Top story of the week:
Top international non-energy story:
Top international energy story:
Top national non-energy story:
Top national energy story:
Top North Dakota non-energy story:
Top North Dakota energy story:
Geoff Simon's top North Dakota energy stories:
Bakken economy:
Commentary:
Global energy crisis: finally. IEA Birol.
Refining: finally, he gets it.
Gasoline: President Biden is running out of options to tame soaring gasoline prices. Link here. Jennifer A Dlouhy and Chunzi Xu are the first nominees for the 2022 Geico Rock Award.
A reader writes:
Refinery capacity has been reduced by design.
The major oil companies are now being sued by the individual states because they deal in ‘carbon.’
They are accused of not informing their customers in their quarterly statements that the business will negatively affect the climate, which will change their profit margins that will / might negatively affect their shareholder’s wallet. Closing a refinery in a contested area such as the east coast helps the new regime feel better about them and raises their ESG level and their profit margins. Scarcity by design is hard to do if you want to obscure the facts. This scarcity of refinery capacity was started years ago.
I was shocked that permits were given in North Dakota for the 2 refineries built there. Both are now going to convert to renewable diesel fuel when the crude oil to be refined is actually next door [literally under their feet].
Small, 20- to 40K-teapot refineries are all we will see as stand alone refineries. Almost all the large ones can add another unit (50kbpd). When they do they will be admonished for destroying our atmosphere and will be sued for misrepresenting their business to the shareholders who will earn higher dividends and see their share value increase.
It is an investor’s dream right now
My not-ready-for prime-time reply:
This is the under-reported story of the decade. Biden et al keep talking about "oil production" as the long pole in the tent. One wonders if they understood the refining issue a year ago. I can't believe that someone like me started talking about his maybe six months ago and I'm not exactly known for spotting things like this. Certainly, the folks in the White House knew exactly what was going on but had no way of addressing it, so they continued to talk about oil production (supply/demand) which is not the current issue. Oil supply / demand will be the issue in three to six years.On another note: you hit the nail on the head. This was not the doing of the federal government per se. This was "keystoning" individual refineries by faux environmentalists, with a strategy of conquering by dividing. Kill individual refineries state-by-state. Start with the "soft" states first, like California.That huge refinery in California (Marathon?) that announced they will be converting from a crude oil refinery to a sustainable reneewable refinery is a great example.
A reminder:
Disclaimer: this is not an investment site. Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.
All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.
Where are all the electric cars? PoliticoPro.
Gasoline: President Biden is running out of options to tame soaring gasoline prices. Link here. Jennifer A Dlouhy and Chunzi Xu are the first nominees for the 2022 Geico Rock Award.
Got tobacco?
In 1902, the NYSE began trading stock in Philip Morris & Co. Ltd.
This was the greatest investment opportunity in the history of the United States, with 247,500,000% returns to date.
The dividends have been so extreme you'd own the company 5x over if you tried to reinvest. And, this, despite the stock market crash in 1929. Just saying. Link here.
If you don't own tobacco now, it's probably too late but there are so many other great opportunities.
Student loan forgiveness. There will be a lot written on this story over the next few weeks. Ignore. It's a non-story.
Oil production growth? Yup. Link here. But the production ramp-ups will only ramp up to projected DECLINES in output.
Without job losses, the definition of stagflation is not met. Link here from Peter Zeihan.
Twitter: for the record, if you have not noticed, my favorite "analysts" (note not all of these are on twitter):
Twitter: for the record, those who have lost their mojo, assuming they ever had any:
A guide to the generations. Link here.
Spain: wow, wow, wow. Earlier this morning I talked about the collapse of Spain. Now this, which just popped up on my twitter feed. "Details tbd, but the end of the world is coming to Spain."
Twitter: if you don't have a twitter account, get moving. You can completely control your twitter feed. I only follow about six accounts. If I miss anything important that would be of interest to me, one of those six accounts will re-tweet.
Russian oil: going dark. As is the entire Russian economy. North Korea on steroids.
Russian oil: even if the Europeans exempt pipeline deliveries, this would still knock two million bbls daily of Russian crude off the market -- Peter Zeihan. Link here.
Covid surge: much worse than it looks. Interesting NPR analysis. My wife tests herself frequently -- self-tests at home. If she is ever positive, her positive test won't be reported to the CDC. She is not alone; this is not unique. And she won't have more than the sniffles. She's had the two primary injections and two boosters. I'm over-due for my first booster.
North Dakota drought disappears. Link here. North Dakota's wet spring weather persists.
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The Book Page
If one enjoys this sort of genre, and at risk of becoming a progressive, I can't say enough about The Shores of Bohemia: A Cape Cod Story, 1910 - 1960 John Taylor Williams, c. 2022. The best part, on top of everything else, the history of so much great literature that came out of the Cape Cod population during this period.
It's kind of amazing how many of those books I have read and how many biographies of the various personalities I have read.
