Saudi Arabia Orders Ministries To Cut At Least 5% In Spending -- March 14, 2016

Tweeting now: Saudi Arabia orders 5% cut in contract spending. Reuters:

Saudi Arabia's government, its finances strained by low oil prices, is opening a fresh austerity drive by ordering ministries to cut their spending on contracts by at least 5 percent, a document seen by Reuters shows.

The spending cuts could further slow economic growth in the world's top oil exporter and hurt the construction industry, where many companies are struggling with deteriorating cash flow and rising labor costs. 

The document, sent by the central government to all ministries and state bodies, instructs them to reduce the value of outstanding contracts signed to support their operations, as well as construction contracts included in the 2016 state budget, by "not less than 5 percent of remaining obligations".

Didn't North Dakota mandate a 4% cut in state spending?

Tweeting now: OPEC, Russia likely to meet in April over production. Bloomberg/Rigzone:

Ministers from some members of the Organization of Petroleum Exporting Countries had suggested that such a meeting would take place this month in Russia.

The talks are now most likely to occur in Qatar’s capital Doha, said three of the delegates, who asked not to be identified because the matter isn’t public.

The probability that Doha will play to host the meeting is high as Qatar is president of the OPEC ministerial conference this year, even as Russia is the country that called for the meeting, two of the delegates said.

The meeting may still not take place if there aren’t many important producers attending and agreeing beforehand to freeze production, three delegates said. 

OPEC data points for 2016. Link here.

• OPEC raises 2016 non-OPEC oil supply estimate by 110,000 bopd to 56.39 million bopd
• OPEC maintains previous forecast of 700,000 bopd year-on-year contraction after revising 2015 figures
• OPEC raised non-OPEC oil supply growth for 2015 (last year) by 110,000 bopd - 1.42 million bopd for an average of 57.09 million bodp
• OPEC notes: in the US -- a reduction in production costs; increased hedging; producers choosing to produce with losses rather than stopping production
• finally: after rising 910,000 bopd last year, OECD Americas' oil supply is expected to see the biggest regional decline this year globally at 480,000 bopd

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Speed Reading

It hit 89 degrees this afternoon; it didn't feel that warm. It was very dry and lots of wind. A beautiful day for reading Doctor Zhivago.

Meanwhile, speaking of Doctor Zhivago, unexpectedly strong winter has returned with a vengeance in the land of Putin:

Freezing poses a risk in the southern European territory.

In the Krasnodar region and Adygea on the nights of 13 and 14 March the ground froze and air temperatures dropped to -1, -2 degrees. The freeze poses a risk to early blossoming apricots and plums.

Morning frost could also endanger emerging winter wheat seedlings.

Continued cooling is forecast for 15 and 16 March in the south of Russia in the Krasnodar Region. On March 15 temperatures are expected to drop to -3 degrees, and on Wednesday -4 degrees is possible in Adygea.

Reconciling Some Things That Have Been Bothering Me The Past 48 Hours; The "Boiling Frog" Metaphor -- March 14, 2016

This is very, very "esoteric," probably not worth posting, but it's something that's been bugging me for the past 24 hours or so. I let Don know it was bugging me. Coincidentally, and certainly with serendipity, Yahoo!Finance has provided a clue to the likely answer to my conundrum.

The first question has to do with why has electric usage declined so much under the Obama administration? What accounts for the significant drop. The population of the United States has increased over the past six years, and the number of electric items/American has certainly stayed the same, but more likely has increased.

If you want to see what I'm talking about, see this post or simply look at the graph below:

I tried explaining this to myself various ways including the increasing amount of electricity provided "off the grid" but that couldn't come close to explaining the decrease shown in the graph above. Something else needs to be found to explain the graph above.

[You know, that graph above is incredible when you think about it; leave it as it is and the Bush/Obama separation is impossible to miss. But then do this, remove the two outliers (the years 2009 -- recession -- and 2010 -- stimulus following the recession) -- and you have this:

Wow, that really stands out. Especially when one remembers the trillions of dollars in stimulus and all the action (or inaction) the Fed has taken for the past six years to get the economy on track.

