Some Nice Links for Fossil Fuel Investors

Note: I'm on the road so I won't be posting as much as I usually do.

First Link

A few days ago I posted a commentary talking about the scenario for a spike in oil prices.

Second Link

Now, Seeking Alpha has an article on a likely breakout in the price of oil. Some comments:

a) I always get a kick out of these stories coming out AFTER the fact; oil has risen from low $70's to almost $90, and NOW we get the story. This would have been more interesting had it been written a couple months or a year ago; 

b) This article again concentrates on price of oil as it relates to strength/weakness of the dollar. If a breakout is to occur, I think it will have little to do with the dollar. The dollar has moved in tandem with the weakness of the dollar and will continue to do so, but the breakout will occur when, like gold, there is a perception, accurate or not, that there is a shortage of oil. See my commentary linked above.

Third Link

Meanwhile, another Seeking Alpha article, this time on "how to play the Bakken." The comments were almost as good as the article.

a) One comment had to do with seven wells were shut in due to excessive salt water and not enough oil. Well, la de da. The wells were on the edge of the Bakken; seven wells is a drop in the ocean of oil in the Bakken (there are 5,000 active wells in North Dakota, and there will be 1,500 new permits in 2010 along); and, companies continue to bring in more rigs to North Dakota. They wouldn't be doing this if the trend for salty wells was the norm.

b) The article caused me confusion by starting out with something called "oil shale." Ignore the first part of the article and cut to the chase by starting with the tenth paragraph when it finally gets to "shale oil," that which is found in the Bakken and the subject of this blog.

c) This Seeking Alpha article is an extremely good article, especially for newbies, but incredibly was the misidentification of the name of the "DJ" basin in Colorado. The author called it the Denver-Juneburg basin; in fact, it is the Denver-Julesburg basin. Even I who had never heard of this basin one month ago learned what the "DJ" stood for, and located the town of Julesberg on the map.

d) The author is even more optimistic about the Bakken than I am, and that's newsworthy in itself.

e) The title of the article includes: 6 Ways to Play [These Fields]. This was clearly the weakest part of the article. The author puts six companies in bold. Two of them, XOM and Royal Dutch are non-players in the Bakken, for the most part (XOM recently bought XTO which has some play in the Bakken). One or two are in the Bakken (EOG and CLR); the other two, Noble and Petrohawk, are elsewhere. These are all producers with the same business model. He does not include oil service companies, like HAL and SLB (fracturing). He does not include pipeline companies, like ENB and TransCanada; he does include companies with unique business models, NOG; and, he does not include utilities, like MDU.

My advice: read the article, and then explore the companies listed in the Bakken market basket in the sidebar at the right. 

Fourth Link

Notwithstanding Representative Nancy Pelosi and Governor Edward Rendell, Pennsylvania, natural gas is considered a fossil fuel by most folks with at least an eighth grade education.

For those interested in natural gas, here is a Seeking Alpha article.

It starts off with this paragraph:

If the elections accomplished anything, President Obama finally mentioned natural gas and not "clean coal". It is the first time Obama has not pushed the myth of oxymoronic "clean coal" and instead supported natural gas - the superior fuel in terms of cost, supply, and the environment.

Anyone who believes President Obama no longer "believes" in "clean coal" does so at his/her own risk. I continue to see President Obama as an ideologue rather than a pragmatist. Even if I'm wrong, it's a fact that his advisors are, for the most part, ideologues.

The third paragraph:

Now is also time for the EPA to do its job and regulate the natural gas drillers such that we don't allow natural gas producers to pollute our water resources like the coal industry has done. All we need is some pragmatic energy policy leadership.

I read the story as that written by someone bullish on natural gas. But, if bullish, why in the world would he advocate the EPA regulating the industry. That will stop the industry in its tracks. Of course, that would raise the price of natural gas in a ballistic manner (hyperbolic manner) overnight (perhaps, that it his goal, as a bull in natural gas.

The fourth paragraph:

Americans are clamoring for the government to embrace natural gas transportation as the primary solution to solve the country's severe economic, environmental, and national security problems.

Really? I would like to see data supporting this statement presented as fact. I haven't seen that clamor anywhere, except maybe from T. Boone Pickens (for an update on T. Boone and his wind energy debacle and move to natural gas, click here). (Random thought: did T. Boone Pickens ghost author this article?)

Interestingly, Clean Energy Fuels Corporation is one of four ways the author says to play natural gas. That and the last paragraph extolling the virtues of natural gas transportation makes me wonder again about the relationship of T. Boone Pickens with the author of this article.

Fifth Link

Coal: Dawn of the Black Gold Rush (Seeking Alpha, November 8, 2010)

Opening paragraph:

Coal is a complex natural resource that is primarily used to fuel power or cement plants, two commodities that are expected to see increases in demand as global populations and per-capita income in developing nations increase. Increased demand for coal is already being seen in China, which accounts for nearly half of global coal demand, and is being used for power generation and metallurgical coal to produce steel. Now with an increase in demand in neighboring India, the two Asian neighbors can consume a lot of coal together, to fulfill their economic dreams of industrialization and growth.

The linked article has many ways to invest in coal. President Obama was visiting India when this article was published, looking for export opportunities for the United States. I wonder if coal was on his "goodie" list or renewable energy exports like solar panels (made in China) or wind turbines (made in Germany).