Monday, March 03, 2008
InvestmentTools.com
US economy a '$3 trillion' casualty of war in Iraq
Stiglitz and Bilmes argue the true cost is at least US$3 trillion, under what they call an ultraconservative estimate. They say it could surpass the cost of World War II, which they put at US$5 trillion, adjusted for inflation.
Sunday, March 02, 2008
Millionaire Now!: TOP HOLDINGS OF MINING STOCKS BY TOP GOLD FUNDS
Midas MIDSX: GCGC, GG, GOLD, MNG
Van Eck Intl Investors Gold INIVX: AEM, KGC
Oppenheimer Gold & Special Minerals OPGSX: AUY, AEM, ABX, KGC, GG
Vanguard Precious Metals and Mining VGPMX: Lonmin
OCM Gold OCMGX: GG, NEM, AEM, GFI, IAG
Tocqueville Gold TGLDX: AUY, GG, GFI
RiverSource Precious Metals & Mining INPMX: GG, AEM, NEM, KGC
Evergreen Precious Metals EKWBX: Newcrest Mining Ltd, ABX, GFI, MDG
DWS Gold & Precious Metals SCGDX: GG, ABX, GFI, Lonmin, FCX
Bill Cara's recommended goldminers for 2007 & Mine
Gold & Silver: Company Rankings from Reuters
Top stocks by relative strength:
Bespoke Investment Group: New Inverse Gold ETNs
THE SHARK REPORT: WEEKEND TIMES
1- POT
2- ISRG
6- AUY
9- RIMM
18- RIO
28-MOS
33-RIG
37-MA
55-NDAQ
56-DE
84-CNQ
95-MTW"
Tuesday, February 12, 2008
Environmental Capital - WSJ.com : Peak Oil: Simmons v. Saudis, Round Two
Peak Oil: Simmons v. Saudis, Round Two
Neil King in Washington, D.C. reports:
Both Nansen Saleri, former chief of reservoir management at Saudi Aramco, and Houston-based investment banker Matthew Simmons are feeling good these days about the famous–and weighty–debate they held four years ago at Washington’s Center for Strategic and International Studies.
Are Saudi Arabia’s massive oil fields in great shape—or falling apart? Can Saudi Aramco help slake the globe’s soaring energy thirst far into the century—or has that ability already peaked?

Simmons, in his book “Twilight in the Desert” argued that several big Saudi fields, including the massive Ghawar field, were showing signs of serious strain. Their debate before a packed house at CSIS marked an unprecedented moment of openness for the secretive Aramco.

Saleri now says in an interview that time has proven Aramco right. Simmons “was saying four years ago that Ghawar was going to collapse and that Saudi Aramco was going to go into decline….[But] that precipitous decline never occurred,” he says.
Saleri, who left Aramco last year to create his own Houston-based reservoir-management company, insists Ghawar will keep pumping five million barrels a day far into the future. Aramco also managed to revive some other behemoths, like Abqaiq.
“Abqaiq became a renaissance story for Aramco,” he says, insisting that the field’s pressure remains strong and its water content is going down even after more than 60 years in production. Abqaiq “is doing fantastically,” Saleri says.
Simmons, reached by phone in Houston, says he feels equally vindicated—and increasingly alarmed. He based his book largely on information dug up in old technical journals. In recent weeks he has hit the archives again, with thoughts of writing a second book.
What he has found, he says, “is so unbelievably scary you can’t believe it.” He claims that there is mounting technical evidence that Aramco is struggling to deal with increasing volumes of water at its hugest fields. With water production going up, he says, oil production is going down.
“It is absolutely clear as a bell now that all of those fields are heading toward being another Cantarell,” referring to the massive Mexican offshore field, which is now in rapid decline.
So how different are the world views of Simmons and Saleri?
Saleri says he’s convinced technology will help revive aging reservoirs all over the globe, and world oil production won’t hit peak until well after 2050.
Simmons believes we may already have hit that peak. After his recent studies, he now fears he has “grossly underestimated how savage the post-peak oil reality will be.”
I do not believe that Simmons ever claimed that Ghawar would collapse. I think he claimed that Ghawar production was falling faster than the Saudis were admitting.
This would be a non-issue if the Saudis would provide the data, and it is primarily because of the Saudi secrecy that I tend to believe Simmons.
Also, the Saudis are doing an awful lot of drilling for a country that claims to be so awash in oil.
There are more rigs in Mexico. There are more rigs in India. There are nearly as many rigs in egypt. The Saudi’s are certainly doing more drilling than two years ago, but certainly not a lot relative to their production or relative to most other large oil producing countries.
If Simmons is right, the world economy is doomed. So let us embrace conservation and renewables as fast as we possibly can. We will eventually need to do so anyway, and if we do it now, the landing will be softer and the climate less severe…
There are many oil fields that produce alot of water some produce water from day one. This is another example of someone who does not understand the engineering jumping to conclusions. Ghawar is probaly the most studied oil field in the world. I cannot image someone with access old technical papers makeing a valid conclusion. There are a few of my papers I would like to have back.
