Could The Economy Explode? Oil Supplies/Stores Build; Oil Price Surges -- That's Not Supposed To Happen .... Unless

Updates

April 14, 2014: this news is very interesting and it's hardly getting any attention today.  Investing.com is reporting:

The euro slid against the dollar on Monday after data revealed U.S. retail sales beat expectations last month, driving hopes that U.S. recovery may be gaining steam after a rough winter disrupted commerce.

The Commerce Department reported earlier that U.S. retail sales rose 1.1% in March, exceeding expectations for a 0.8% gain. Retail sales in February were revised up to a 0.7% increase from a previously estimated 0.3% rise.

Core retail sales, which exclude automobiles, rose 0.7% last month, beating expectations for a 0.5% reading, after a 0.3% gain in February.

I missed the 30-second sound bite on the radio, but this was said to be the highest month-over-month gain in months? years? Are we looking at a potential economic explosion on the upside?

Original Post

From Yahoo!InPlay:

Crude oil extended yesterday's gains following bullish gasoline inventory data. The EIA reported a build of 4.030 million barrels in crude oil inventories for the week ending Apr 4 when consensus called for a smaller build of 0.8-1.3 million barrels.

However, gasoline inventories had a draw of 5.188 million barrels vs expectations for a draw of 0.7-1.0 million. The energy component lifted from its session low of $102.37 and brushed a session high of $103.77 before settling with a 1.0% gain.

Okay, so the WTI oil inventories build was four times what analysts expected (4 million bbls vs expectation of 1 million bbls) and WTI oil surges another one percent, to close over $103.

Regular readers know that I am very, very disillusioned with the economic recovery, or should we say, economic non-recovery. The headlines regarding economic indicators don't give me a warm fuzzy. A huge new tax (ObamaCare) right in the middle of a recession was absolutely the wrong thing to do.

But consider this. Could the economy explode? That is, could the economy move out of its current doldrums into something headier than any of us can imagine? I'm not necessarily suggesting that every economic indicator will all of a sudden surge over the next few months, but once things start to turn, could things move a lot more quickly than folks imagine? One truism: it seems "we" are always surprised where we least expect it. And the last thing I expect: a surging economy this summer.

There was a great line in Sylvia Nasar's book, Grand Pursuit: I forget who it was, it might have been Keynes -- but great thinkers at the time, including men of Keynes' stature never even imagined WWI breaking out. Their economic theories suggested countries were too interdependent to even consider going to war against each other. Keynes (or whoever it was) continued living like he always had, not even thinking about the likelihood of war. The point Ms Nasar was making (and Donald Rumsfeld has made the same point), it is often that things we were not even considering happen, taking everyone completely by surprise.

Go back to the story above, about the oil build. The oil build is four times what was expected, and yet the price of oil continues to surge. Two days ago I completely discounted the global economy. Maybe I was wrong.

The oil build was four times what was expected, but look at the gasoline draw (remember, the US exports gasoline and diesel to Europe). The gasoline draw was five times expected: five million bbls vs an expected one million bbls.

I don't know if these graphs which I just pulled down, are current enough to include this most recent data. But look at the graphs. The first one is "US gasoline demand."

Pretty striking.

But this graph is even more striking:

I've followed this metric almost ever since I began tracking the Bakken. I've never paid much attention to it: the number of days has always been in the 22 - 24-day range it seemed (except during the winter). But look at the trend.

Here are the crude oil stocks (rounded to the nearest whole number), in millions of bbls:

• current week: 1,080
• previous week: 1,076
  one year ago (2013): 1,085
• two years ago (2012): 1,061

Compare current week (1,080) with two years ago (1,061). Despite the huge build in oil right now, and it's going to get "worse" and "worse" -- with the Bakken, Permian, and Eagle Ford hitting their strides -- WTI surges to $103. That doesn't make sense (unless it's an inflation hedge driven by the Fed's minutes -- but "everyone" agrees that inflation is not on their radar scope).

Throwing this out on the table for discussion, perhaps I was wrong earlier this week, when I said the recent rise in the price of oil had nothing to do with the economy.

The oil industry is made up of some pretty savvy CEO's -- I'm thinking of XOM right now. I can't imagine they would be building oil stocks -- yes, I know, the shale revolution has moved more quickly than some imagined, and it might be out of their control to some extent, but that's a pretty healthy increase (1,061 to 1,080) if they thought the economy was about to turn negative. The oil stores/pricing story has me confused, but that's that. It is what it is.

Now, back to gasoline. Back to that spectacular down-trend in the second graph. Remember these four data points: a) oil stocks going up; b) refinery utilization at 92%; c) more oil arriving daily from the BPEF; d) gasoline at more than $4.00/gallon in California.