Break, break.

The second thing that bothered me is a much more difficult question (at least for me), but there's probably an explanation for that also.

So, let's begin.

First question: what explains the significant drop in electricity sales during the Obama administration? 

The answer has to be connected with manufacturing in the United States. Even the EIA suggests that a decrease in manufacturing is one of the explanations (if the EIA were not being politically correct as an arm of the Obama administration, I think the EIA could have provided this answer).

It is coincidental and pure serendipity that Yahoo!Finance answered the question for me late this afternoon. Look at the size of the loss of manufacturing jobs under the Obama administration (yes, I know it goes back to 2005. If the US Department of Labor provided this chart as is, it would make sense that another arm of the Obama administration would take this back to Bush's second term to obfuscate the issue; if Yahoo!Finance developed the chart, one can come up with all kinds of ideas why they took it back to 2005).

Folks can argue about the degree to which this loss of manufacturing occurred under the Obama administration, the war on coal, the killing of the Keystone XL pipelines, and the incredible number of new EPA rules and regulations in the past few years would explain much of it.

In stark contrast, under the Bush administration, 2005 - 2009, electric usage was up significantly, suggesting that the loss of manufacturing associated with decrease of electricity use occurred under the present administration.

On another note, the mass media keeps talking about the Bakken bust. Whatever is going on in the Bakken pales in comparison to a 25% loss of manufacturing jobs in New Mexico and New Jersey; a 20+% loss of manufacturing jobs in Rhode Island, West Virginia, and Delaware, and additional huges losses in Mississippi, Florida, and Illinois.

The Bakken bust occurred over a very short period, measured in months, and across a very, very small geographical area. It was, therefore, impossible to miss. In addition, "everyone" knows booms will eventually end. Further, boom and bust cycles are well known in the oil and gas industry.

The loss of manufacturing jobs under the Obama administration occurred over several years and across a huge geographic area. It was not as "exciting" as the Bakken boom. The media didn't see it coming and didn't even note it while it was happening. Part of that is because the mainstream media could never report honestly on the Obama economic policies. But if one wants to take politics out of this, the reason the media missed this may have more to do with the "boiling frog" metaphor.

*********************************

The Second Question

Now for the bigger question. How can one reconcile the huge loss of manufacturing jobs and the huge decrease in electricity use under the Obama administration and yet the US wealth increased significantly under the current administration?

Note how much US wealth has increased over the past four years. It has been quite impressive to say the least. So, how do we explain the "discrepancy"? Despite the huge loss in the number of manufacturing jobs the wealth of the US has increased significantly over the past four years. How can we reconcile the loss of all those manufacturing jobs -- look at those percents again, in the chart above -- with continued huge annual increases in US wealth.

Most folks would argue that the amount of global manufacturing has not changed all that much over the last few years; whether it has decreased a bit (Chinese economy?) or increased a bit, overall global manufacturing probably hasn't changed all that much.

This is the answer. The US has sent a lot of manufacturing jobs overseas. But the companies that are doing the manufacturing, say GE and Ford and others, are still headquartered here in the US. The corporate officers and staff are doing very, very well. The companies are doing very, very well (better than if they had kept the factories in the US). The shareholders of these companies have been doing very, very well (we're still in a bull market).

It's no different than what "we" saw during the golden age of the British Empire. The Brits back home were becoming wealthier and wealthier on their colonies overseas. They were called colonies then; today we call it something different. But the results are the same.

Misnumbered Permit? -- March 14, 2016

Updates

March 15, 2016: NDIC added #32618, a Petro Harvester salt water disposal well to the 3/14/16 report.  No explanation why this SWD permit did not start with the number "9."
 

Original Post

Generally, permits for salt water disposal wells are numbered with a starting "9", such as 9XXXX.

Not noted on either yesterday's or today's "Daily Activity Report" was permit #32618. Permit #32618 is for a salt water disposal well, Petro Harvester's Sorum SWD 1 in Flaxton field.