The truth is you are all, including S and S, a bunch of guessers that have NO idea of what the future holds. So shut the pie hole.
Currently we are only able to get 50% of the fossil fuels out of the ground. New biotechnolgy is in the making which processes unpumped oil in the ground and turns it into methane. This should revolutionalize the industry and increase world-wide reserves.
Also, don’t discount huge new reserves found off-shore.
Simmons, as an investment banker in the oil industry would have a pretty good view of “new technology” looming on the horizon. I think he has stated, more than once, that no such technology has made an appearance. My inclination, based upon past track records and what I’ve seen of these optimistic predictions (and how different the operating regimes would have to be for the optimisitic predictions to bear out) is to go with Simmons on this one.
Nine Secrets Health Insurers Don’t Want You to Know - Health.com
A Message from the President - HealthCare Advocates, Inc.
Monday, February 11, 2008
Honestylog.com: Honesty in Food & Fitness
When I began pushing weights last May I wanted to focus on that, so I did and I built muscle and lost a little fat. Tried to eat good some of the time, but still lots of burgers (which are fine, without the bread). I was losing about 1 pound per month net (I was also gaining muscle).
Then around October I began to eat well most of the time. Probably the closest approximation is "Paleo." This is the authoritative resource:
http://thepaleodiet.com/index.shtml
http://thepaleodiet.com/faqs/
http://thepaleodiet.com/articles/2006_Oxford.pdf
Now I was losing maybe 2 lbs. net per month. However, I kept hearing about intermittent fasting at Art's site...
...and so I decided to try it. It made a lot of sense from and evolutionary perspective. After the first 30-hr fast, ending with a workout and a nice meat dinner, I knew I was hooked for life. I just cannot begin to express all the benefits. I simply think that we evolved to go long periods with hunger and that the body adapted itself to do things over those periods of time that just might be necessary for full health and well being. Think about it: the average person has sufficient fat stores to go two, possibly three months with no food. That didn't just happen by accident.
So that was the major piece to the puzzle, and then I realized something. Since I was putting myself in a state of evolutionary hunger, I was allowing for gene expression to mold my appetite to a greater extent than the complex hormonal biochemistry that prevails when we're perpetually in a fed state. (That's my speculation, so it may be gobbledygook, but I doubt it.)
I just really can't believe how my appetite has so dramatically changed with the fasting. I seriously don't even have a craving in the world for a pizza, and that is almost unbelievable to me. I always crave pizza -- every day of my life. Haven't been to a fast-food place in 2-3 months (I haven't paid attention) and that was probably 3-4 times per week for years. Love fast food burgers & fries.
But this has nothing to do with will power. For me, it takes no will power to fast for 30 hours (well, maybe the first two did) twice per week, and the change in appetite is a natural result. And what I crave is lots of animal fat and meat. I couldn't even finish a light vinaigrette salad last night coming off a 30-hr fast. Instead, I ate nearly a pound of ribeye smothered in butter-sautéed mushrooms, and broccolinni blanched and bathed in melted butter, lemon, and parmesan.
So, I think the Paleo and all those are fine, but a person ought to feel great doing them; naturally great. Given my experience with fasting, I now understand that I would have never known and understood my true appetite had I not started that.
As to the specific question, yea, I eat quite a bit of cheese. And butter; and bacon dripping and dipped in the grease. I now eat the strip of fat on steaks because it's so appealing.
Radical; but I feel fabulous, I'm gaining strength and muscle, and fat is falling away.
Your mileage may vary, but that's my story.
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
I have also recently started Art's EvFit. I am about a month into it. Now I too am going to take the IF plunge. I bought EatStopEat and am going to use that system. But I have a question for you. Why do you go for 30 hours? Art himself says he usually goes for about 17 (lunch to breakfast) and EatStopEat recommends two 24 hour fasts. Why did you settle upon 30 hours? Did you read that this is a better time frame than anything shorter?
Anyway I enjoy your blog and I love reading about your success with Paleo and IF.
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
It was by accident. I actually did two fasts before getting the Eat Stop Eat book. I wanted to be able to skip three complete meal cycles, so rather than after dinner to dinner, I chose to do before dinner (i.e., after lunch) to dinner. Then, as Brad shows in ESE, the max fat burn is from 18 to 30 hours where it begins to taper off. I concluded that I had by accident extended my fasts to the most efficient time period, 30 hours.
