Europe Puts Hurdles In Obama's Climate Path

Hi NB,

I copied Glenn Morton on what you had to say about what he wrote.

Here is his reply:

From: “Glenn Morton” glennmorton@entouch.net
Subject: RE: $4 gas is here to stay
Date: Sat, 13 Dec 2008 18:39:39 -0600

Tell Nathan that the only thing I disagree with his post on was the thought that oil companies would drill in anticipation of the price rise. He is right on everything else.

This wont happen because of the way we do economic analysis in the business. Projects have to pass the hurdle of making money at half price du jour economically speaking. Most projects that were being undertaken over the past year or so were judged at $70/bbl. We do that because we know we are in a business with lots of price volatility.

Today projects are going to have to pass muster at about $20/bbl, and almost nothing will. Drilling activity is stopping, rigs are being stacked and people being let go. At the start of December there were 80 rigs in the Gulf of Mexico. 15 were stacked (meaning in port waiting business), 2 were in shipyards, but the demand is expected to be only for 55 of them very shortly. Most of the rig stacking onshore will take place next year after the contracts run out.

bttt

You wrote:
“http://www.reuters.com/article/newsOne/idUSTRE4BA5CO20081211 note last paragraph” ~ NB

At your link:
Jim Rogers calls most big US banks, “bankrupt”.
http://www.reuters.com/article/newsOne/idUSTRE4BA5CO20081211

Last paragraph: “He’s investing in growth areas in China and Taiwan, in such areas as water treatment and agriculture, and recently bought positions in energy and agriculture indexes.”

Yep! Here’s more:

Jim Rogers: “The Dollar is Doomed and the Fed’s Days are Numbered” (He moved his whole family to Singapore and says that people need to learn Manderin. He plans to sell all his dollars at the next rally) http://www.youtube.com/watch?v=KY5cy7w6seY&feature=related

Peter Schiff:
Obama administration will be a disaster and will be the reason why we won’t be able to dig ourselves out of this economic collapse.
http://www.youtube.com/results?search=related&search_query=%20commentary%20analysis&v=h6kQddulxlM&page=2

10/28/08 Peter Schiff predicts doomed economy under Obama
Get ready for change........ ... peter schiff obama thestreet bailout economy election ... 1 month ago 83,858 views
http://www.youtube.com/watch?v=sMdF1CiQAkA

Gerald Celente of CEO Trends Predicts Revolution, Food Riots, Tax Rebellions By 2012
http://www.youtube.com/watch?v=7QCyhi-6EFc&feature=related

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=118211&t=01008118765082075349

If you read the speeches made by Ben Bernanke a few years ago, you will find that he pledged to eliminate a lack of aggregate demand in the economy by dumping tons of freshly printed dollar bills on the economy. Well, folks, he is now doing just that and he will keep it up until it looks like people are spending again. The markets have caught on to this. Stocks have been rallying on bad news. Today commodities rallied on terrible news in oil inventories and China exports. What this means is that the markets are anticipating all that money falling from the sky and finding it’s way into the economy.

Unfortunately for Mr. Bernanke, he can bombard us with dollars but he can’t ultimately determine where those dollars will end up going. He wants them to go into house prices, car buying, and job creating investments, and some of the money will no doubt go into these areas. He doesn’t want the money to work it’s way into metals prices, gas and energy prices, or food prices, but these areas are likely to be the prime beneficiaries of his money deluge. Another prime winner in the money game will be Asia as all those consumers rush to Wal-Mart to spend their loot. I would just guess off the top of my head that about $5 will go into “undesirable to Ben” places for every dollar that goes into “Ben’s favorites”. Ultimately, this means that the stuff people really need is going to skyrocket in price, while the economy remains in “circle the drain” shape. This won’t happen overnight, but it is inevitable that it will happen sooner or later. Remember that printing money doesn’t create prosperity or jobs that last. It just wipes out the middle class and the retirees who are invested in fixed income and who can’t figure out what is going on until its too late. I like silver, gold, farmland, agricultural commodities, gasoline, and Asian stocks.

1 Comment:

#1) On December 10, 2008 at 6:11 PM, FAHayek (98.54) wrote:

All to true, the government is the cause of the problem and they are making it worse. Come visit my blog to read my perspective. Governmental Undulations In the Market.

Governmental Undulations In the Market
December 10, 2008
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=118142&t=01000103058597130673

Here are a couple of items you may find of interest when you get time to read them (I threw in an opinion piece I like at the end):

Supertankers store 50m barrels of oil
By Carola Hoyos in Oran and Javier Blas in London
Published: December 15 2008 23:17 | Last updated: December 15 2008 23:17
http://www.ft.com/cms/s/0/d638d9fc-caf7-11dd-87d7-000077b07658.html?nclick_check=1

Oil companies and traders are storing at least 50m barrels of oil in supertankers in a clear sign of supply outstripping demand as the global economy slows.

