Random Notes and Idle Chatter
Moratorium in the Gulf of Mexico lifted? Hey, not so fast. Legally the moratorium is lifted, but Interior is slow-rolling the process. Required "compliance statements" will become synonymous with "environmental impact statements" and just as long to review and approve. In addition, indications are that the next lease sales in the Gulf will be canceled. Although lease sales in March, 2011, wouldn't result in new oil for years, it certainly pushes new production farther out. All things being equal, this will help push oil prices higher. One almost gets the feeling that talk of $100 oil is a self-fulfilling prophecy. I wonder what the talk around the coffee table at the Economart is about today? Answer: sports, sports, sports, and $100 oil. [Update, November 12, 2010: CNN.com confirms -- no new permits have been issued; meanwhile those government bureaucrats looking at deep water permits, apparently with nothing to do, continue to get paid their salaries. What a great country.] [Update, November 16, 2010: renewed concern that the supplementary environmental impact statements will affect 2011 leasings.]
Before the sudden decrease in the value of the dollar, the Saudis (who control the price of oil) said that they were comfortable with $80 oil. With a significant decline in the value of the dollar since that statement, I assume the Saudis are re-evaluating that $80 price.
At $100 Oil, Wind Energy is Re-Energized
Could there be something going on at a very high level regarding the price of oil? $100 oil revives the wind turbine industry (which is moribund in the US); and, it helps sell electric vehicles and hybrid vehicles. Who is the number one benefactor of wind energy in the US? Most likely General Electric (GE).
At $100 Oil, Electric and Hybrid Vehicles are Re-Energized
My understanding is that GE and the Administration are very "close," as in friends. (GE is the parent company of NBC, MSNBC, and CNBC.) GM is known by some as "Government Motors." GM is coming out with the prohibitively expensive Chevy Volt which will be a tough sell. Lead story today: GE will buy 25,000 GM Chevy Volts. This all sounds very cozy: the government, GM and GE. Oil at $100/barrel will calm the critics.
Two Big States With Big Budget Problems Will Benefit With $100 Oil
Federal, state, and city governments have significant cash-flow issues. The states and cities cannot print money, but at $100 oil, governments can start talking about windfall profits taxes. Two states with serious budget problems will benefit significantly from $100 oil regardless of windfall profits. Royalty payments to Texas and California will increase significantly.
At $100 Oil, Bakken Investors Should Do Very, Very Well
It was only a few months ago that oil appeared to be in free-fall, falling towards $60 and talk that it would fall below that key support level. CNBC anchors were saying that even at $60, oil was too expensive. Based on fundamentals (supply and demand), they said, oil should be significantly lower.
Bakken oil companies were making money at $60 oil and bringing in additional rigs. Sometime ago, if I remember correctly, one of the oil companies said that earnings were robust when oil was over $40 in the Bakken. I can only imagine how they will do at $100 oil.
On an earnings per share basis, the Bakken companies did not report the stellar results some would have expected with $60 oil. It appears that is because Bakken companies are still investing in the Bakken and that takes a huge amount of money, but two to three years from now, their production and profits should be phenomenal.
Snapshot
With the market down 100 points today (granted, it's Veterans Day and volume will be low), 8 of 15 companies I follow in the Bakken Market Basket are up; and two of the three major US oil companies are up.
More $100 News
Fuel policy raises price of diesel and price of oil in China.
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