Sunday, February 10, 2008
Language Matters: The Ultimate Dilemma for Oil-Dominated Economies
By Peter McKenzie-Brown
Energy security, always a critical mission for any nation, will steadily acquire greater urgency and priority. As it does, international tensions and the risk of conflict will rise, and these growing threats will make it increasingly difficult for governments to focus on longer-term challenges, such as climate or alternative fuels – challenges that are in themselves critical to energy security yet which, paradoxically, will be seen as distractions from the campaign to keep the energy flowing. This is the ultimate dilemma of energy security in the modern energy system. The more obvious it becomes that an oil dominated energy economy is inherently insecure, the harder it becomes to move on to something else.
I am a big fan of Paul Roberts, whose book The End of Oil: On the Edge of a Perilous New World (from which I copied this passage) is one of the best tomes available about the current energy situation. The book was published in 2004, though. Although Roberts accurately spotted the major trends and concisely explained the issues, the period in which he did his research and writing was one of high optimism compared to the situation today. Sometimes he seems almost naïve.
The big word today is recession, with fears around the world that the US may already be there, and that Europe and Japan will soon follow. Perhaps the ballyhooed “disconnect” between growth in the developing world and that in the west is nonsense, goes the thinking: growth in China, India and other rapidly developing countries actually will respond to a slowdown in the West. Those fears have raised concerns in the oil markets: Will demand for the commodity decline so much during the recession that surpluses will wash around the world, driving prices down?
Fearing a crash in demand, the price of West Texas Intermediate briefly dropped to its lowest level in three months at the end of January. Then, as I suggested elsewhere, reality began to intrude: OPEC doesn’t have a lot more oil (in the sense of productive capacity) they can produce. Geopolitics, rising demand and historically tight supply still govern the price of oil. Traders aren't likely to let oil prices decline from their current lofty levels. (Natural gas prices, by contrast, are likely to rise rather quickly.)
Won’t a slowing of oil demand give the world a respite – buy a bit more time during which we can “do something” about the energy mess? Not if the decline in demand is caused by recession. The world’s energy problems need money to be solved. In an era of job loss, declining consumer spending, huge government and trade deficits (in the United States and other western countries), rising inflation, tightening credit and seemingly interminable religious and energy wars around the world, money for energy solutions is increasingly unavailable. Add to these problems the uninspired leadership in the US, Canada and much of the rest of the world (especially in respect to the intimately related issue of carbon emissions) and the outlook seems particularly bleak.
How bad can things get? I’ll give the last word to Paul Roberts, who describes a grim worst case in which crude oil production has peaked, followed by “global recession, worldwide unemployment, economic chaos, and, perhaps, a dangerous and escalating competition among the big oil-importing nations over the remaining reserves in the Middle East.”
In an afterword to the reissue of his book, Roberts describes an important change in people’s awareness – by which he mostly means that of the American people. He writes,
More people and policymakers now seem to understand that the energy system is in serious and growing trouble and that without a fundamentally new approach we are almost assured of a catastrophic failure. What our new awareness actually means is hard to say. It may be the first tentative step toward building a more sustainable energy economy. Or it may simply mean that when our energy system does begin to fail, and begin to lose everything that energy once supplied, we won’t be so surprised.
Tuesday, February 05, 2008
A trainwreck in Maxwell
I wonder how much you'll hear about this cancer study?
Because the cause is NOT evil tobacco this time.
Nope, it's the hippies best friend- Mary Jane. Which according to these studies is 20 times as cancer causing as the evil tobacco.
Anybody who's taken a hit will know that the smoke can't be good for you, as heavy and harsh as it is.
HONG KONG (Reuters) - Smoking a joint is equivalent to 20 cigarettes in terms of lung cancer risk, scientists in New Zealand have found, as they warned of an "epidemic" of lung cancers linked to cannabis.
Studies in the past have demonstrated that cannabis can cause cancer, but few have established a strong link between cannabis use and the actual incidence of lung cancer.
In an article published in the European Respiratory Journal, the scientists said cannabis could be expected to harm the airways more than tobacco as its smoke contained twice the level of carcinogens, such as polyaromatic hydrocarbons, compared with tobacco cigarettes.
The method of smoking also increases the risk, since joints are typically smoked without a proper filter and almost to the very tip, which increases the amount of smoke inhaled. The cannabis smoker inhales more deeply and for longer, facilitating the deposition of carcinogens in the airways.
"Cannabis smokers end up with five times more carbon monoxide in their bloodstream (than tobacco smokers)," team leader Richard Beasley, at the Medical Research Institute of New Zealand, said in a telephone interview.
"There are higher concentrations of carcinogens in cannabis smoke ... what is intriguing to us is there is so little work done on cannabis when there is so much done on tobacco."
Ok, it's a small study, but I expect the truth to be known shortly as all the hippies start dying like flies because of their past indiscretions.
AND I expect Cali, Washington and all the other Liberal Meccas to do away with their pro dope stance and get on the anti-cancer bandwagon ASAP.
Because not only is the secondhand smoke bad...they need to do it "for the children!"
But we all know they won't because if they do it it's somehow ok.