Every fiber in my body suggests that eight weeks from now it will be "the same old thing" -- the economy still in the doldrums. But when the gasoline draw is five times what was expected, and the trend line for gasoline demand and the trend line for days of gasoline supply are that sharp, it gives me pause.

As long as I'm rambling: the Fed minutes were said to be the reason the market surged today. First, of all, the tea leaves suggested this is what the Fed would do. This should not have been a surprise. If it was a surprise and the surprise resulted in a the stock market surge, I'm disillusioned with the analysts and the traders. "Everyone" knew that the new Fed chairman was not going to spoil the party. Even I knew that, and had blogged along those lines for quite some time.

What if the movers and the shakers see a US economy the rest of us (i.e., me) are not seeing?

Before you say, "but," one last comment: the mid-term elections are but a few months away. We are now entering the mid-term election cycle. ObamaCare, the biggest new tax increase since social security is already baked into the market. Is the American economy like the surfer, just getting ready to mount her surfboard at the top of the pipeline?

Waitin' for a big surprise?

Bloodshot Eyes, Terraplane Sun

The granddaughters will be surfing this summer at Huntington Beach, CA.

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One could argue that the North American energy revolution is one of the top ten stories that began in 2007 (+/- a couple of years) and should continue to play out for a decade. It would be nice if at least once a week, if not every day, CNBC would devote a quarter-hour, preferably a half-hour to a scholarly discussion of energy.

Eight (8) New Permits -- The Williston Basin, North Dakota, USA; Enerplus Reports A Huge Well

Active rigs:

	4/9/2014	04/09/2013	04/09/2012	04/09/2011	04/09/2010
Active Rigs	191	188	209	173	104

Eight (8) new permits today --

• Operators: American Eagle (2), MRO (2), Slawson (2), Zargon, Legacy
• Fields: Colgan (Divide), Bailey (Dunn), North Souris (Bottineau), Big Bend (Mountrail), Mackobee Coulee (Renville), 
• Comments: 

Wells that came off the confidential list were reported earlier; see sidebar at the right.

Wells coming off the confidential list Thursday:

• 20981, 1,048, Enerplus, Hall 5-11H, Spotted Horn, t2/14; cum 36K 2/14;
• 24939, 603, OXY USA, Adelbert Ames 1-19-18-143-94, Murphy Creek, t10/13; cum 29K 2/14;
• 25654, 568, Oasis, Kate Evelyn 5501 14-3T, Cow Creek, t2/14; cum 5K 2/14;
• 25742, 653, Oasis, W. E. Isley 6093 12-26B, Gros Ventre, t12/13; cum 9K 2/14;
• 25788, drl, Hess, En-Cvancara A-155-93-3231H-6, Robinson Lake, no production data,
• 26172, drl, Hess, SC-4WX-153-98-3130H-2, Banks, no production data,

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20981, see above, Enerplus, Hall 5-11H, Spotted Horn:

Date	Oil Runs	MCF Sold
2-2014	29696	0
1-2014	5933	0

$35,000 / Producing Acre In The Permian

I'm kicking myself. I forgot to link a story I saw this morning: it was announced today that a small operator sold about 23,000 producing acres in the Permian for about $843 million (the numbers are what I remember; the acreage may be a bit off, but the dollar figure is probably correct). I know that when I did the math, each producing mineral acre was being valued at about $37,000/acre.

So, to "confirm" that I wasn't too far off the mark, here's another story (and perhaps I posted it last December). FuelFix is reporting, back on December 9, 2013:

A subsidiary of Denver-based producer QEP Resources is buying oil and gas properties in the Permian Basin for $950 million, a move to hike the oil production on its books, the company said Monday.

The properties, more than 26,500 net acres near Midland, have a daily production of 6,700 barrels of oil equivalent, 68 percent of which is oil. In terms of acreage, the deal would make QEP one of the smallest public operators in the Permian. All told, the acreage has 47 million barrels of oil equivalent in net proved reserves.

For newbies: the "talk on the street" was that this 50-year-old basin, the Permian, was on its last legs before the Bakken laboratory came out of nowhere. 

That works out to just under $35,850/producing mineral acre.

6,700 x $75 = $500,000 / day = $183 million / year

Bakken Economy: Minot Voters Approve $40-Million Elementary School; Brent - WTI Spread Below $5

The Dickinson Press is reporting:

Voters here have approved a $39.5 million bond referendum to ease crowding at Minot’s elementary schools.

Nearly 67 percent of voters said yes Tuesday to a proposal from Minot Public Schools to build a new elementary school in southeast Minot. The funding also will allow the district to construct additions and renovations to Edison Elementary and Perkett Elementary and add safety enhancements for all district buildings.

