Apple Temporarily Shuts Down New iPhone Ordering -- September 10, 2016

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New Apple iPhones Already Over-Subscribed

Apple temporarily quit taking new iPhone 7 and 7 Plus orders due to overwhelming response. This is nothing new for Apple. It's part of the game. The Obama administration shuts down pipeline projects; Apple shuts down new iPhone orders. It's all part of an alt-right conspiracy.

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Bloomberg's Op-Ed On Harold Trump

Article here.

A reader sent me the article. My reply, not ready for prime time, with minimal editing:

Sounds like this guy has a "beef" with Harold Hamm. And, of course, Bloomberg, a strong Hillary supporter, would definitely print an article negative of Harold Hamm, a strong Trump supporter.

To the extent that it's accurate, in all fairness, I agree that the US should not put a tariff on imported oil, and to the extent that it's accurate, I would fault Harold Hamm for advocating this. I do not want artificial "quotas" on oil production. Look what the "Fed" rate does to the equity market. I think a free oil market is exactly the way to go.

Having said that, this writer, too, has a blind spot, is missing the bigger story, and except for one graphic, doesn't say anything new.

The writer still writes about the relevancy of OPEC. In fact, as others have written and I have said for a long time, OPEC is irrelevant. There really never was an OPEC: it was all about Saudi Arabia. Whatever Saudi Arabia did, the other "OPEC" members simply went along.

The other blind spot in the article: the usual canard that the Mideast has the lowest capital and operating costs to produce oil. That matters not a bit. Saudi Arabia budgets for $100 oil. It doesn't matter what it costs Saudi to produce oil: it's their only product; it accounts for 90% of their government's revenue.Without oil, Saudi is toast. (Actually, with summer temperatures at 120 degrees in the summer, Saudi is toast without air conditioning, but that's another story for another time.)

But the graphic was interesting. Note the the "operating costs per bbl." That is incredible: $2 - $7 for Iran, Iraq, Saudi Arabia; and only $8 for tight oil in the US. Nothing else comes close. That is amazing. Sure, the capital costs per bbl are crazy, but one would think some of that will come down. The US shale industry is not particularly "mature." As it matures, CAPEX comes down appreciably. As just two examples: infrastructure projects costing $60 million are still going up in the Bakken; and, the DAPL, is budgeted for well over $3 billion.

I think this is the bigger story: just the fact that Saudi Arabia is still considering a freeze suggests that they recognize they are in a lot of trouble. My hunch is that there are two factions among the Saudi princes: a) one faction wants a freeze in production; b) the other faction wants the market to sort things out. But neither faction is talking about flooding the market with oil to kill the US shale oil industry. That would be hard to do with US shale operating costs at $8/bbl.

That's the big story and why the article is worth reading, if only to look at the graph.

One last point made by the reader who sent the article: when one considers the shipping costs (Saudi oil to the US gulf coast) vs the pipeline costs (Permian crude oil to Houston), $5 Saudi oil might be at a competitive disadvantage to $8 Permian oil. Perhaps not a disadvantage, but certainly helps level the playing field.

By the way, in the graph below, we are not provided the denominator for calculating the CAPEX costs for a bbl of oil. Over time, those CAPEX costs will come down immensely at the same time production capacity will be seen to increase.