Sunday, February 03, 2008
WorldNetDaily: Fear doesn't control my vote
Fear doesn't control my vote
Posted: January 29, 2008
1:00 a.m. Eastern
It seems to matter little where I go or who I am with, the question I am repeatedly asked many times with breathless anticipation is: "What do we do if Hillary Clinton wins the presidency and/or who can beat Barack Obama or Hillary Clinton?"
Those of you with whom I correspond already know my feelings, but for those who do not, let me make my position unequivocally clear. I don't care who wins the Democrat presidential nomination, and I don't care, as such, if Obama or Clinton win the Holy Grail of politics. I care that the Republican Party doesn't have a candidate I can support as a true conservative left in the race.
I am a conservative, but I'm not an ideologue – nor is my vote governed by fear. That is to say, I will not vote for a Republican nominee to whose positions I am vehemently opposed and/or whom I do not trust, just to keep Obama or, more likely, Clinton out of the White House.
Fear is a powerful motivator that can be used to coerce well-intentioned persons, groups or even the entire nation into making incredibly poor decisions – and the Republican National Committee is not above using same. The idea that I must abandon my moral compass and vote for a candidate I could not find more objectionable – in order to shut out a liberal candidate who bears little or no substantive difference to the one I voted for – is offensive to me.
(Column continues below)
Some have told me they will vote for whomever the Republican candidate is, for fear of those whom a Democrat president will appoint to the Supreme Court – to which I respond: Who was the president that appointed Anthony Kennedy and Sandra Day O'Connor? Who was the president that appointed David Souter, and who appointed John Paul Stevens? Here's a hint – they weren't Democrats.
Under which president has the federal government grown exponentially? Which president thumbed his nose at the voters and arrogantly pledged his support for an amnesty bill for illegal aliens? Which presidents supported abortion, race-based preferences and race-based affirmative action? Which president signed McCain-Feingold? Which president's attorney general vigorously opposed the Michigan Civil Rights Initiative? Which president's attorney general dropped the ball in Lawrence vs. Texas, which opened the door to homosexual marriage and the undermining of the family? Which president campaigned vigorously for Arlen Specter when, in fact, Pat Toomey was the true conservative? Which president had his Justice Department undermine a lower-court ruling in the District of Columbia pursuant to the right to bear arms under the Second Amendment? Want a hint? Once again, they weren't Democrats.
Voting, in my opinion, is one of the most important acts of citizenship an American can perform. The value of that act should not be taken lightly or under duress.
As my grandmother used to say, "No good is no good," to which I add, my voting for one "no good" over another "no good" doesn't make same less "no good." Thus, as I have been forthright in stating from the beginning, I plan to write in the name of my choice, devil be damned, if Democrats win in the meantime. I survived Carter and Clinton. I can endure whomever and whatever they come up with this time, including the certainty of their punitive tax increases.
Former RNC Chairman Ed Gillespie is to be credited, in part, for the calcification of my position. While still RNC chairman, Gillespie, referencing a possible Giuliani-Clinton New York senatorial contest, dismissed conservative concerns pursuant to Giuliani by insisting the conservative base would support Giuliani just to keep Clinton out, even though he favored all that we opposed. I found his arrogance indefensible then, as I do the same mindset that embodies the party today.
I am well aware that many will disagree with me for an avalanche of reasons – that said, so be it. The battle lines must be drawn somewhere. I believe the future of our party depends on it. The party cannot continue in the state of decline it now experiences. Where are the substantive differences that set us apart during the Reagan years? How offensive it is to his memory and to the movement he set in place when we hear liberal Republicans and/or Republican charades claim to be in the image of Ronald Reagan.
I agree with Thomas Sowell and others calling for a revolution to reclaim the Party of Lincoln. Obviously, the RNC has not taken the lessons of 2006 to heart. Perhaps a few more defeats will jar them into listening to us.
Kaboom: A Soldier's War Journal: Dear John
Dear John
The first of my guys received a Dear John letter the other day. (Well, to be completely accurate, it was a Myspace message. Whatever. Same concept, new century.) While I'm not surprised it happened, I am a bit perturbed that it happened in the first freakin' month of our deployment. Who knows how many more Dear Johns await the Gravediggers. Here's hoping that my illustrious and beautiful girlfriend, City Girl, at least has the decency to Facebook my Dear John letter - a Facebook message is WAY more classy than a Myspace message. (I kid, I kid ... not about Facebook being more classy, though.)
Anyways, if you're unfamiliar with the contents of a Dear John letter, or are interested in penning one yourself, I've gone ahead and drawn up a composite sketch. All you have to do is fill in the specifics. You are more than welcome. Remember, I'm here to serve you. And yes, I'm aware that my writing can occasionally slip into the anachronistic and mysoginistic. Sometimes such is fair, sometimes not. This definitely falls into the former category, given the situation that sparked this post.