New Post-Boom Low: 31 Active Rigs -- Will The Bakken Go Under 30? One New Permit; Whiting Reports Two Nice Wells; Twelve (12) Permits Renewed -- March 14, 2016

Active rigs:

	3/14/2016	03/14/2015	03/14/2014	03/14/2013	03/14/2012
Active Rigs	31	112	191	187	203

Wells coming off confidential list Tuesday:

• 30495, 629, CLR, Burr Federal 11-26H, Sanish, t1/16; cum 18K 1/16; only one month of "real" production;
• 31087, 2,399, Whiting, P Pankowski 153-98-4-6-7-13H3, Truax,t9/15; cum 81K 1/16; off-line much of the time;
• 31089, 2,374, Whiting, P Pankowski 153-98-4-6-7-14H3, Truax, t10/15; cum 97K 1/16; off-line some of the past few months;
• 31590, dry, Statoil, Jack 21-16 5TFH, East Fork, no production data,

One new permit --

• Operator: XTO
• Field: Siverston (McKenzie)
• Comments:

Twelve (12) permits renewed, including --

• Whiting, 4, P Earl Rnnerfeldt (3) and P Lynch (1), all four in Williams County
• BTA Oil, 3, 9210 Barkland permits, all in Golden Valley County
• Enerplus, 2, one Glacier permit and one Acadia permit, both in Dunn County
• Oasis, 1, Hanover Federal in Williams County
• North Plains Energy, 1, a State well permit, in Divide County
• The twelfth permit was for a SWD well

Six (6) producing wells completed:

• 30651, 0, Odegaard State 21X-16AXB, Midway, t2/16; no production in first month;
• 30669, 10, Odegaard State 21X-16E, Midway, t2/16; cum --
• 30714, 1,864, State 11X-16TF4, Charlson, t2/16; cum --
• 30859, 156, XTO, Odegaard State 21X-16F, Midway, t2/16; cum --
• 31424, 1,006, Hess, AN-Evenson-152-95-0310H-14, Sanish, t2/16; cum --
• 31662, 1,489, Hess, AN-Evenson-152-95-0310H-13, Sanish, t2/16; cum --  

 *****************************************

31089, see above, Whiting, P Pankowski 153-98-4-6-7-14H3, Truax:

Date	Oil Runs	MCF Sold
1-2016	6394	9963
12-2015	8556	0
11-2015	27823	0
10-2015	41931	0
9-2015	12151

31087, see above, Whiting, P Pankowski 153-98-4-6-7-13H3, Truax:

Date	Oil Runs	MCF Sold
1-2016	5936	9570
12-2015	13321	0
11-2015	7435	0
10-2015	34516	0
9-2015	19138	0

30495, see above, CLR, Burr Federal 11-26H, Sanish:

Date	Oil Runs	MCF Sold
1-2016	15528	4014
12-2015	830	1
11-2015	105	0
9-2015	972	0

Had Enough? Or Mission Accomplished? Putin Orders Russian Troops Out Of Syria; Will Maintain "Presence" -- March 14, 2016

Updates

March 18, 2016: either in the post below, or in the comment section, or in an e-mail, I suggested that Putin can now come and go into Syria as he wishes, on relatively short notice, probably faster than the Bakken can ramp up. The Wall Street Journal reports:

Russian President Vladimir Putin pledged to continue providing military aid and intelligence to Syrian President Bashar al-Assad, declaring that Russian warplanes could redeploy to Syria at any moment.

“If it is needed, Russia is capable of boosting its numbers of its presence in Syria literally in a few hours, depending on the situation, and use the full power of our capabilities,” Mr. Putin said on Thursday in an address to Russian military personnel who served in Syria.

On Monday, Mr. Putin said the bulk of Russian military forces would withdraw from Syria, after a bombing campaign that began at the end of September—a nearly six-month mission the Russian president said had cost some 33 billion rubles ($477.5 million). Russia’s announcement surprised U.S. and Western officials, and raised questions about the direction of nascent peace talks that began in Geneva the same day.

