find the most profitable "finds" of them all. Without the tailwind of ever rising oil/ng prices lifting everyone's boat all producers will not be created equal.Glad to hear you are making some bucks on ECOL. They have been doing surprisingly well.Rich
He, or whomever was writing in his Newsletter, discussed the opportunity that Mindwest nat gas could provide to repatriate businesses back from overseas.Two different issues comparing ng and oil for refiners. Both share one thing though and that is the role infrastructure (especially pipelines) play and how quickly markets can get turned upside down as the midstream people and producers adjust.Not to be repetitive but RBN has several great series in their archives on ng & oil pipeline developments in addition to the role trains are playing.It is really a stunning testimonial to capitalism when you see just how quickly the country has responded to events as they have developed. I doubt there is another place on the planet that could pull it off in half the time.And that's with all of the partisan fighting in the country; can you imagine what we could accomplish if we actually decided to work together?B
A side benefit would be that the oil “risk premium” that causes the price of oil to spike every time Iran or some other Middle East country sneezes would evaporate and be forgotten. Hi Rich,I don't see how you come to this conclusion. As long as anyone (Asia) is dependent on ME oil then the risk premium will still apply unless you assume the disconnect between the US and world prices is a permanent situation. Increased supply would certainly lead to lower prices but any disruption will still impact prices it would just be from a different level.If we are a net exporter of oil and ng then that will mean that the price of oil and ng produced in the US is also the lowest cost to produce of any in the entire world (after factoring in transportation costs)And I really don't understand how you come to this conclusion. Being able to export only proves we can compete at the world price it doesn't say anything about production costs unless you know what the profit margin is as well. The idea that Bakken oil for example is low cost production is simply not based on fact.Armed with cheap and dependable energy that will in turn give US manufacturing a competitive advantage over other parts of the world and that could be sufficient to erase our trade deficit entirely and perhaps even create a surplus, erasing unemployment and pumping $$$ into government coffers by the boat load as a result.LOL, although in a toned down way I agree with what you wrote I suspect you still might want to consider cutting back on your caffeine consumption in the morning. :<)Drill, baby, drillYeah, but I wouldn't forget how big of a role save, baby, save has had on our economy as well.I still prefer "all of the above" myself.B
His point was that the #2 cost for most manufacturers is energy, and that even wages (#1) had both declined significantly here and increased significantly where outsourced. Don't forget transportation costs, it's cheaper to produce near your markets which is why rock pits can be so attractive: the expense of transporting gravel can be a huge moat.As for distance to refineries, I do believe that each refinery specializes in a type of crude, one designed for light, sweet crude might have difficulty in handling heavy, sour crude. <rant_alert>Last night I was watching an old documentary about the B-29 bomber being built at the tail end of WWII. The factories crawled with workers. A few years ago I read about modern factories in Germany that were almost entirely devoid of workers, robots having taken their place. As the economy uses more technology, capital gains importance relative to labor. Labour must gain new knowledge and new skills to find productive jobs. But at the limit there will be too many workers to fill even the low skill, low pay jobs while capital appropriates the benefits of increased efficiency. Wealth redistribution will become a major issue and it will be contentious and possibly bloody.Now we return to regular programming. ;)Denny Schlesinger
A side benefit would be that the oil “risk premium” that causes the price of oil to spike every time Iran or some other Middle East country sneezes would evaporate and be forgotten. Rich I would not be optimistic about a reduction in the volatility of oil prices. They were just as volatile during the times of John D. Rockefeller when all the oil used in the USA was national.Denny Schlesinger
A few years ago I read about modern factories in Germany that were almost entirely devoid of workers, robots having taken their place.Ever read any Thorstein Veblen?
"Do not invest in CHK"_____________________________Yes, ... I loved Chesapeake because what they’ve proven is this: There were four ways to make money in the shale gas place but one of them wasnt producing the shale gas and selling it at a profit!Same reason I'm loving Continental Resources (CLR) now: There are four ways to make money in the shale oil place but one of them isn’t producing the shale oil and selling it at a profit!
I tend to think that the way to profit from this prediction will be safest outside the oil patch. Picking winners inside the oil patch will be tough because what will be needed is to pick the ones who will find the most profitable "finds" of them all. Without the tailwind of ever rising oil/ng prices lifting everyone's boat all producers will not be created equal. Aha! Recent developments for one entity have me offering a suggestion that is both inside andoutside the oil patch. How is that possible? Well, I haven't dug into the idea as much, but how about a developing midstream player who just acquired the ability to transport Bakken oil toeither East coast or West coast refineries? I'm talking about Inergy Midstream (NRGM), an MLPthat recently acquired railroad assets from Rangeland Energy. I will have to take a look at amap to see how well this ties into East-West railroad lines.http://www.forbes.com/sites/mergermarket/2012/11/06/differen...
... btw, if you into this shale oil sharade:... Red Leaf Resources and Enefit, these two companies are moving ahead with plans to produce shale oil in 2014 and 2019 respectively, cite lower break-even prices than the rest. Total (TOT) has made a $200 million + commitment to move Red Leaf Resources' system. Watch 'em, ... their press releases often give best clues what's up next!http://www.redleafinc.com/https://www.enefit.com/en/oil
Ever read any Thorstein Veblen? No, what does he have to do with the text you quoted?Denny Schlesinger
If you had read him, you would know. One of his ideas, early for the time, was that increasing use of technology would make the workforce more productive leading to need a smaller workforce to maintain the same production. While one could expect new forms of needed production to arise, over the long term one couldn't expect enough new production to be required to keep everyone fully employed, especially since the increased technology would require progressively more skilled workers, thus providing little role for unskilled workers.
I should note that it is a long, long time since I dealt with his work at all. Still, it has seemed like a sound notion to me for many, many years.
If you had read him, you would know. There are several million people I haven't read.
Still, it has seemed like a sound notion to me for many, many years. It sort of seems to me that it has applied steadily for a long time, and with effects of technology seems especially apt now, as much as our leaders seem to want to bunch "jobs" together, while blurring important distinctions.
Possibly even billion ...I was introduced to Veblen many years ago by an economist for whom I had some respect. It seemed to me to be a very important realization which seems to have escaped many people. And yet, we see evidence of it with every recession since employers institute automation and other productivity measures to reduce workforce while maximizing production and then, surprise, surprise, don't need as many workers on the other side unless they are actually expanding ... and the workers they need are more skilled.We have absorbed some of this by a dramatic growth in service industries like fast food, but those are very low paying, low skill jobs with little future.
Possibly even billion ... Yes but I didn't need to read Veblen to figure it out. ;)Now China is doing it!Analysis: China turns to machines as farmers seek fresh fields http://news.yahoo.com/analysis-china-turns-machines-farmers-...
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