Williston's new recreation center was tagged as a $70 million project; I don't know the final outlay.

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Brent - WTI Spread Below $5

From Bloomberg, at the moment, 5:38 p.m. central time, April 9, 2014:

• Brent: $107.98
  WTI: $103.34

Spread: $4.64

Flashback: one analyst suggested the Brent-WTI spread would average $11 in 2014 --

In the February Short-Term Energy Outlook (STEO), EIA projects that the discount of West Texas Intermediate (WTI) to North Sea Brent crude oil, which averaged $11 per barrel (bbl) in 2013, will average $11/bbl and continue at the same level in 2014 and 2015 (Figure 1). This discount reflects the economics of transporting and processing the growing production of light sweet crude oil in U.S. and Canadian refineries. EIA expects this forecast WTI discount to represent the Light Louisiana Sweet (LLS) discount to Brent minus a pipeline transport cost of approximately $4/bbl from Cushing, Oklahoma to the Gulf Coast.

The WTI–Brent spread previously represented the cost of moving crude oil on marginal modes of transportation such as railroad and truck from the bottleneck at the Cushing, Oklahoma, hub. However, with adequate pipeline capacity to move crude from Cushing and growing tight oil plays to the Gulf Coast, Gulf Coast refiners have completely backed out imports of light sweet crude. As a result, lower crude prices, previously limited to the Midcontinent, have moved to the Gulf Coast, and they are reflected in the discount of LLS to Brent, which developed in the second half of 2013.

Continuing strong production growth combined with recent infrastructure adjustments will result in more light sweet crude flowing to the Gulf Coast in 2014 and 2015. EIA estimates U.S. crude oil production grew by more than 1 million barrels per day (bbl/d) in 2013, and the majority of this growth was light sweet crude oil from the Bakken, Permian, and Eagle Ford tight oil formations. In the latest STEO, EIA projects that U.S. crude oil production will grow by an additional 1.0 million bbl/d in 2014 and 0.8 million bbl/d in 2015 to reach an average production of 9.2 million bbl/d. Much of this production growth will be in the Gulf Coast or connected to the Gulf Coast region by pipeline.

There are three main recipients for incremental crude production that arrives on the Gulf Coast:

• U.S. Gulf Coast refineries
• Canadian refineries via foreign–flagged vessel for holders of export permits
• U.S. East Coast refineries via U.S.–flagged vessels

Much more linked at the linked article, including talk about the Bakken. 

Might Texas Ship (By Ship) Crude Oil To California?

A long Rigzone story. Many story lines, including this one:

“As the state continues to witness declining domestic production and the Kern County fields lessening, given the technology and the geology, it’s really not viable that California will be a major producer for quite a while,” stated Christopher Guith, vice president for policy at the U.S. Chamber of Commerce’s Institute for 21st Century Energy to Rigzone. 

It was just the other day that I said the same thing: they won't be fracking in California in my investing lifetime. Period. Dot. Two obstacles: a) activist environmentalists; b) geology.

Rigzone is reporting:

In September 2013, Texas produced its highest monthly rate of natural resources on record – pumping 2.7 million barrels of crude per day, the highest average of oil output in over 32 years, according to data from the U.S. Energy Information Administration.

With this excess crude, Texas might become a supplier of oil to California if the trade is profitable.

Once an oil exporter, the Golden State now depends on imports for more than 60 percent of its oil supply.

About a quarter of California’s imports are from Alaska, with the rest coming from the Middle East and Ecuador, according to the U.S. Energy Information (EIA).

However, because of California’s history as an oil producing and exporting province, its refining industry was originally built to process local crudes. The state’s refineries have evolved from processing California oil to processing a mix of California crudes, Alaska North Slope, Arab heavy and Ecuador Oriente, among others, according to Gregory D. Croft, University of California, Berkeley.

But...

Until now, a U.S. policy, the Jones Act, made domestic shipping more expensive, as California imported oil from the Middle East, Ecuador and Alaska’s North Slope.

If a shortage of qualifying ships can be overcome, Texas crude could become affordable on the West Coast as the highest domestic output creates a surplus of light oil while driving prices down.

“It always comes down to economics,” Guith stressed. “Traditionally, Alaska had been the source for a huge chunk of California’s resources, and that’s still the case, but if you look at the economics, it’s significantly cheaper, both from the initial price per barrel, as well as transportation costs, to move Canadian Albertan crude or Texas crude.”

“Both Middle Eastern, as well as African imports, are going to erode pretty quickly,” Guith stated. “When this comes on line, there is no way that Middle Eastern crude can compete both at a per barrel cost, plus knowing that a lot of U.S. is trading at a discount to WTI, plus cheaper transport costs.”

