Energy Prospectus

I can tell you with certainty that demand for liquid hydrocarbon based fuels will be much higher than 104 million bbls per day by 2040. In fact, they will be close to that level before 2025. Demand for liquid fuels is over 93 million bbls per day today (see: http://www.iea.org/oilmarketreport/omrpublic/) and demand goes up an average of more than a million bbls per day each year.

The "hope" that biofuels will fill the gap is total nonsense, unless you want half the world to starve and food price inflation to ridiculously high levels.

The Age of Cheap Oil is over.

This is why investing in companies with large domestic reserves, like the large-caps in our Sweet 16 (EOG, CLR, CXO, DVN, XEC, RRC and WLL) makes a lot of sense.

looks like Obama is still determined to shutdown the U.S. coal industry. China has til 2030 to even begin to reduce greenhouse gas emissions, while the U.S. will have to accelerate our reductions. With deals like this one, can't wait to hear the deal Obama and Kerry are cutting with Iran on their nukes.

http://www.npr.org/2014/11/12/363421002 ... erate-cuts

Saudi Arabia awaits the American shale producers to make the next supply move. It has financial reserves to cover fiscal demands and the war in the Middle East from its sovereign wealth fund to offset low crude oil prices not only for weeks but for years.

By Dr. Daniel Fine

The shale oil boom which returns 25 percent of the New Mexico State revenue is under "bust" threat from Saudi Arabia.

The current price decline in both midland Texas light sweet crude and brent (world price) will begin to defer future projects if prices fall to $72 a barrel and below. An estimated 80 percent of production and projected production in the next five years requires price stability higher than $ 75 per barrel. Saudi Arabia is combining market share strategy with a world oversupply of crude oil.

Oil producers in New Mexico are partially protected through cash flow hedges, which are crude barrels sold forward with prices established in futures (must be higher than present prices). However, no more than 50 percent of production is estimated to be hedged or protected in 2015. The other half must be sold at whatever the market (West Texas crude) price will be. An oil company can hedge 2016 production at $79.00 per barrel compared to the current hedge protection of $95.

Decline ratios (rate of recovery after initial production) are high. Massive drilling of new wells for replacement is the economic challenge. At least half of the new shale or light sweet crude oil production from the Southwest to North Dakota through the Rocky Mountain energy corridor is at risk.

This effectively limits the 10-year-old shale oil technology play and consequent "energy revolution."

The shale oil or light sweet unconventional oil boom is the target of Saudi Arabian oil strategy which is market share. This rejects production cuts in response to weak demand and prices. Defense of market share coupled with falling world oil demand accounts for a global price fall of 25 percent since July.

The timing of the Saudi action has hit the Southwest U.S. unconventional oil producers when they are already vulnerable to a massive infrastructure bottleneck. Producers have confronted a discount price of as much as $15 per barrel because there is not sufficient pipeline take-away capacity from the Permian and San Juan basins to refineries on the Gulf of Mexico coast or anywhere. This is the result of unanticipated high oil production without investment in transport to get it to markets or process it here in New Mexico. Stand-by rail transport is costly and trucking is competitive with rail. New pipeline and refinery capacity is required in New Mexico and Texas.

Strategic market share is the Saudi Arabian counter-attack upon the American shale-oil and gas-supply revolution which threatens Saudi exports. Saudi ARAMCO is reacting to the rise of American oil production as a threat because of the demand to lift the 1975 prohibitions against American crude oil exports.

The argument for America to become a world crude oil exporter not only displaces Saudi crude exports to the U.S. market but also promotes geopolitical leverage against OPEC and Russia. With the lowest world cost of producing oil, Saudi Arabia is acting in its national interest against American competition or influence against its national interest.

The Saudis seem upset that the small US shale oil producers could have such a clout.

Riyadh (AFP) - OPEC's biggest crude producer Saudi Arabia will have its sights set on the upstart US shale oil business at a crucial cartel meeting to debate possible output cuts on Thursday.

1. Saudi Arabia is trying to sabotage America's shale oil boom The Week (RSS)
2. Saudi oil minister denies crude price war AFP
3. Venezuela calls 'OPEC and non-OPEC' talks on oil slide AFP
4. Oil prices mixed as hopes dim for OPEC output cut AFP
5. Oil prices settle at three-year low MarketWatch

Analysts say the kingdom is content to see shale oil producers -- and even some members of the cartel -- suffer from low prices and will resist pressure to reduce output and shore up the cost of oil.

A barrel of crude has plunged by about one third in value since June to around $80 in an increasingly competitive market.

Saudi Oil Minister Ali al-Naimi was silent about his government's intentions Monday as he arrived in Vienna ahead of the OPEC gathering.

"Is this the first time we have oversupply?" he was quoted as saying by Dow Jones Newswires when questioned about current supply and demand.

However his Iraqi counterpart Abdel Mahdi arrived in Vienna pushing for action, deeming the steep price drop "not acceptable".

Analysts say the kingdom is strong enough to withstand lower prices.




.. e United Arab Emirates and Kuwait could bear the burden of lower production, "I don't think they will cut because they will lose their market share," said Fahad Alturki, chief economist and head of research at Jadwa Investment in the Saudi capital.

Figures from the US Energy Information Administration showed Saudi exports to the US dropped by almost 30 percent from 1.25 million barrels per day in July to below 900,000 bpd in August, although it remains the second largest US supplier after Canada.

The kingdom then cut its prices for crude sold to the US market, sending global prices plummeting in early November by almost $2