Posted on 10/14/2014 6:04:38 AM PDT by ckilmer
NEW YORK (Real Money) -- Blame it on the Permian. That's where the oil is flooding into the markets right now. Sure, it is absolutely true that the Bakken and the Eagle Ford shales are responsible for the lion's share of new oil being produced in this country. Sure, the Bakken in North Dakota is amazing with its 1.1 million barrels a day, double what it was when I went there a couple of years ago, and the Eagle Ford is sensational with 1.5 million barrels a day now. But the Permian is 1.7 million barrels and it is conceivable that it could DOUBLE over the next two years. That's right, double.
Last night, I asked the CEO of Magellan Midstream Partners (MMP) , Mike Mears, and he didn't rule it out. Why would Mears know? Because he runs the biggest pipelines out of the Permian. He told me the numbers jump every single day and the more pipe that gets laid, the more we are going to pump. I got the sense that the gating factor is all about exporting, because Magellan is also one of the largest storage companies. He says that while there's storage that could handle most of what's coming out of the Permian right now, if it goes to the levels I am talking about we will have no place to put it and not enough refining capacity to refine it.
Yes, there's that much more coming on line.
I think this decline in oil price is a very real issue for this economy. The boom can be self-fulfilling at this pace. All talk about being continentally sufficient by 2020 is now off the table. I get the sense we could be there within three years at this blistering pace. But without the storage, we will have to cut back on the drilling. And if prices go lower, then the budgets will have to be cut back, too.
In other words, the boom is sowing the seeds of its own demise, being pushed along by the OPEC countries that don't want us to be self-sufficient.
If you take away this boom, you take away the biggest growth opportunities for good jobs. There is so much at risk right now with this price of oil that the selloff can make sense.
Think about it. We have no energy policy. We don't have a fossil-fuel-friendly president who sees what is about to happen: overproduction with no place to put the oil. We can't build the storage capacity, pipelines and refineries to use all the oil we have.
So, what started out as some huge windfall of oil and natural gas is now turning into something that could go very awry with just a few more dollars down for West Texas. We will be knocking the price down ourselves with no outlet for oil. And we will be bringing back unemployment in states that have been the backbone of our recovery.
It is a nightmarish scenario that had been part of a dream come true and it's just a few dollars down from happening, with no government in sight to prevent it.
Sure, it's a worst case scenario. But what exactly in heaven's name do you think the stocks are pricing in?
That crashing of oil prices is what is keeping the coal industry from using coal for fuel production. Cost to much to setup a plant.
Low energy prices is bad??
Perhaps temporarily for the energy industries but for everything else it’s great.
They respond as rational actors in the market.
Jim Kramer is always wrong. If he says the sky is blue, it’s cloudy. If you want to be correct, do the exact opposite of what he says.
I’ve been watching his schtick for years, and I have yet to see him make a single correct prognostication.
Many energy experts say the world market, which consumes about 90 million barrels a day, has one million barrels more than it needs, although that could easily change if the Islamic State, also known as ISIS, attacked Baghdad and threatened the southern Iraqi oil fields, or if militias suddenly renewed their blockades of oil ports in Libya.
Times seems to think if ISIS grabs more oil fields the price will go up instead of further down. Hmmm.
As for the Arctic, if the Russians were anticipating ice free conditions in the near future, think again. If planning to work a ocean field with ice in place, more expensive to get and deliver. They would need technical assistance.
The OPEC guys import the majority of their base food staples from those importing oil. So far, no one is applying this leverage. ISIS has compromised the indigenous farming operations... expect shortages there if not famine.
Times seems to think if ISIS grabs more oil fields the price will go up instead of further down. Hmmm
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This is true. Almost all of Iraq’s oil is in the southern shia areas. ISIS attacks are in the north. If they went around Bagdad and attacked further south likely the price of oil would go up.
As it is the instability in that country has already capped further oil production increases. That country was set to go from 3 million barrels @ day to six million barrels @ day. However, investors won’t be putting more money there until the war cools down considerably. That won’t be any time soon.
ass........ hole in the ground
Jim Kramer is always wrong.
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Cramer got his talking points from Mike Mears. Here’s the quote from the article above.... (nor is the idea improbable. Permian production started 2014 at 1.3 million barrels@ day. It will end 2014 at nearly 2 million barrels@ day production.)
But the Permian is 1.7 million barrels and it is conceivable that it could DOUBLE over the next two years. That’s right, double.
Last night, I asked the CEO of Magellan Midstream Partners (MMP) , Mike Mears, and he didn’t rule it out. Why would Mears know? Because he runs the biggest pipelines out of the Permian. He told me the numbers jump every single day and the more pipe that gets laid, the more we are going to pump.
Permian oil my ass. Oil is declining in price because the world economy is declining toward depression.
“refineries in Syria were bombed”
In the context of this article... use of our military in the mid-east to REDUCE supplies will be in our national interest.
An historic reversal! Mind-blowing even.
Less dramatically...even if we don’t become independent we will greatly benefit from the capabiliy to put an upper limit on prices.
Ok its both rising supply and falling demand.
I’ll just go on record as saying we need to buy American.
Buy American.
But what about the fact that ISIS takes over and sells for $30 a barrel? How would that make the price go up? Also stuffs about Libya now. They could start selling Libyan oil. Op-ed in today’s NY Post says they are now poised to take over the whole region of North Africa—Egypt, Algeria, Tunisia . . .
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