Dear (insert rank and name here):
Hi. I know it’s been a while since I’ve written. I’ve gotten all your letters … it’s just hard, you know? With you in (insert foreign nation here) fighting in (insert war from American history here), it’s not like things back home have been easy. Or simple. I don’t really know how to say this, so I’m just going to tell you like it is: I’ve met someone else. His name is Jody. I swear to God, I wasn’t looking for anything like this to happen – it just did and now we’re in love.
I know you have to hate me. I promised that this would never happen to us, but it did. Life’s funny like that, isn’t it? While you’re half a world away, getting shot at for a living by (insert enemy here), protecting freedom, justice, and the American way of life, I’m discovering my inner concubine, getting penetrated by Jody’s inferior geothermal thunderstick on a nightly basis. But he’s a far better cuddler than you ever were, he flatters me every morning, and he communicates with me! Imagine that, you insensitive prick.
What else needs to be said? You’re probably going to go crazy now, so you should recommend to your C.O. to take away your weapon for a couple of days. Suck it up, tough guy – remember, like you always told your friends, you can’t make a ho a housewife.
From your former dream forsaking you to a lifetime of what ifs,
(Insert every horribly negative term for a female here)
P.S. I’m keeping the dog.
Friday, February 01, 2008
Tuesday, January 29, 2008
Losses and the Economy | ArthurDeVany.com
Losses and the Economy
January 29th, 2008Everyone seems to be worried about bank losses and the state of the economy. Here is a NYT article that sums up this view.
The nice thing about a financial loss is that it is an event that changes values of assets. It does not destroy assets. The real physical things that were there, like houses and factories, are still there and fully functional.
All that has happened is that prices have adjusted to new information. It doesn’t really matter that a few banks will have to restate the value of their loans. The new prices are signals that will redirect the flow of investment and spending to new assets and commodities. Some relative prices will change, but the price level may not change. If it does, that is not significant either.
What will matter is how these changes affect expectations and liquidity. A sudden revaluation would usually increase liquidity, but a slow revaluation would reduce it. A fall in liquidity would hurt because valued transactions do not take place.
Just as in a hyper inflation, people will not buy or sell if they can’t form a reasonable expectation of what an acceptable price is. I remember the story Axel Leijonhufvud used to tell of a store owner in Brazil during their hyper inflation. He had a striking vase in the window and Axel asked how much he was selling it for. The store owner said it is not for sale. Why not? Because I don’t know the price for it and if I name a price and you buy it means I was a fool.
So, the real problem is not that there are losses. It is that prices need to change and that will take a while. All the interventions that are being proposed or passed into law by an ambitious Congress will slow that process and confuse the clarity of future expectations. One thing this is not about is consumer spending; that is a discredited Keynesian idea but the Congress loves it because it empowers them to spend. People will not spend if prices have not adjusted. Giving them money will not change that. Like the Brazilian shop owner, they have to come to an understanding of what the price is.
Sunday, January 27, 2008
Wishing Wealth: GMI: 0; GMI-R: 0; 16th day of the down-trend; A great new book on the Turtles
Michael Covel's new book, "The Complete Turtle Trader," is a masterpiece in describing the trading philosophy and rules used to train the famous Turtles, who learned how to make millions trading, in a two week course taught to them by Richard Dennis and William Eckhardt in the 80's. The most important thing I learned from this book was the mentors' primary emphasis on exits from a trade rather than entry. Dennis is quoted as basically saying one might profit by selecting positions by trial and error as long as one had a good exit strategy. Go into every trade as if you will lose money and you will be prepared in advance for that possibility and limit your losses. Don't take my word for this, read the book. The turtles used an extremely systematic and innovative set of rules to trade futures, which I think can be adapted for trading equities. This is a good time to be out of the market, to analyze one's prior trading performance and to, perhaps, read a great book..
Saturday, January 26, 2008
Language Matters
the trading range of oil (the space between the red and green lines) during the last six years. Second, it shows an extended breach in that trading range – essentially, three months of trades above the red line. What used to be resistance has now become support. I consider it highly significant that oil prices popped up after touching their three-month low. In the future, oil is likely to trade above the red line.
One of the great things about technical analysis of this kind is that it is a way of imposing order (straight lines) on a market riven by noise (jagged lines.) However, technical analysis is not an excuse for not understanding what decisions help form the jagged lines of day-to-day trading. Oil prices are governed by a highly sophisticated market – one that can quickly balance innumerable pricing factors to establish appropriate prices for oil, but so doing creates endless charts of jagged lines. Herein I present my perception of how that market developed and of the major factors influencing it. As a Canuck, I will deal with the matter from a Canadian perspective.
The Background: As oil became a vital factor in western life during the twentieth century, exploration for the stuff – a new industry – found more than the world could consume. In response, big companies set prices for the oil they controlled overseas, while governments and regulators in the US helped create a parallel environment in which America’s huge domestic oil industry could prosper from higher prices. By 1970, these different policies had created a global pricing environment in which oil produced in the United States cost $3.18 (U.S.), while oil produced overseas only fetched $1.30 (U.S.)
