Well, This is Cool -- Iran to Practice Closing the Strait of Hormuz

Ya gotta love it. The link takes you to the news that Iran wants to practice "closing" the strait.

Just think: not this year, but in a year or two, had we had the Keystone XL, we could have completely ignored events in the Strait of Hormuz. Sure, oil and the price of oil is now global, especially now that Bakken oil is reaching the Gulf of Mexico. The price of North Dakota sweet and Louisiana sweet will track with the price of Brent, but closing access to Mideast oil won't affect supplies in North America; it will simply affect the price. [Some have written in suggesting I am wrong on this. My reasoning depends on several conditions, not worth time or effort to expand. Maybe later.]

This Iranian saber-mongering is simply that, saber-mongering. To me it suggests that Iranian leadership is in desperate trouble; this is their second-to-last ace card. I wonder how long Iran will close the Strait? One hour or two hours? My hunch is that folks in the Mideast are "scheduling" the event to be least disrupting to the tankers moving through the strait.

At best it's a power game. It will be interesting to see if Saudi asks the US Navy to keep the strait open, or just let this play out. I know what I would do if I were "king for a day," but its counterintuitive so I will keep my thoughts to myself.

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It turns out the Iranians are oil investors' best friends. Just when the price of oil was headed down, I see oil is headed back up, up $2.00 today. If Bakken investors work this right, maybe we can invite the faux-environmentalists back to Nebraska to block any re-routing of the pipeline to ensure that the price of Bakken oil remains on the high side. It looks like we have plenty of takeaway capacity with the railroads for the time being, and if Nebraskans like all those 100-tanker unit trains rolling through their scenic countryside and through their towns and villages, well, what can I say.

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I see electric rates have skyrocketed.  This, despite the fact that we've been in a recession, and the economy continues to sputter along. But the skyrocketing rates are not a surprise. Don has been talking about this for months -- regardless of what the linked article says, it all goes back to legislation, rules, and regulations to kill the coal industry, the cheapest form of energy to generate electricity; putting up transmission lines for wind farms that are not needed (and, in fact, will wreak havoc with electric grids); and, mandates for renewable energy from states like California. From the linked article:

Households paid a record $1,419 on average for electricity in 2010, the fifth consecutive yearly increase above the inflation rate, a USA TODAY analysis of government data found. The jump has added about $300 a year to what households pay for electricity. That's the largest sustained increase since a run-up in electricity prices during the 1970s.

Electricty is consuming a greater share of Americans' after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated, a USA TODAY analysis of Bureau of Economic Analysis data found.

Maybe I've missed it, but I've not seen one bit of an improvement in quality of life in the US after years of mandating a cleaner environment through renewables like solar and wind. It would be nice to see one example of something positive coming out of wind or solar energy. I haven't seen it, and it certainly isn't for lack of looking.

Here's the link from below.

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Until the Iranian news this a.m. there wasn't much news. I was going to talk about the squandering of America's riches and the lost decade (2000 - 2009) and it appears, at least another lost decade (2010 - 2019) with the White House cronyism that has resulted in such a mess of things energy-wise one does not even know where to begin. The story of the US Navy buying biofuel at $16/gallon vs conventional jet fuel for $4/gallon is the Democrat's answer to the GOP's $600 hammer or toilet or whatever it was. I guess I prefer the Bush II style of cronyism: at least that group understood the concept of win-win.

The difference is this, I suppose: we expect cronyism and back-door deals from the GOP. The good news was they came up with ideas that served their interests, but also helped the country. It was my understanding that the new administration, back in 2007 and 2008, promising hope and change, also promised more transparency and an end to cronyism.

So, that's what I was going to write about.

I was also going to point out that when I read about the $16/gallon biofuel (vs $4/gallon conventional jet fuel), it was obvious that to make this work (high priced biofuel), the price of conventional oil, gasoline, diesel, and jet fuel was going to have rise at least a bit to make biofuel not look so expensive. Or create an appearance of a shortage of fossil fuel, "panicking" the Americans into accepting biofuels as a remedy. What better way to create a perception of shortage and/or raise the price of fossil fuels precipitously than by banning fracking; placing a moratorium on off-shore drilling including the entire gulf; and, killing strategic pipelines.

And then like a light switch being flipped, I saw the light.

It's been my experience that humans like the "rules of three." This has been discussed at length by philosophers. The Trinity is as good as any other example. Three's are nice. Medications are often prescribed "tid/three times daily" with no scientific basis for such prescribing. The Saturn V that took men to the moon had three rocket stages. The US nuclear cold war strategy was a triad: submarine-launched ICBMs, land-based ICBMs, and Air Force bombers (particularly the B-52, bless it's heart -- the B-52 is now celebrating its 60th birthday, or something like that -- it first flew in 1952 and is still flying).

So, I didn't see it until today, but any administration that wants to kill the fossil fuel oil and gas industry should have a  three-point strategy also: a) ban fracking; b) ban off-shore drilling; and,  c) ban new strategic pipelines. This particular administration has come close to accomplishing this. With the Iranian headline this a.m. I assume the administration has to re-think the timing of their strategy. They don't want the price of oil to spike just before the election season gets into full swing.

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For newbies looking for information on the Bakken, some data points, based on FAQs I continue to get. All of this has been written about numerous times on this blog, but based on comments, it appears that most folks don't read much of the archived material, reading only the daily posts. This means that for regular readers, this is all old news.

As a rule of thumb, or if talking to folks at the Economart, some quick sound bites regarding the Bakken (my opinions only; others will weigh in with their own opinions):

• the Bakken is the best source rock in the world
• Saudi Arabia's TOC of one-half percent does not even come close to the Bakken's 11 percent
• Bakken wells pay for themselves in three years, often as soon as 18 months
• Bakken wells will continue to produce oil for 35 years
• drilling will continue through 2020, perhaps 2030; it will take 50,000 wells to drill out the Bakken; about 5,000 Bakken wells have been drilled so far
• there is no shortage of fresh water for fracking in North Dakota
• production from the Bakken will continue through 2100
• there is a suggestion that before it's all over, oil shipment by crude will play an equal role to pipeline
• short laterals used to cost $3 to $6 million; long laterals now cost $10 million
• operators desperate to cut costs; jury still out re: sand vs ceramics
• while jury is out, we will see decrease use of ceramics; increase use of sand only
• the Bakken might be in the second inning of a nine-inning game; surprises may lead to extra innings
• North Dakota is now producing 500,000 bopd, putting ND on track to surpass California and Texas 
• North Dakota could jump to second place, behind Texas, in oil production by this time next year
• there are "no" dry holes in the Bakken
• as a rule of thumb, a Bakken well will produce 1,000,000 bbls of oil over the lifetime of the well
• there are multiple payzones in the Williston Basin; the Bakken is the focus right now
• the Eagle Ford in Texas is getting a lot of press right now; wiki suggests the Eagle Ford has 1 billion bbls recoverable oil; all agree the Bakken has 3 billion bbls recoverable oil; some think the Bakken + the Three Forks has 24 billion bbls recoverable