With the lack of infrastructure from Texas to California, industry players are petitioning the government for a repeal of the Jones Act, a maritime act in place since the 30s, which demands for U.S.-flagged only vessels to transport goods between U.S. ports. This repeal would allow for domestic sweet crude to move economically between ports, displacing foreign sweet imports, while maintaining the crude oil export moratorium for the United States (except Alaska).

The Jones Act won't be repealed under this president. He can't even make a decision on a non-controversial pipeline like the Keystone (yes, non-controversial for rational folks -- non-rational activist environmentalists, with the help of the patsy mainstream media made this an issue).

DJ Basin Could Produce 4 Billion Barrels Of Crude Oil

Link here:

... just using estimates from the two biggest oil and gas companies — Noble Energy Inc. and Anadarko Petroleum Corp. — working in the DJ Basin, which sprawls north and east of Denver into Wyoming and Nebraska.

The two companies, together, figure the DJ might be capable of producing at least 4.1 billion barrels of oil equivalent and possibly as high as 4.6 billion barrels, figures that include other natural gas liquids such as propane, butane and ethane.

And that number is likely to go even higher,...

Again, let's put that into perspective. The Bakken could be a trillion-barrel reservoir (and that's just the middle Bakken and the upper Three Forks formations in the Williston Basin). With a paltry 3% recovery rate, that comes out to 30 billion bbls of recoverable oil. Let's say Harold Hamm is off by a factor of two, and the middle Bakken / upper Three Forks is only a 500-billion-bbl reservoir but operators get a 5% recovery rate: 25 billion bbls. A reminder: a throw-away line in a recent article suggested the primary recovery rate in the Bakken might be as high as 15%.

The Wood MacKenzie Report Keeps On Giving

Another data point coming from the recent Wood Mackenzie report: only one in five shale basins will succeed. Bloomberg is reporting:

Only one in five global shale regions may succeed in producing significant amounts of oil and gas as countries from China to Argentina seek to emulate the U.S. boom, said energy consultants Wood Mackenzie Ltd.

Argentina is leading the pack, with plans to drill about 200 shale wells this year, more than three times the number in China, Andrew Latham, Wood Mackenzie’s vice president for exploration research, said in an interview in Perth, Western Australia, where he’s attending an industry conference.

“You hear people talk about lots of different basins,” Latham said yesterday. “It’s all good, but it’s all potential, and I’d be surprised if more than one in five plays that gets drilled ever becomes commercially significant in terms of production. You only get to be one of the five by drilling.”

Let's put that in perspective:

• Argentina is leading the pack -- 200 shale wells this year. 200. North Dakota will drill 200 wells each month this year.

• China: 60 wells this year. 60. This month "they" will drill more than 70 wells in McKenzie County alone. 

• Globally: 400 wells this year. "They drill that many wells in four counties in western North Dakota in two months. 

For Those Who Favor Ethanol Over Shale Oil

For anyone who tells you we don't have enough water for fracking....

The Hill.com is reporting:

In order to meet the excessive ethanol mandates in the RFS, more and more land has been converted to grow corn for fuel — not food. In the 16 years prior to RFS implementation, corn acreage in the U.S. rose by just 6 percent. By contrast, in the seven years since the mandate was enacted, corn acreage has spiked by 22 percent — quadruple the growth in half the time. The Environmental Working Group estimates that more than 23 million acres of America's wetlands and grasslands — an area the size of Indiana — have been converted to industrial cropland since 2008, encroaching on our wildlife habitats and gobbling up enough conservation land to cover Yellowstone, Everglades and Yosemite National Parks — combined. [And a lot of those cornfields are making North Dakota farmers rich. Hoo-ah!]

But it's not just our land that's under attack. By 2030, nearly one of every 10 gallons of water consumed in the U.S. will be used for biofuels production. That's more than is cumulatively used by every household in the country. Let that sink in.

Making matters worse, fertilizer runoff resulting from the increase in corn production to make ethanol has contributed to an alarming growth of the dead zone in the Gulf of Mexico, leaving marine life asphyxiated and surrounding industries suffering in its wake.

And what about our air? Studies have found that corn ethanol nearly doubles emissions over a 30-year period. According to the EPA, the lifecycle emissions of corn ethanol are higher than that of gasoline. So much for being a cleaner fuel.

The environment is not the only victim. Food producers and anti-hunger activist groups, including Oxfam and ActionAid, have been warning us for years of the policy's impact on food prices and security. In the U.S., the average American family of four saw an increase of $2,000 in their grocery bills during 2012.

The RFS is slated to further increase the price of staple commodities like corn, wheat, rice and soybeans by 20 percent. And policy-driven land grabs by global corporations seeking to capitalize on the crop-for-fuel craze have forced family farmers and local citizens off their land, taking access to affordable food away from the world's neediest populations.