This situation received a severe blow in 1973 when OPEC began to act as a cartel – an organization committed to keeping prices higher than the market would ordinarily allow. They were so successful that OPEC’s member states made price control the organization’s primary purpose, and for more than a decade a statement from OPEC was enough to give world energy markets the jitters.
The energy crises of the period were possible because the world was no longer awash with oil. In particular, production in the United States (then the world’s largest producer) had begun to decline. The Western world needed new supplies, and the volumes required were only available from OPEC members. This period culminated with the Iranian Revolution of 1979-80, which brought panic to oil markets. Dubai oil prices rose from about $2.00 (U.S.) per barrel in 1972 to $36 (U.S.) in 1980.
All this was far more traumatic a generation ago than the rapid oil price increases of the last ten years. The reason is that – at least, in relative terms – oil then played a much larger role in the world economy.
Spot and Futures Prices: The market responded dramatically, and predictably, to these painful price increases. Consumers used less oil while producers pumped more. OPEC soon lost the ability to keep prices high. Then, in 1986, Saudi Arabia, an OPEC leader, flooded the market with oil in an effort to re-establish market share. As a result, prices plunged. Dubai oil dropped to $13, and fluctuated around that level for more than a decade. It did not move decisively upward again until 2000, when tight oil supplies began to squeeze prices higher.
Aided by the convergence of computer and telecommunication technology and by increasing competition among global oil producers, the world’s response to these three “price shocks” – the price spikes of 1973 and 1980-1981 and the price collapse of 1986 – was to create a sophisticated global energy market. After much turmoil, this market, which now accommodates innumerable buyers and sellers, imposed a laissez-faire discipline on the matter of global oil pricing.
In this market, petroleum prices take the forms of “spot” and “futures” prices. Spot prices represent what traders charge for oil for immediate settlement – usually, delivery within two days. Futures prices are prices for delivery of oil at a certain date in the future – as soon as one month, as far into the future as nine years – at specified prices.
Driven by a global network of traders working around the clock (except weekends and holidays), spot trades take into account the needs of refineries and a constant stream of geopolitical and economic data. As the recent OPEC/events of September demonstrated, the markets are more strongly influenced by information about how much crude oil inventory is in America’s stockpiles than by OPEC statements about how much oil they are going to produce. News about hurricanes and other extreme weather events also figure into price calculations. So do rumours and worries about conditions in the world’s large economies.The world’s energy traders bring uncountable resources, facts, needs, expectations and beliefs about the future into their collective trading decisions. This interplay of intelligence and knowledge creates a group mind capable of processing extraordinary amounts of information as it establishes global prices. Charts of spot prices changing minute by minute can be found on numerous web sites.
Benchmark Pricing: Spot prices represent the business end of crude oil pricing, but futures contracts are the ones that truly set prices. As their name implies, futures contracts anticipate what prices will be in the future. Investors and speculators buy these contracts on major commodity exchanges, and spot traders use them as their main references as they negotiate prices. Traders have developed many strategies using futures contracts. They are commonly used for financial speculation, but they also have practical business uses. Refiners can use them to secure the price they will pay for oil at certain points in the future, for example.
To create futures markets, exchanges had to settle on particular kinds of oil to serve as benchmarks. The price of a barrel is highly dependent on both its grade (which is determined by factors such as its specific gravity and its sulfur content) and its point of delivery. In North America, the benchmark price on the New York Mercantile Exchange (NYMEX) is West Texas intermediate oil (WTI), delivered at Cushing, Oklahoma. The following technical chart of futures pricing illustrates trends in oil prices since about 2000. The green and red lines suggest a “trading channel” which prices seem bound to follow.
There are other benchmark crude oil contracts. Of these, the most important is Brent light, delivered at a port in the north of Scotland. Traded on the International Commodity Exchange in London, this oil contract essentially determines the price of oil in Europe and Africa. Oman oil, which is traded in Dubai, helps determine the cost of oil in the Middle East.
The US government’s Energy Information Administration uses an entirely different approach to oil price calculations. It calculates the weighted average cost of oil imports (including oil from its biggest supplier, Canada) to determine the world oil price for the United States. Known as the Imported Refiner Acquisition Cost index, this is a lagging indicator. Instead of giving information about what prices are or will be, it describes what they have been.
Edmonton Par: Although Canada is a large and growing oil producer, we are a price taker rather than a price maker. Canadian prices are established by reference to the benchmarks of New York, especially, and of London. Those benchmarks are the price makers.
The “real” price of oil is its spot price – the amount a buyer will pay for oil for real, immediate delivery. One important Canadian pricing standard is Edmonton light oil. How prices for that oil are established illustrates spot pricing in action.