March 16, 2016: Putin's hand grows stronger as right-wing parties advance in Europe. From Bloomberg:

A growing pro-Kremlin contingent in Europe, likely emboldened by Russia's decision to withdraw most of its forces from Syria, is tipping popular sentiment further toward President Vladimir Putin.

The most pressing of the issues vital to Putin is European Union sanctions against Russia, introduced in the wake of Moscow's intervention in Ukraine in 2014. It’s hard to say whether the EU can preserve unity on the subject for much longer, said Petras Vaitekūnas, the former Lithuanian foreign minister, who advises the Ukrainian Security Council.

“I expect big problems with that, and with our ability to repulse Putin’s onslaught,” he said.

Ten days ago, yet another far-right party supporting Russia gained a foothold in an EU country, this time Slovakia. People’s Party, Our Slovakia won 8% of the vote in national elections, joining a burgeoning club including Hungary’s Jobbik, Greece’s Golden Dawn and Marine Le Pen’s National Front in France.

March 15, 2016: The Los Angeles Times has an op-ed with the headline -- how Putin beat Obama in Syria. 

The entire world was surprised when, at the end of September 2015, Vladimir Putin suddenly started moving Russian aircraft, tanks and troops into Syria.

At the time, President Obama predicted the Russian intervention would fail.

"An attempt by Russia and Iran to prop up [Syrian President Bashar] Assad and try to pacify the population is just going to get them stuck in a quagmire and it won't work," Obama said.

This week, the world is equally dumbfounded by the Russian president's announcement that he is withdrawing the "main part" of his forces in Syria.

Obama tries to wave away what Putin has done in Syria and Ukraine: "The fact that he invades Crimea or is trying to prop up Assad doesn't suddenly make him a player. You don't see him in any of these meetings out here helping to shape the agenda. For that matter, there's not a G20 meeting where the Russians set the agenda around any of the issues that are important."

It's telling that Obama thinks that the only thing that matters is the agenda at international gab-fests. That's because the president, like most European heads of state, lives in a 21st century, post-power world where international law is more meaningful than brute force. Putin, by contrast, inhabits a 19th century, Realpolitik world where strongmen act to advance their own interests with scant regard for the feelings of other states, much less of multilateral institutions such as the G20 or the United Nations.

In the clash between these two incompatible visions of the world, there is no doubt which one is winning: From Crimea to Syria, Putin is rewriting the rules of the international game in his favor.

In the case of Syria, Putin's objectives are two-fold. First, he wants to ensure that Assad, a longtime Russian ally (and buyer of Russian weapons), is not toppled. Last fall, rebel forces were advancing and threatening Assad's grip on power. No longer. The Russian intervention was ostensibly supposed to attack Islamic State. In fact, some 90% of Russian sorties have been directed not at its strongholds but at more moderate rebel groups backed by the United States. This has enabled Assad to regain part of Aleppo province and to consolidate his hold on an eastern corridor running from Damascus to the Mediterranean Sea.

Putin's second objective is to reassert Russian power in the world — to make clear that Russia is not isolated after the unlawful invasion of Ukraine and that, in fact, it is ready to challenge American primacy in the Middle East, a region where the U.S. has been the dominant power for decades. That mission also has been accomplished.

As a bonus, Putin even got to show off the capabilities of a new generation of advanced weapons systems, from fighter jets to cruise missiles, that he hopes to sell to eager customers around the world.

Putin can achieve his limited objectives in Syria at much lower cost, and if Assad gets into trouble again, it's easy enough for Putin to send back more Russian forces. He is not, after all, giving up the newly established Russian airbase in Latakia province. It will now be Russia's second military installation abroad, alongside the long-standing Russian port facility nearby at Tartus on the Syrian coast.

March 15, 2016: The WSJ argues that Putin accomplished his mission in Syria -- 

When Russia began its bombing campaign in Syria last year, the move provoked outrage in Washington and warnings from the White House that Russia faced a quagmire.

