Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Three Mile Island for U.S. Oil Supply

Commodities / Crude Oil May 05, 2010 - 01:13 AM GMT

By: David_Galland

Commodities

Best Financial Markets Analysis ArticleDavid Galland, Managing Director, Casey Energy Report writes: Willie Shakespeare may have summed it up best when, borrowing the voice of King Richard III, he penned “A horse! A horse! My kingdom for a horse!” 

History is replete with examples of how, but for the proverbial horse, kingdoms have been lost.


My reference point is an accident that will almost certainly lead to tragic miscalculations and havoc down the road. And, I might add, an exceptional opportunity for the patient and attentive investor.

It has to do with an impending shortage of easily accessible (read: inexpensive) oil to quench the insatiable thirst of the United States.

It’s also connected to the inroads the cash-rich and geopolitically ambivalent Chinese – among others – have been making in building strategic relationships, and making direct investments, with the world’s major energy providers. 

With only so much oil to go around, every new off-take agreement signed by the Chinese with the Saudis or Venezuelans, for example, is a net loss in supply to other bidders, notably the world’s largest energy consumer, the United States.

That the Chinese, and other countries, are aggressively securing long-term energy arrangements, coincidental with what appears to be an official U.S. diplomatic initiative to actively offend all the major energy producers, makes the securing of U.S.-controlled reserves and production critical.

The problem with cheap oil can be seen in the chart here.

And it has been confirmed in a recent report issued by the U.S. military, conveniently summarized by DailyFinance: “A recent Joint Operating Environment report issued by the U.S. Joint Forces Command suggests that the U.S. could face oil shortages much sooner than many have anticipated.

“The report speculates that by 2012, surplus oil production capacity will dry up; by 2015, the world could face shortages of nearly 10 million barrels per day; and by 2030, the world will require production of 118 million barrels of oil per day, but will produce only 100 million barrels a day.”

Bottom line: The U.S. needs secure oil sources, and “on the double,” as a military type might say. And so the pressure has increased for the U.S. government to remove its actual and effective regulatory bans on offshore drilling. 

While it’s more smoke than fire, the Obama administration recently made a tentative step in that direction – because even though its most ardent supporters may hate the extractive industries, Team Obama is not stupid enough to think that the energy gap is going to be closed by solar or wind power anytime soon.

Which brings us to the lost horse in this drama – the messy sinking of an oil rig off the coast of Louisiana, resulting in a spill of about 5,000 barrels, or 210,000 gallons, a day into the Gulf. It is estimated that it could take a month or more to cap the well.

The damage caused by this untimely sinking will extend far beyond wreaking havoc on the wildlife – the real importance is that it hands the luddites and enviro-fanatics just the ammunition they need to stick a brick wall in front of the baby steps underway for expanded offshore drilling. It is the equivalent of the accident at Three Mile Island, which set the nuclear power industry back by decades.

And that means precious time lost, and a near certainty that America will find itself hostage to the oil-producing nations in the years just ahead. That, in turn, means higher and higher prices, and hundreds of billions of dollars flowing overseas. Which, in turn, means a persistently high current account deficit, adding yet more weight to the pressure building on top of the U.S. dollar.

Even if the U.S. were to adopt the equivalent of a war footing in its quest for new offshore discoveries, the size of our steady demand assures that any new finds would still be insufficient over the medium to long term. If the military’s assessment is even close to being on target – with global shortages appearing in four short years – then even the most urgent action taken today would prove woefully inadequate.

But the U.S. is not adopting anything remotely close to urgent action in the quest for new oil supplies. Quite the opposite. The administration and its well-meaning but ill-advised allies are advancing legislation to hinder and penalize virtually all the base-load power providers. And thanks to the poorly timed sinking of the Deepwater Horizon rig, the opponents of “dirty” energy have been provided with a powerful weapon to be used in challenging all new offshore drilling initiatives.

How to play it? First and foremost, you’ll need to be patient. Oil prices aren’t going to skyrocket overnight, and the base-load power industries – oil, coal, gas, and nuclear – will still have to struggle through the coming onslaught of politically motivated regulatory hamstringing. Between now and the time that the depth of the nation’s energy problem becomes apparent to all, the energy sector will remain volatile.

The time to begin buying is when new legislation, coupled with a next leg down in the broader economy and markets, results in an across-the-board sell-off in the energy sector. That will be the time to get serious about building your energy portfolio. Between now and then, your goal should be to learn as much as you can about this critical sector.

And don’t forget to include the oil services sector in your studies. That sector could be the poster child for “feast or famine.” While the sector has bounced off its 2009 bottom, as the inevitable scramble for new offshore discoveries begins, the better-run companies will reward patient investors with multiples.

But first, thanks in no small part to the sinking of the Deepwater Horizon rig, the U.S. will take several steps back – away from anything that looks like energy security. 

The single best way to stay closely in touch with energy and the many opportunities to profit available is with a subscription to Casey’s Energy Report, headed up by the hard-charging Marin Katusa in close collaboration with Dr. Marc Bustin, arguably one of North America’s top unconventional oil and gas experts. It is no coincidence that of 19 stocks Marin recently picked, 19 were winners… a 100% success rate. Click here for more.

© 2010 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014