Initially, the price for Edmonton light is set by the companies – Imperial Oil, Petro-Canada, Shell and Suncor – with facilities at Refinery Row, near Alberta’s capital city. Each morning they post the price they will pay for Edmonton light. Those prices closely track the most recent closing price for NYMEX futures contracts. The daily average of the prices offered by those four refiners is known as Edmonton Par, and it is the standard used for calculating oil prices in Western Canada.
Foreign buyers (mostly located in Chicago) negotiate deals that take into account Edmonton Par, the futures price in New York, the spot price in Edmonton, the date the oil will be delivered, the difference in quality between Canadian light and WTI, the cost of transportation and the availability of competing supplies. As with other efficient markets, the price of Canadian oil reflects a balance of the needs and intelligence of many buyers and sellers.
Canada’s Split Personality: Global markets have had quite a big impact on the distribution of oil within Canada and across North America. In particular, they have helped determine which parts of North America use Canadian oil, and which use oil from the US and overseas.
Refiners avoid the high transportation charges required to pipeline oil from Alberta to Toronto and points east. Instead, they buy oil from offshore Newfoundland or from international markets. That oil is delivered to ports in eastern Canada or to a pipeline terminal at the ice-free harbour in Portland, Maine. From those delivery points the oil is piped to major refining centres in Come-by-Chance, Nfld.; Saint John, NB; Montréal and St. Romauld, PQ; and Nanticoke, Ont.; and to smaller eastern refineries.
Oil from western Canada is another story. It is highly competitive from Vancouver to Sarnia, and in parts of the US West and Midwest. Many refiners in those areas have developed equipment designed to refine specific kinds of oil from Canadian producers. That specialized equipment is one part of the industrial infrastructure that has created secure markets for Canadian oil. Another is North America’s complex network of interconnected pipelines, which make delivery relatively easy.
In practice, Canada has a split personality in the matter of oil imports and exports, and this is mostly a function of our planet’s market pricing for oil. We are the seventh largest exporter of oil in the world, but also the seventh largest importer. In 2006, each day Canada exported 1,784,000 barrels of crude oil, mostly from the west. At the same time, however, we imported 849,000 per day into the east. Canada was thus a net exporter of 935,000 barrels of oil per day.
Because a great deal of our oil production is lower-quality heavy oil, in 2006 Canadian production on the whole sold for less than the $66 per barrel fetched by West Texas Intermediate. However, those net exports added more than $55 million per day to our trade balance with the world.
The creation of a sophisticated global marketplace for crude oil coincided closely with the years in which Canada joined the big leagues of global oil producers and exporters. As we have seen, market pricing now suffuses the sector, and it has helped put the industry into its present form. An example is Canada’s decision to import oil for its eastern refineries while exporting oil from the west. In this instance and many others, efficient markets have helped create a cost-efficient industry.
Bloomberg.com: Worldwide
Wednesday, January 23, 2008
Mexico's crude oil production fell 5.3 percent in 2007, year-end figures show
2008-01-21 22:26:34 -
MEXICO CITY (AP) - Mexico's crude oil production fell by 5.3 percent in 2007 as compared to the previous year, but natural gas output increased by 13 percent, the state-run oil company Pemex said in announcing year-end results on Monday.
Oil production fell by about 174,000 barrels per day to a daily average of 3.082
| |
Discovered in the 1970s, the offshore Cantarell field has long been Mexico's biggest-yielding field, but recoverable oil there is now running out.
Bad weather in the Gulf of Mexico, including Hurricane Dean and other storms, also hurt production, accounting for about 40,318 barrels per day in average daily production losses. Accidents and bomb attacks directed at company pipelines also hurt production, the company said, but did not quantify their effect.
Mexico's three oil export terminals in the Gulf were closed Saturday and Sunday due to bad weather. They reopened on Monday, the transportation ministry reported.
Though export volumes declined, total export revenues grew by 9.3 percent to around US$38 billion (¤26.2 billion) in 2007 _ the highest level in Mexico's history _ largely because of a rise in prices. The average price for the market-basket of Mexican crude rose by US$8.62 (¤5.95) to US$61.66 (¤42.58) in 2007.
Crude export volume ran at about 1.69 million barrels per day, the lowest since 2000. December exports slipped to 1.5 million barrels a day, down from 1.9 million barrels daily in November.
Domestic gasoline sales rose by 5.9 percent, the company said, and natural gas production reached 6.058 billion cubic feet per day.
Wishing Wealth: GMI: 0; GMI-R: 0; 1,453 new lows; safely in cash-- and patient
"When I began this blog in 2005 I wrote that I was a chicken and had successfully avoided all significant market declines since 1995. It appears that my indicators have kept me out again. While I do not make recommendations on this blog I did tell you when I went to cash in my pension plan and in my trading IRA. I hope that many of you looked at my indicators and also took actions to protect your funds. The market signaled this decline weeks ago and if we heeded its warnings and ignored most of the "stay invested" media pundits it was possible to emerge unscathed.