The surge in floating storage, – enough to meet France’s oil imports for a month and the biggest since late 2001–, is likely to push the Opec oil cartel, which is due to meet on Wednesday in Oran, Algeria, to make a deeper production cut to reduce stocks. Storing oil in tankers is unusual as it is significantly more expensive than inland.

Abdullah al-Badri, Opec’s secretary general, said on Monday: “Stocks are very high. We have to act. We see a very sizeable reduction [in production].”

Chakib Khelil, Opec president, said: “Everybody is supporting a cut.”

Oil prices rose briefly above $50 a barrel, recovering from a four-year low of $40.50 earlier this month. Oil later traded $1.30 down at $44.95 barrel on concerns that Opec’s cuts would not be enough to prevent further stock building.

Several Opec officials have suggested a 2m barrels-a-day cut, the biggest in recent history, and were also hoping to persuade Russia – the world’s largest oil producer outside the cartel – to make a reduction.

But with Russia’s oil output already declining because of a lack of investment, any commitment is likely to be seen as a political gesture rather than an actual reduction.

Whatever the size of Opec’s cut, the floating storage surge is a clear sign the cartel is losing its battle to cut supplies more quickly than demand falls.

Jens Martin Jensens, managing director at Bermuda-based Frontline, the world’s largest operator of supertankers, said that as many as 25 supertankers – each holding about 2m barrels – were being used as floating storage worldwide. Other traders suggested a similar number, pointing to companies such as BP and Royal Dutch Shell and traders such as Vitol and Koch as the holders of the oil.

Opec ministers said in November they intended to reduce developed countries’ oil stocks from the equivalent of 56 days of demand to 52. But the surge in floating storage indicates that tanks are brimming, in spite of Opec’s having announced 2m b/d in cuts. Indeed, inventories have risen to almost 57 days’ demand.

The International Energy Agency, the western countries’ oil watchdog, said the surge was the “result of abundant prompt supplies having a hard time finding customers”.

2 Comments:

1. In the worst year ever for oil, investors can lock in the biggest profits in a decade by storing crude.

Traders who bought oil at the $40.81 a barrel on Dec. 5 could sell futures contracts for delivery next December at $54.65, a 34 percent gain. After taking into account storage and financing costs investors would earn about 11 percent, according to Andy Lipow, president of Houston consultant Lipow Oil Associates LLC. The premium, known as contango, is the biggest for a 12-month span of futures since 1998, when a glut drove crude down to $10.

Stockpiling crude may provide higher returns than commodities, stocks and Treasuries as the U.S., Japan and Europe endure simultaneous recessions for the first time since World War II. Crude sank 70 percent in New York since peaking at $147.27 in July. The Standard & Poor’s 500 Index fell 38 percent this year and two-year government notes yield 0.9 percent.

“The bottom line is that you buy crude at a low price and lock in a profit by selling it forward,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “It’s low risk. The contango can definitely pay for storage and the cost of capital and leave plenty left over.”

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the U.K. to take advantage of higher prices for future delivery. The ship is one of as many as 16 booked for potential storage instead of transporting crude, said Johnny Plumbe, chief executive officer of London shipbroker ACM Shipping Group Plc. 5

2. [This] means that investors are confident enough to pay storage costs believing the rise in prices will result in more profit later even after paying the additional expenses. Look at the futures market and you can see how quickly they believe it is going to rise. Up $9 in five months.

Crude Light Oil Comp. - nymex
http://online.wsj.com/mdc/public/page/2_3028.html?category=Energy&subcategory=Petroleum&contract=Crude%252520Light%252520Oil%252520Comp.%252520-%252520nymex&catandsubcat=Energy%257CPetroleum&contractset=Crude%252520Light%252520Oil%252520Comp.%252520-%252520nymex 10

A related item:

ExxonMobil to invest in refinery expansion
By Ed Crooks
Published: December 16 2008 02:00 | Last updated: December 16 2008 02:00
http://www.ft.com/cms/s/0/27f2a81c-cb12-11dd-87d7-000077b07658.html

ExxonMobil, the world’s biggest oil company, is to invest $1bn in expanding the capacity of three of its refineries. This comes in spite of the global downturn in demand for oil products and the squeeze on margins that has led many other companies to delay or cancel projects. The refineries, two in the US and one in Belgium, will be expanded to add a total of 143,000 barrels per day of extra capacity to produce diesel fuel, increasing Exxon’s diesel production capacity by 10 per cent. ..... [snip]

Related (opinion):

‘We have suddenly been plunged into a new age of superstition, where scientific evidence no longer counts’
http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/11/30/do3010.xml

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