But President Vladimir Putin’s announcement that he would draw down some forces this week signaled his determination to skirt such a predicament. After five months of bombing in Syria, Kremlin watchers say, Russia has accomplished what it set out to do.

Russia has long said it wants to avoid a Libya-like scenario in Syria, where the toppling of a dictator allowed Islamic State to use the power vacuum to build up a force of several thousand fighters there. Mr. Putin argued that Syrian President Bashar al-Assad is the most effective tool for fighting jihadist terrorism in Syria—whatever the West may think of Mr. Assad’s human- rights record.

A drawdown of Russian forces is a signal that Mr. Putin believes that, for now, Mr. Assad’s future is ensured. The Kremlin will certainly continue to support him, manning Russian military bases and carrying out missions at the request of the Syrian government, said Ivan Safranchuk, a political-science professor at Moscow State Institute of International Relations.

“I think that Russia’s goals are mainly achieved,” he said. “The regime has survived, it doesn’t control all the territory of Syria, but there are no existential threats to the regime anymore.”

Original Post

Reuters is reporting:

Russian President Vladimir Putin said on Monday he was instructing his armed forces to start pulling out of Syria, over five months after he ordered the launch of a military operation that shored up his ally, Syrian President Bashar al-Assad.

Putin, at a meeting in the Kremlin with his defense and foreign ministers, said Russian military forces in Syria had largely fulfilled their objectives and ordered an intensification of Russia's diplomatic efforts to broker a peace deal in the country.

But the Russian leader signaled Moscow would keep a military presence: he did not give a deadline for the completion of the withdrawal and said Russian forces would stay on at the port of Tartous and at the Hmeymim airbase in Syria's Latakia province.

Czeched Baggage? The Answer To Why Hellfire Missiles Are Being Sent To Portland, Oregon; The Most Interesting Man On Earth And His Thoughts About Flying Serbian Air -- March 14, 2016

Updates

March 14, 2016, 7:49 p.m. Central Time: Keystone Kops. State Dept now says Hellfire missiles destined for Portland, MAINE, not Portland, Oregon. Who's in charge of the US State Department? Probably reported many places, this link here: no explanation given for mix-up.

March 14, 2016: we have the answer to why the Hellfire missiles were being sent to Portland. It is all part of the city's art program. From our daughter who lives there:

The MAX (Portland's light rail) stop closest to us is the Rockwood stop and it has these "decorative" spikes on it.  I always thought they were really missiles disguised as art with each spike pointed at the right trajectory for specific targets.  Maybe they are filling them up now... or refilling...

Original Post

Czeched Baggage

Keeping Portland Weird

I don't even know where to begin filing this, what tag to use.

The Huffington Post is reporting:

Serbian authorities are investigating reports that two missiles were found in cargo headed to the U.S on a passenger flight from Lebanon to Serbia.

The cargo containing the pair of "armor-piercing missiles" aboard an Air Serbia flight from Beirut was discovered Saturday at Belgrade Nikola Tesla Airport. The missiles had been packed in wooden crates, according to Serbian TV station N1.

Serbian media reports say the cargo was bound for Portland, Oregon.

Czeched baggage?

And why in the world were the Hellfires headed to Portland in the first case?

But it gets weirder. Here's how the Pentagon responded:

There's no legitimate reason for the missiles to be on a passenger flight, Robert Caruso, a former State Department and Pentagon staffer, tweeted Sunday. The missiles, he speculated, were probably stolen.

And this guy is paid "the big bucks" to come up with conclusions like these. He shouldn't jump to these conclusions. Oregon is seeded #1 in collegiate March Madness and the Hellfires may have been part of the planned celebrations if Oregon advances to the finals. 

Okay...

And this from Serbian Airlines:

Safety and security is Air Serbia's number one priority.

But it's not the airline's fault. It's the airport authority's fault.

According to Aleksander Radić, a military analyst who spoke with N1, while weapons are occasionally transported through Nikola Tesla airport, it is completely unheard of for that be done via passenger plane. He added that airport procedures mean that the airport is responsible for checking all baggage before putting it on board, not the specific airline.