The market will signal a bottom at some point and it is critical to concentrate on its behavior. The trick is to wait for the turn and to wade in slowly. Anticipating bottoms is a fruitless exercise. I am very willing to miss quick short-term bounces and to wait for the signs of a real change in trend. When the GMI returns to 3 or 4 and the QQQQ is in an up-trend there will be ample time for me to profit from the rise. In 2003 after the bear market my account gained over 50% in the market rise, without margin (not allowed in an IRA) or the use of options. I have learned over the past 40 years that the secret of success is to be in the market (on the long side) only when the market is in a confirmed up-trend. So I will remain in cash now and monitor the IBD100 stocks for possible future leaders. (See yesterday's post.) As Jesse Livermore once said, the most money is made in the sitting, not in the trading....."
Friday, January 04, 2008
Forget oil, the new global crisis is food
The amount of U.S. grain currently stored for following seasons was the lowest on record, relative to consumption, he said.
'You should be there for it fully-hedged by having access to those stocks that benefit from rising food prices.'
He said there are about two dozen stocks in the world that are going to redefine the world's food supplies, and 'those stocks will have a precious value as we move forward.'
Mr. Coxe said crop yields around the world need to increase to something close to what is achieved in the state of Illinois, which produces over 200 corn bushes an acre compared with an average 30 bushes an acre in the rest of the world.
'That will be done with more fertilizer, with genetically modified seeds, and with advanced machinery and technology,' he said."
Forget oil, the new global crisis is food
'It's not a matter of if, but when,' he warned investors. 'It's going to hit this year hard.'"
Friday, August 31, 2007
The Skeptical Optimist: The second law of thermodynamics isn't all it's cracked up to be
Hydrogen from Water using Gallium w/ non useful energy
Thursday, August 30, 2007
Wednesday, August 29, 2007
Patterico’s Pontifications � Huang v. Hsu — 1996 v. 2008: Question — Will Hillary’s Rivals Attack Her While Her Husband Got a Pass?
Huang v. Hsu — 1996 v. 2008: Question — Will Hillary’s Rivals Attack Her While Her Husband Got a Pass?
[Posted by WLS]
The blogosphere is starting to buzz a little bit over Hillary’s “John Huang”. Articles in yesterday’s WSJ, a follow-up today, and even a piece in the LAT have got to have the Clinton camp worried about what to say about Norman Hsu.
http://online.wsj.com/article/SB118826947048110677.html?mod=Politics-and-Policy
http://online.wsj.com/public/article/SB118835199704811801.html?mod=blog
John Fund at the WSJ has now posted a entry at the sites Political Diary that he made available to Powerline.
As a refresher, recall from 1996:
Bill Clinton benefitted from the political largesse of the Lippo Group, owned by the ruling Riady and Suharto families from Indonesia.
John Huang was a formerly the head of US Operations for the Lippo Group, controlled by the Riady family of Indonesia, before being named a mid-level Commerce Dept. official in the Clinton Admin. He enjoyed enormous access to the WH for such a mid-level employee. As a DNC fundraiser in 1996, he raised $3.4 million for the party and the Clinton re-election effort — mostly from the Aisan-American community. Huang had been hired in the early 1980s by the Riady Family-owned “Worthern Banking Group” in Little Rock.
Huang took a 50% pay cut to join the Clinton Admin in 1993, but the blow was softened by a $750,000 severance package from the Lippo Group. Among the dubious contributions obtained by Mr. Huang was $200,000 donated by an Indonesian gardner, who later had to return to Indonesia to avoid testifying in the Senate investigation into 1996 fundraising practices. Charlie Trie was the Arkansas restaurantuer and generous financial contributor who received wire transfers of hundreds of thousands of dollars from the Bank of China, but mysteriously relocated to Bejing when subpoenas started to roll out.
Now Hillary has the ubiquitous Mr. Hsu.
As reported by the WSJ, Mr. Hsu — a wanted felon and fugitive from justice for a fraud conviction in California — has raised more than $1 million already for Hillary’s campaign, including more than $45,000 from the Paw family in San Francisco, who have contributed more than $200,000 to various Democrat candidates and organizations through Mr. Hsu.
Mr. Paw is a mail carrier, earning $49,000 a year. He donated $4600.
His wife is a homemaker. She donated $4600.
Their four adult children have various occupations — one is an executive at a mutual fund, while another is a local high school “attendance liason”. All donated $4600.
The recently refinanced their 1200 square foot house near SF Airport for $270,000.
What else they all have in common is that their contributions closely track the contributions made by Mr. Hsu to the same candidates and organizations.
The question is whether Hillary’s rivals on the Demo crowd will want to make an issue of this.
Bill got a pass in 1996 because he had no challenger, and the key facts didn’t come out until after the 1996 election.
Now such pass for Hillary.