Sylvia Nasar's Grand Pursuit puts a lot of this in perspective. But you don't have to read much more to know how bad the president's ethanol program is. But if activist environmentalists are happy, that's fine with me. I don't have a dog in this fight, but I love North Dakota corn farmers getting rich off this, and North Dakota entrepreneurs getting rich with ethanol plants in the state. 

Fed: Print More, Print Longer; For The Granddaughters; For Investors Only; Oil Hitting New Recent High, Trading Just Under $103

Updates

Later, 2:20 pm central time: how interesting. The long note below I wrote well before the "Fed minutes" were released. I have not yet read the minutes, but here is the headline: Wall Street extends gains following Fed minutes. The Dow has an incredible 3-digit gain and oil is up over $103. Reuters is reporting:

U.S. stocks jumped on Wednesday, with the three major indexes hitting session highs, after minutes from the Federal Reserve's latest policy meeting showed a more supportive central bank than previously expected.

The Dow and the Nasdaq rose more than 1 percent with internet and biotech stocks leading the gains. Facebook shares jumped 5.6 percent to $61.45.

Fed policymakers were unanimous in wanting to ditch the thresholds they had been using to telegraph a policy tightening, according to minutes of a meeting last month that shed little new light on what might prompt an eventual interest-rate rise.

"People are taking solace in the idea that the Fed may be more accommodative than previously thought, for longer than previously thought," said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group in Greenwich, Connecticut.

"That's giving the lift to stocks."

Thank you, Ms Nasar. Thank you, Mr Keynes. 

Original Post

 
At midday, oil is trading up another 0.40% and is now trading just under $103.

Trading at new highs: CLR, ECA, EPD, ERF.

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I really learned a lot from Sylvia Nasar's book on economics, Grand Pursuit. I am reminded of that, again, today with the following:

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

How low can "they" go. Look at this, over at Yahoo!Finance:

The Fed has been winding down its massive bond-buying stimulus since early this year, and Kocherlakota said he has no plans to "relitigate" that decision, which puts the Fed on track to ending bond-buying altogether before the end of the year.

Instead, he said on Tuesday, the Fed must do better on returning the economy more rapidly to full employment and a healthy 2-percent pace of inflation.

The Fed has kept its short-term policy rate between zero and a quarter of a percentage point since December 2008, and Kocherlakota told the Greater Rochester Chamber of Commerce that "we should be thinking about" pushing it even lower.

"It's really about demonstrating a commitment to stay with the recovery for as long as it takes to get the economy fully recovered," he said.

There are a lot of folks that talk about the coming bust: the US is in debt $17 trillion and increasing as we speak. There are a lot of folks telling us every day that the market is risky, that it's going to implode, any day now. Maybe. If it does, it will be quite a ride.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

But for all the gloom and doom, there are also a lot of folks on the other side of the coin.

And then one looks at the market.

It certainly doesn't look like a market that is predominantly "owned" by the gloom and doom crowd. The five year Dow: http://finance.yahoo.com/echarts?s=^DJI+Interactive#symbol=^DJI;range=5y.

The fed has a dual mandate: employment and inflation.

The fed is frustrated with the administration (posted by mainstream media; I don't remember if I linked the story). Everything the Fed is doing to try to increase employment seems to be met with obstacles set up in place by the administration. It's obvious the administration doesn't care about jobs. Doesn't affect me; I don't have a dog in that fight. Moving on.

Inflation. Everything I've been taught about inflation seems to be at odds with what I'm seeing, and what I expect. Sylvia Nasar, in Grand Pursuit, walked me through the history of economics, which really helped. It appears that the great strides made in economics were made about the same time great strides in literature and physics were also being made: at the turn of the century (1900) and during that period leading up to the first world war, the interwar period, and then sort of stopping before the second world war. Everything "we" learned about economics seemed to be "discovered" between 1850 and 1940.

It will be interesting to look back on the late 1990s, and going through 2020, to see how the theories of economics evolve. When very, very smart folks can continue to advocate spending even when the government is $17 trillion in debt, or whatever it is, I have to be missing something. (I understand ObamaCare is now estimated to have added $2 trillion to the national debt -- future liabilities, obviously; reported in the mainstream media.)

When the government can be $17 trillion in debt, or whatever it is, and there are very smart folks who want to spend even more to "jump-start" the economy, I must be missing something.

One has to ask the question: with all this "printing of money" since 2008, why is no evidence of inflation (now) and some very smart men and women see no threat of inflation on the horizon?