I'm glad we cleared that up. A lot of folks might have otherwise canceled their Serbian Air reservations.

I can't make this stuff up.

**********************************

The Question & Answer Page

I asked whether the most interesting man in the world has/had ever flown Serbian Air. I was told the most interesting man in the world has always preferred flights in which the number of takeoffs exceed the number of landings by exactly one (1). I was unaware of this video until just now:

Total Electricity Sales In US Fall For 5th Time In 8 Years -- Pretty Much Says It All About The Obama Recovery -- March 14, 2016

Regular readers know that I consider gasoline sales (in volume, not dollars) my number one data point for tracking the health of the US economy. Sales of electricity might be the second most important data point. It might be the first, but I had not tracked it before. So, now I have a second data point to track the health of the economy.

Electricity, of course, would be even a better indicator than gasoline for gauging the health of the US economy (I would imagine).

Total electricity sales fell in 2015 for the 5th time in past 8 years -- EIA.

This pretty much says it all about the Obama recovery. In fact, the only year that electricity sales stand out is in his second year, suggesting it takes a while for a huge economy like the US to turn around ... but then look at the data for every subsequent year in the administration of a president who probably played more golf than Ike.

ObamaNation.

From the EIA caption:

Total electricity sales in 2015 fell 1.1% from the previous year, marking the fifth time in the past eight years that electricity sales have fallen.

The flattening of total electricity sales reflects declining sales in the industrial sector and little or no growth in sales to the residential and commercial building sectors, despite growth in the number of households and growth in commercial building space.

Declining rates of electricity demand growth reflect a combination of factors, including the market saturation and increasing efficiency of electricity-using equipment, a slowing rate of economic growth, and the changing composition of the economy, which has reduced the role of electricity-intensive manufacturing.

It is interesting to compare this graph with the change in overall US wealth, posted earlier.

**************************************** 

Connecting Russian Dots

Ayn Rand, 1905 - 1982.
Coco Chanel, 1883 - 1971.
Doctor Zhivago, the novel spans 1903 -- 1943.

I have no idea, now, exactly how it started, how I got into my "Doctor Zhivago" stage. Most likely it started when we visited the Dallas Museum of Art and saw the "reconstruction" of the Riviera home of Coco Chanel. That led me to read Garelick's biography of Coco Chanel (which I am still reading).

Probably unrelated, but coincidentally and with serendipity, I watched "Doctor Zhivago" for the first time in several years, and then re-watched it several times in the past few weeks. That led me to ordering a used copy of the novel which I am now reading.

About the same time, but slightly before the Coco Chanel biography and watching "Doctor Zhivago" I read Ann Heller's biography of Ayn Rand.

I think if I were teaching Russian history at the AP level in high school or to freshmen/sophomores in college, I would have them become familiar with these three books as their "outside" reading, along with "standard" history books.

In addition to the "history" of this period, these books provide a wonderful feeling for the things that were going on the daily lives of people during that period, mostly in Russia but also elsewhere vis a vis how Russia thought was influencing global events. 

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School Is Out For Spring Break

I'm sitting in Starbucks in Southlake, TX -- yes, I know -- some time ago I said I would never visit Starbucks again after they raised their prices, but I make exceptions. Today is one of them. The smallest ("tall") coffee is $2.00 here with tax; bottled water of the same amount: $2.45. If I come here in the afternoon after a bike ride, I buy the water; if in the morning, a coffee. After 5:00 p.m., a martini. Just kidding. LOL. I wish. More on that later.

I say all that to say this: the weather is wonderful and the sidewalks are full of young women ages 12 - 16 carrying those cute little boutique bags with purchases from Victoria Secret and the like. What a great country. My eyes watch out of curiosity but no longer out of "lust" -- my thoughts only return to my soulmate, and years past.