I've just finished with the section leading up to WWI; the section regarding WWI, and am now reading about the 18th Amendment, the 19th Amendment, the Jazz Age, and the great writer and literary critic Edmund Wilson.
I had no intentions of any more blogging this morning, but after checking the market, I could not resist (blogging about oil, energy, the market).
First of all, I am quite disappointed. As an investor with a 30-year horizon it is disappointing the market has not yet "capitulated." But, here it is, with all this bad news and the market is up again today, going into a three-day (for me, a four-day) weekend.
Sell in May, go away?
Monday is a holiday. I guess we still have one more opportunity to sell in May, Tuesday, next week.
I don't recall but I believe PSX is among the top five refiners in the US. So, I was curious. Remember, I've been talking about this for weeks: it's no longer about oil production (supply/demand) or about transportation of that oil.
It's now about refining.
By the way, what is the current crack-spread built into the price of gasoline at $4.50 / gallon? Link here: $30 to $50 / barrel.
Fact: there will never be another greenfield refinery built in the US. Probably true for Europe also. True for Russia. That leaves Saudi Arabia and neighbors, and they will be slow to the fight.
So, what is PSX doing this morning? Holy mackerel.
MPC? One of the three largest refiners in the US? I think it may be the biggest by capacity:
Seems to validate / corroborate my thoughts on refining.
MNRL's yield, sad to say, is falling, no matter how hard the company tries to maintain the yield:
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First Among Equals
I own no shares in OXY. At one time I did, then got "cold feet" and sold. Big mistake, but there were enough other opportunities in the same sector that I have no regret. For that reason, I generally don't follow OXY too closely nor do I blog much about it.
But OXY is becoming very, very interesting. There are many indications that BRK could buy the entire company, OXY, just as BRK owns all of Burlington Northern railroad and See's Candy.
It would only be done on a friendly basis and Warren Buffett and Vick Hollub have become close friends based on some reports. For someone like Vicki Hollub it would resolve a number of "things she has to be thinking about."
To buy OXY seems beyond the pale, but one needs to remember that buying Burlington Northern would have seemed also to be "beyond the pale." Really, beyond the pale, to buy an entire railroad.
OXY would be a lot "easier."
Except for one thing: oilmen (and in this case, an oil woman) are incredibly independent.
Having said that, Warren lets his subsidiaries run their own businesses with little interference.
OXY's market cap, about $70 billion, is in same ballpark as the market cap of BNSF (BNI) when the latter was bought back in 2009, in a deal worth $44 billion. I assume the premium paid for OXY would be well in excess of the company's market cap.
One huge advantage to becoming a subsidiary of BRK: all of a sudden access to financial data is extremely limited, hidden. Exhibit A: does Burlington Northern release an annual report for public consumption?
Maybe I need to look at OXY again. LOL.
Time for the disclaimer?
Disclaimer: this is not an investment site. Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.
All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.
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Britain
I don't recall the exact numbers, but Bakken mineral owners are very, very aware of the impact that production and severance taxes have on activity in the Bakken, especially when the Bakken has a huge competitor in Texas, the Permian. If the severance tax jumps from five percent to six percent, some operators will move from the Bakken to the Permian, simply based on the delta between severance taxes.
Now, think about this: Britain has just announced a 25% windfall profits tax on oil produced from the North Sea. There is already talk that some majors are going to exit the North Sea.
BP has already fired the first shot across the bow.
I don't think the UK parliament has gotten the memo that oil operators have moved from production to "free cash flow." If they don't see FCF from the North Sea, they will move elsewhere. There are plenty of places to go. FCF is the new kid on the block.
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Pemex
A few weeks ago, the president of Mexico said he would end exporting Mexican crude oil; he wanted to make Mexico more self-sufficient. How did that work out? Link here. Or link directly to Reuters.
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Vindicated
Yesterday I did a piece on "that stunningly massive draw." I did not agree. I did not see any massive draw, much less a "stunningly massive" draw.
I pointed out on the "gasoline demand" graphic that, in fact, things looked a bit "pathetic." Well, here it is, in The WSJ: gasoline prices are surging, demand is slipping ahead of Memorial Day weekend; record-high prices are pinching Americans' pockets ahead of what is usually peak summer driving season.
Josh Young noted the same thing. Hugely bullish on crude oil, Josh Young says he is watching this phenomenon closely.
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Russia: Flight Of Capital And Western Technology
From Rigzone, Equinor exits ALL Russian joint ventures.
Add Equinor to the long list of companies exiting Russia.
Putin has literally destroyed his country "overnight." On so many levels.
It's gonna be a long time before any Western leader wants a photo-op with Putin.
By the way, how much wealth has Putin destroyed for his country? CNBC is reporting that Russian stocks may be "essentially worthless." Regardless of the quoted price of equities on the Russian stock market, modeling suggests they are all worthless.
It took a model to "show" that. LOL.
A big "thank you" to the reader who sent me the link.