Up until eleven (11) hours ago, Dennis Gartman (who is considered a smart talking head) was very, very bullish on stocks, and just a week ago said his most valuable lesson he has learned in 40 years of investing was "don't fight the Fed." Now, at least one very smart man, from a very conservative region of the country, Minneapolis Federal Reserve Bank President Narayana Kocherlakota, wants to cut rates even further. Continuation of the linked story above:

Instead, he said on Tuesday, the Fed must do better on returning the economy more rapidly to full employment and a healthy 2-percent pace of inflation.

The Fed has kept its short-term policy rate between zero and a quarter of a percentage point since December 2008, and Kocherlakota told the Greater Rochester Chamber of Commerce that "we should be thinking about" pushing it even lower.

"It's really about demonstrating a commitment to stay with the recovery for as long as it takes to get the economy fully recovered," he said.

The idea of lowering the Fed's main policy rate, already near zero, or cutting the rate the Fed pays to banks on reserves they keep locked up at the central bank, is outside the mainstream of current Fed policymaking, which currently is focused on providing guidance about what economic conditions could lead to the Fed raising rates.

Kocherlakota, whose lone dissent against the Fed's policy decision last month marks him as the central bank's most dovish member, said that guidance falls short.

He is either crazy as a loon or smart as a fox. Of course, not only does anyone know, but one can find any number of smart men and women on both sides of the coin.

I'm an inveterate optimist when it comes to almost anything, and particularly investing.

It seems 90% of "business news" is related to banking. Everything else (pharmaceuticals, energy, retail, media, entertainment) is filler. It's all about banking, somethingI know nothing about.

But I'm beginning to think the bankers and all the smart people making economic policy don't know about energy.  And that's why I'm optimistic.

Renewable Energy And Coal: An Inconvenient Truth -- It Took The US To Build Up To One Billion Tons Of Coal Use; The Chinese Want To Add Another One Billion Tons Over The Next Six Years -- Presidents Come And Presidents Go

From the interview below:

It took the good old U.S. 150 years to gear it up to one billion tons. And they want to add another one billion tons of coal in the next six years. So it doesn't matter how many wind turbines are built.

Well, actually it does, when it comes to migratory birds and bats. 

When it comes to the energy arena, there is the investing arena and there is the political arena. The president is in the political arena when it comes to coal (and everything else). When it comes to coal, he is speaking and beholden to his base. In the investing arena, the situation is different.

I love politics (although not so much any more, as I grow older and have fewer productive years left) but I survive in the investing arena.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here. For investment advice, google George Soros or Algore.

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A portion of the interview that you can find at The Wall Street Journal, an energy report, over at Berry Petroleum:

MR. BALL: What you've essentially described is that nothing fundamental is happening. Am I wrong about that?

MR. SMIL: It is and it isn't. Look at the Chinese example. They are building all these wind capacities and solar capacities, but in the past eight years they added one billion tons of coal production. It took the good old U.S. 150 years to gear it up to one billion tons. And they want to add another one billion tons of coal in the next six years. So it doesn't matter how many wind turbines are built.

MR. BALL: So renewable energy is insignificant?

MR. SMIL: Renewable energy is very significant. I live in a province where we have the cheapest electricity in North America, indeed in the Western world, but all of it is perfectly renewable because we have beautiful Manitoba Hydro. Every few tens of kilometers we can put a river dam. Bingo. One gigawatt here. One gigawatt here.

MR. BALL: So there's no one answer for the world. There are specific resources that work in specific places.

MR. SMIL: Wind is my favorite example. I live in one of the windiest places of this continent. This is a wind corridor all the way from Texas through Nebraska all the way to Manitoba.

Except when do I need most of my juice? For the past three months, we had the third-coldest winter in the past 100 years. But there's absolutely no wind for three months and it's minus 45 overnight and we have a chill factor of minus 55. What would I do for those three months?

It's all regional. It's all local. And we just have to descend to that level to judge it. If you just say globally, that tells you very little.

When you talk in terms of electricity, renewable is very important. Hydro in Manitoba. Hydro in Sweden. Wind in Denmark. Of course, those are very important.

But when you look at the total primary electrical supply, it remains insignificant.

Globally, the new renewables, that is wind and solar, are still way less than 5% of global total primary energy supply. If you look at the fossil fuels in 1990, they were 88% of the global supply. In 2012, they were 87% of global supply. These are very embedded, inertial things. These things don't change rapidly.

Just for the record, I invest in, and accumulate shares in, Canada's largest solar company.

Just for the record, I invest in, and accumulate shares in, Canada's second largest wind company.

I am an equal-energy investor. Except I don't think I invest in coal, except directly.

North Dakotans Trust Their State Government

A Bakken story will appear here later. Smile.

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NoDaks "trust" their state government.

I've never understood this. Why wouldn't folks "trust" their government officials? They keep re-electing them.