Years ago, as a junior in college (or thereabouts), four of us took a road trip from Sioux Falls, SD, to South Padre Island, TX. Lots of fun, but in retrospect, more trouble than it was worth. But it was a box to be checked off; part of an adolescent's bucket list, I suppose.

Yes, it's a great country:

It's 5 O'Clock Somewhere, Jimmy Buffett and Alan Jackson

Interruption In Blogging -- March 14, 2016

Later this morning, there will be an interruption in blogging. I will be biking to Southlake, where I will find a spot to begin blogging again.

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Reality Check

The Wall Street Journal reports that ENI has begun producing oil from the Arctic:Eni Starts Pumping Oil From World’s Northernmost Offshore Platform Italian company needs oil at more than $100 a barrel to break even at Arctic Goliat field.

After long delays and cost overruns, Italian oil company Eni SpA has started to pump oil from the world’s most northern offshore platform, Goliat, which is located in the Arctic about 50 miles from Norway’s northern coast.

Eni’s plans to begin pumping from Goliat were already two years behind schedule and well over budget when they hit another snag last December, as Norwegian regulators requested more information about safety and other issues before giving the green light.

The Italian oil and natural-gas company has invested about $6 billion in Goliat so far. With the continued fall in oil prices denting its margins, Eni is likely to struggle to make Goliat economically viable. Several analysts have put the break-even point for the platform at more than $100 a barrel. A spokesman for Eni said Sunday that the company expects the break-even point to be just below $50 a barrel.

Eni said in a written statement Sunday that Goliat, the first oil field to start production in the Barents Sea, is estimated to contain reserves totaling roughly 180 million barrels of oil. Its daily output is expected to reach 100,000 barrels. The Italian oil company holds a 65% stake in Goliat. Norway’s national oil company, Statoil AS A, controls the rest.

The only other time I blogged about the Goliat was on October 8, 2104. At that time the estimated cost was $7.21 billion. Something tells me $7.21 billion is closer to the real number than $6 billion.

And that's with a "b."

$6 billion for one platform. In the Arctic. Time for a reality check.

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The Amazon Page

Jeff didn't call if "Amazon" without a reason. Now, come the warehouses.

Delivery in a day is just too slow. At least, that seems to be the philosophy at Amazon, which in the last year has quietly built out a network of at least 58 Amazon Prime Now hubs in the US to fulfill one- and two-hour deliveries.

Those hyper-fast deliveries are available to Prime Now customers living in the high-density urban areas where the hubs have been built. 

The new warehouses—typically 50,000 to 60,000 square feet—are fed by Amazon’s 86 gargantuan fulfillment centers, but only with about 10,000 bestselling items as rated by the company’s internal data. An analyst said he could confirm 58 Prime Now hubs, but there could be more.

“This has probably been the most secretive piece of data that the company has not been talking about ... equivalent to Amazon having retail stores."

To slice away at shipping costs, the company is eliminating the middlemen in China who deliver goods from warehouses to seaports, opting to bring that job in-house. It also bought thousands of tractor trailers (not the trucks) to more efficiently load and ship goods. 

And most recently, Amazon announced it’s leasing 20 Boeing 767s to deliver its own goods to and from its fulfillment centers, a move that diminishes the company’s reliance on third-party shippers such as FedEx and United Parcel Service. The company’s flight hub will be in Wilmington, Ohio.

The new Prime Now hubs are one of three types of warehouses the company is running to further reduce third-party delivery costs. In addition to its fulfillment centers, it began in 2013 to build so-called sortation centers. Those warehouses are meant for nearby small-parcel shipping, which allow the company to shift deliveries from FedEx and UPS to the less-expensive US Postal Service.

“Nobody beats the post office when it comes to taking the cost out of shipping."

For example, if a customer in Boston bought a one-pound item through Amazon online, it was then shipped from the Breinigsville, Pennsylvania, fulfillment center by FedEx or UPS for about $4.50. Now, Boston shipments can be sent to a sortation center in Stoughton, MA, where the US Postal Service delivers the package for about 80% less.

At the link one can find how shippings costs for Amazon are surging.