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How Bad Is The Energy Shortage In Europe
For folks paying attention, they know that Spain is the poster child for the EU when it comes to more than enough energy for its citizens, and the poster child for renewable energy -- wind and solar. Spain has been simply outstanding the last few years with regard to renewable energy.
Folks are counting on Spain for this energy, and perhaps fossil fuel energy (more on that later, perhaps).
But look at this.
How bad is the energy shortage in Europe?
From oilprice.com, a link to the best writer of all on this subject (fossil fuel energy), Charles Kennedy: Spain initiates energy austerity with air conditioning limits.
When Spain starts announcing air conditioning limits, one knows it's bad.
And it's only May. This is not good.
Energy transition is dead, Greta.
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WTI: $115
While posting this note, WTI jumped from $114 to $115.
Whoo-hoo.
Josh Young will probably note this.
PSX continues to trade above $101, but has dropped back a bit from its 52-week intra-day high of $102.27.
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Dam Removal
Earlier we talked about the largest dam-removal project in the US -- the removal of hydroelectric dams in northern California. For the record, I wrote about this project as early as December 11, 2020.
Now this, just breaking over at Seeking Alpha: California faces summer power outages as drought drains hydropower generation.
Energy transition is over.
By the way, I did not post it, because I was not particularly interested but apparently Governor Newsom is asking Joe Biden if there's money in the national budget to pay for extending the life of the last nuclear plant in California that was slated to close in 2025, or thereabouts.
California, by the way, has a huge, huge budget surplus but still asking for a federal handout for nuclear energy.
Energy transition is dead.
This is one of the very few Fridays in nine months that I have not gotten up early to walk Sophia to the bus stop. Yesterday was the last day of school for Sophia this year. Sophia is likely to be home with her family all day -- until she gets bored and wants to come over to our apartment. She's not allowed to watch YouTube videos at her home, but she has total access to my big-screen iPad and she knows how to use it.
We have no plans for tomorrow, Saturday.
We have no plans for Sunday.
We have no plans for Monday.
Nada, nothing.
We slept in late this morning, though I checked the news, the market, the war, almost everything except Uvalde every hour or so starting about 6:15 a.m.
I see the Europeans have decided to continue funding Putin in his war against Ukraine; the Ukrainians are about to take a huge loss in the east; and, there will still be a shortage of oil this summer, and a worse shortage of natural gas next winter.
Oh, speaking of all of that, that reminds me. Greta has a new book out. The front cover doesn't name an author; it just says "created by Greta Thunberg" or whatever her last name is.
"Created by" -- not authored -- LOL. God created the world; Greta created a book.
I woke up to two great essays: one sent to me by a reader and one sent to me by Literary Hub.
The first, sort of on/about Leonard Cohen, so that piqued my interest. Leonard Cohen is a favorite of mine. Someone gave me a biography of Cohen years ago; I never read it; I did not want my version of Cohen ruined by the facts.
Likewise I have never read the definitive biography of Steve Jobs. Both were beautiful hardcover books and both were tossed when we downsized. Or at least when I downsized. My wife has not yet done much in that arena.
Oh, speaking of downsizing, sort of. Yesterday, I was going to slice an apple and eat it with caramel -- that caramel that is heavily featured around Halloween every year. I don't recall when I got my little $3.99 tub of caramel but it must have been around Halloween last year (2021). For those who don't know, caramel lasts "forever" in the refrigerator. I eat it infrequently and sparingly and at least three-quarters of the tub was still there. At least it was "there" until it was no longer there. As Tina Fey would say, there was no there there. LOL.
Later in the day I mentioned this to my wife. She said she threw it out because it was old. Yes, it was old, but using that reasoning, she should be getting ready to throw me out. LOL. Worse, I can guarantee you that I do not age as well as caramel, much less wine.
Okay, so I digressed. Not sorry.
The second essay, the one sent by a reader was by Ammo Grrrll, "Thoughts From The Ammo Line," reflections on Mother's Day.
The two essays were remarkably similar in a funny sort of way. In the first, the author talked about getting to know a famous person through little bits of trivia, and the second was an author tossing bits of trivia about herself. Amazingly, Ammo Grrrll (and her husband) seem to mirror my wife and me "to a T," as they say.
Etymology of "to a T": link here. My favorite: the variant in which meat on a spit is perfectly done to the proper degree -- the proper turn (1780). The first use might be related to a T-square from the 1600s. If so, that very well could have been another phrase coined by Shakespeare. It's exactly the type of phrase Sir Henry Nevin would have used.
As for me, as soon as I'm done with this, I'm going to make breakfast:
Speaking of eggs, it appears the shortage is over. Target now has plenty of eggs, but the price has barely come down. Before the shortage, I could find a dozen eggs for $1.19, but that price quickly escalated to $3.89 if one could find eggs at all. At Target they have come down to $3.19 for a dozen, I believe, and at our regional grocery stores should be slightly less expensive.
One wonders why Target would drop the price from $3.89 too $3.19? I doubt folks shopping at Target would make a separate trip to Albertson's to get eggs for $3.59.