The Dickinson Press is reporting:

A Gallup poll released last week shows that 77 percent of North Dakota residents trust their state government “a great deal” or “a fair amount.”

That nips a handful of other Midwestern and western states. North Dakota was followed closely by Wyoming, at 76 percent; Utah, 75 percent; South Dakota, 74 percent; and Nebraska, 73 percent.

At the other end of the spectrum is Illinois, where only 28 percent say they have at least a fair amount of trust in state government.

Illinois has solved their problem: they are sending the politicians they don't trust to Washington, to screw up the rest of the country so Illinois won't look so bad.

For Investors Only; Statoil To Introduce New Technology In Western Canadian Oil Sands

I would not have expected this. Futures suggest the price of oil that we saw yesterday will hold.

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Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

How low can "they" go. Look at this, over at Yahoo!Finance:

The Fed has been winding down its massive bond-buying stimulus since early this year, and Kocherlakota said he has no plans to "relitigate" that decision, which puts the Fed on track to ending bond-buying altogether before the end of the year.

Instead, he said on Tuesday, the Fed must do better on returning the economy more rapidly to full employment and a healthy 2-percent pace of inflation.

The Fed has kept its short-term policy rate between zero and a quarter of a percentage point since December 2008, and Kocherlakota told the Greater Rochester Chamber of Commerce that "we should be thinking about" pushing it even lower.

"It's really about demonstrating a commitment to stay with the recovery for as long as it takes to get the economy fully recovered," he said.

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Four companies announce increased dividends/distributions, including Bank of New York Mellon and Plains All American.

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Statoil to deploy 14 new technologies in western Canada oil sands. Rigzone is reporting:

Statoil ASA aims to test and deploy over the next five-to-10 years up to 14 new technologies designed to reduce energy and water use when producing a barrel of bitumen from its Canadian oil sands operations. In its 2013 Oil Sands Report, published Tuesday, the Norwegian firm said the new technologies will improve or replace elements of its current SAGD (steam-assisted gravity drainage) method. T

he technologies have been included in plans for Statoil's Corner Project in Alberta, where the firm expects to achieve a 10-15 percent reduction in the volume of steam used to produce a barrel of bitumen.

Statoil has regulatory approval to produce 40,000 barrels per day from its Corner lease area.

Statoil said its oil sands production decreased "slightly" last year, to 15,000 bpd from 16,000 bpd in 2012. Meanwhile, its carbon dioxide intensity increased from 55.5 kilograms (122 pounds) per barrel in 2012 to 69.7 kilograms (154 pounds) per barrel last year, although this was lower than 2011's 72.7 kilograms (160 pounds) per barrel.

Statoil said the increase in carbon dioxide intensity was expected because of two operational factors: more steam being utilized in 2013 when a fourth steam generator was added to support new well pads as well as current production wells; and the firm experiencing an imbalance in the reservoir after a planned maintenance period.

The North American Shale Revolution Is "For Real"; Won't Easily Be Duplicated Elsewhere

I track "big stories" at the sidebar at the right.

One of the big stories, of course, is the North American energy revolution.

A reader sent me a link to a nice essay at icis.com:

The North American shale gas advantage may not be replicated easily or at all elsewhere, providing a long runway for local players to build on their global cost advantage
A unique set of circumstance has helped drive the exploitation of North American shale gas and tight oil deposits. They are unlikely to be replicated elsewhere.

This means that the US and Canada are in a unique position as the shale revolution unfolds. Companies active in energy intensive industries and those that use methane or natural gas liquids (NGLs) as feedstocks are on a roll. Their energy costs are coming down rather than increasing in the way they are in other parts of the world.

And the good news for them is that shale gas and oil drilling in the US continues apace and is unlikely to slow unless gas prices push too low. Hydraulic fracturing technology and drilling techniques have improved to such an extent, in just a few years, to suggest that shale gas and oil supplies can be sustained for a lengthy period.

It is difficult to conceive of such rapid progress in other countries with significant shale deposits.

This was the key point made on 31 March by Kenneth Medlock III of Rice University at the AFPM International Petrochemical Conference. A keynote speaker at the event, Medlock highlighted the critical factors that have come to play in concert over the past five or six years to help bring the abundance of shale. Simply having shale resources is not enough.

Shale is no longer a “flash in the pan” in the US and Canada. It appears to be much a much more sustainable hydrocarbon resource. But it has taken the world’s largest upstream services industry to bring about the revolution. Less than 20% of that sector exists outside North America.

Drilling activity has been intense. A Rice study with the Bureau of Economic Geology has shown that of 16,000 wells drilled in the Barnett Shale in the US, 14,000 were drilled after 2002. That rate of drilling, and the characterisation of geological shale deposits it brings, is nowhere near being replicated elsewhere.