By the way, my wife and I have found the same thing: UPS is exorbitant for mailing packages; lots of gimmicks that raise the price. The USPS is still the least expensive way to mail packages (that I know of).

By the way, the other thing Bezos has tapped into: human behavior. As delivery rates improve, and folks get used to shopping on Amazon, they become addicted. He can gradually increase prices of his products and folks won't even notice; they are still incredibly less expensive than traditional brick-and-mortar stores. The second American human behavior: consumerism. 

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Car Sales

There is an interesting story line percolating through the business news today, coming from many sources and many angles. Car sales are strong, but just below the surface things may not be what they seem. This report lists four reasons why car sales might be surging:

• increasing number of loans to those considered "bad" risks
• sales being "goosed" by ever-longer loans (I'm not sure if this is a legitimate concern)
• pushing "leases" that count as sales (I'm not sure if this is a legitimate concern)
• "dumping" sedans onto rental car companies and other bulk buyers (I'm not sure if this is a legitimate concern) 

A fifth reason was also listed, low gasoline prices, but that's pretty obvious.

The reason this story has some validity, at least for me, the issue of "sub-prime" loans for auto sales was also a big story for The Wall Street Journal today:

To understand how far the U.S. auto business has been reaching for new customers, consider the early performance of a bond issue called Skopos Auto Receivables Trust 2015-2.

The bonds were built out of subprime auto loans and sold in November. Through February, about 12% of the underlying loans were at least 30 days past due, a third of which were more than 60 days delinquent. In another 2.6% of loans, borrowers had filed for bankruptcy or the vehicles had been repossessed.

Those borrowers are at the outer fringe of the auto market. Still, the high level of missed payments for loans made so recently is a warning sign for an industry that needs every customer it can get to keep sales increasing at a record pace.

Minor Housekeeping Note: QEP Wells Coming Off Confidential List Last Week Now Updated, Posted -- March 14, 2016

See this link.

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As Noted

Yes, here it is. Last night just before signing off for the night, I said that we would see Japan core machinery orders for January surge to 15%. And here's the report this morning:

Japanese core machinery orders jumped 15% in January, the second straight month of increase, the government said Monday, despite lingering concern about the slowing Chinese economy.

The rise in core orders--a leading indicator of business investment--was better than a 2.7% increase expected by economists surveyed by The Wall Street Journal and the Nikkei.

This is not trivial. This is the third month in a row that Japan has reported huge (and unexpected) increases in core machinery orders. And, note, again. the 15% this most recent month far exceeded the expected 2.7%. One wonders how much this has to do with Japan's energy story: their nuclear energy program is in shambles. By the way, what are shambles? The word has an interesting "history." Sort of reminds me of the "history" of "bedlam."

Decline And Fall Of Bakken CBR To The East Coast, Part 5 -- RBN Energy -- March 14, 2016

Active rigs:

	3/14/2016	03/14/2015	03/14/2014	03/14/2013	03/14/2012
Active Rigs	32	112	191	187	203

RBN Energy: the decline and fall of East Coast crude by rail.

If East Coast refiners bought their crude at the wellhead in North Dakota during February 2016 they would have paid average prices of about $4.90/Bbl below U.S. Benchmark West Texas Intermediate (WTI) at Cushing, OK – which works out at about $26.25/Bbl (price estimates from Genscape).

If they shipped that crude by rail to refineries in Philadelphia, PA on the East Coast they would have paid about $14/Bbl rail freight - meaning the delivered cost of crude would be $26.25 + $14 or $40.25/Bbl. Alternatively they could have simply imported Bakken equivalent light sweet crude priced close to international benchmark Brent for an average $34/Bbl – saving a minimum of $6.25/Bbl. Today we describe how these economics have had a detrimental impact on crude-by-rail (CBR) shipments to the East Coast.

This is pretty cool, google: cbr oil Bakken blog. 9,220 hits. This blog has top two spots followed by Bakkenblog.com. Even Sven's Bakken Blog shows up high on the list (second page).