And the article continues at the link. A great read. 

We've been through two lost decades (2000 - 2008, and then 2009 - 2016). With the huge energy gap developing between North America and the rest of the world, the US could see a golden age beginning in 2017. My hunch: politicians in Washington (DC) will manage to screw it up.

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Here's How Politicians In Washington Will Screw It Up

The methane hoax over at IceAgeNow. 

Wednesday; Beach Railport Development Moves Forward; ND Legacy Fund Nears $2 Billion

From The Los Angeles Times:

Pentagon will remove 50 nuclear missiles from silos, a move that satisfies a treaty with Russia,and is cheered by some lawmakers. The removal would eliminate an entire ICBM squadron at one of three Air Force bases in North Dakota, Montana, and Wyomin where the US keeps its 450 Minuteman III missiles -- a potentally major economic blow. So much for all those sanctions on Russia for actions in the Crimean/Ukraine.  

But a senior defense official, who briefed reporters Tuesday on the plan, said a total of 50 missiles would be removed from silos at the three missile bases. That will keep all nine ICBM squadrons operational.

The decommissioned missiles will no longer be counted as operational under the treaty, but would continue to be maintained and guarded. The silos also will be kept operational, the official said, describing them as "warm but empty."

Lawmakers from the three states applauded the plan, which avoids the need to lay off hundreds of Air Force personnel and cut millions of dollars that the bases pump into the local economies.

Talk about a great job in the US Air Force: missile launch officer with no missiles. Sort of like being vice-president of the US. A job title with no job.

I'm not exactly sure how this could be a possible economic blow. It looks like there will be lots of economic activity involved in removing the missiles -- wouldn't it be a hoot just to launch them over the Pacific this July 4th. With or without the warheads.

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Active rigs:

	4/9/2014	04/09/2013	04/09/2012	04/09/2011	04/09/2010
Active Rigs	191	188	209	173	104

RBN Energy: US laws and regulations affecting NGL exports.

This blog series is about export rules we call the ‘Molecule Laws’. 

The “laws” are actually a hodge-podge of rules, policies, regulations, procedures and a few laws administered variously by the Department of Energy (DOE), the Federal Energy Regulatory Commission (FERC), the State Department, and the Department of Commerce. 

The laws paint a confusing picture regarding export restrictions on different hydrocarbons. They made no difference when there was nothing to export. 

But now, with production booming, they’ve become important.  In episode one we learned about Molecule Law #1: Methane molecules can be exported based on destination (Canada & Mexico are ok) and in the form of LNG to other countries from approved terminals. In other words, any arrangements made to export natural gas that require liquefied natural gas (LNG) terminals – have to go through an approval process involving the DOE and the FERC. And (for the most part) if you want to ship to countries that actually want LNG then you need additional DOE approval for export to non-free trade association (FTA) countries like Japan and China – although that FTA membership profile could change any time.

This time we look at the molecule laws that apply to NGL exports.

The Wall Street Journal

Long and frigid winter will affect the produce aisle at the supermarket.

Calling it a landmark agreement, the Justice Department announced Tuesday that Rhode Island will work to move about 2,000 people with development disabilities from menial jobs and segregated settings to mainstream environments. Most will probably find jobs in state government.

Never say "no." GM will invest almost $500 million in two Michigan plants to bolster the development and production of its Chevrolet Volt and Cadillac ELR hybrid-electric vehicles. Most of that will probably be spent on a "safe" ignition.

American Airlines distributed the last big chunk of its payout to its bankrupt predecessor's shareholders, delivering a windfall that was even bigger than expected.

The Los Angeles Times

What is it about "engine starters" and ignition switches? Now, it's Toyota's turn: recalling more than 6 million vehicles due to a defective engine start that can keep the motor running and has caused at least two fires.

Mickey Rooney's death stirs family feud; reveals how far star fell (couldn't have been too far; he wasn't all that tall). His body goes unclaimed as his family battles where to bury him.

Tiger Woods' absence from Masters greet mostly with shrugs. I would have watched the Masters had he been playing, but I have no plans to watch it now. Woods has fallen as far as Mickey Rooney, and Tiger is still alive.

Beef prices hit all-time high in US. I have not seen a rise in the price of Omaha Steaks.

Obama issues orders seeking equal pay for women. He might want to start in his own office.

News From Elsewhere

North Dakota's legacy fund nearing $2 billion. As far as I know it's all in cash under someone's mattress. 

The Dickinson Press is reporting:

The Beach City Council, following the zoning board’s 4-to-1 recommendation from March 17, approved the rezoning of 275 acres west of town where Utah-based developers plan building a $65 million facility that would bring in oilfield commodities by fall 2015 and eventually ship out oil.