An important item is covered here that lets us catch up on the present oilmarket. Oil has recovered slowly backthrough to the $90 dollar mark as the global economy continues to recover backto pre 2008 levels of activity. Duringthis recovery, OPEC has been able to ship a million barrels per day over theirso called quotas. This all means thatthey are restraining supply to allow this price level to be reached whilecovering any shortfalls.
I suspect they have the capacity to keep the price in this particularrange. This is important. Any higher and contraction begins to imposeitself in the developed markets which is not desirable to anyone.
More important the investment to replace declining reserves is now in fullswing because the industry must replace cheap declining reserves with newexpensive reserves in the face of an expanding global economy. Unsurprisingly the oil industry is spendingeverywhere they can.
Locking the price at $90 assures us that the development of North Americanshale oil reserves and restoration of depleted conventional reserves using thenew petro fracking method is profitable and will turn into a massive land rushthat will actually make
North Americacompletely independent of global oil.
Major alternatives are also emerging and I have no doubt that we will seethe complete and rather abrupt end of the oil age quite soon. Up until that is actually happening we haveto keep the economy turning over and oil does just that. You will be amazed over how fast the finaltransition will actually be.
All things indicate that peak conventional oil has passed and the presentscramble should plausibly replace contracting reserves.
But keep in mind, this contraction is fast and happening across thespectrum of all our present production where any and all new production isexpensive. That is why oil is at $90 andwhy the alternative options are now holding up economically.
OPEC Caught Lying...
By Nick Hodge | Tuesday,December 28th, 2010
Now that the Peak has passed, all sorts of interesting tidbits are emerging.
Take the December 13th BusinessWeek article thatdeclared OPEC is cheating the most since 2004...
Apparently, the oil cartel pumped 26.78 millionbarrels per day (mmbd) this year. Yet they have a production limit of only24.845 mmbd, set at the end of 2008 in response to the recession.
So your friendly neighborhood fuel gang has beenbreaking its output limit by 1.934 million barrels — everyday, all year long.
With crude at its highest price in two years,overproduction allows OPEC members to boost profits without formallychanging output targets.
An extra 1.934 mmbd at $80 works out to a nice “informal”$56.47 billion boost.
OPEC's been lying... That's nothing new.
What's important here is to note the willingnessto extract as much as they can as prices rise.
Analysts,start your engines
If the price of oil creeps high enough, OPEC willofficially raise its target to cash in.
$100 seems to be the obvious trigger to make thathappen, and the consensus is that it will happen this year.
Oil's at $91.43 as I write this — up 30% fromthe year's low.
Goldman says it'll “average $100 in 2010 and $110in 2012.” JPMorgan says we'll see $120 by the end of 2012.
Adding to the pricing fire,
stockpilesdeclined by 19 million barrels this month thanks to intense cold and holidaytravel. That's the biggest monthly decrease since December 2006. U.S.
I'm sure you've noticed gas station marqueenumbers are back on the march.
Prices at the pump have officially broken $3.00for the first time since October 2008. And they aren't expected to ease anytimesoon.
John Hofmeister (former President of Shell,current Head of Citizens for Affordable Energy) is touring TV land this weekwith a new prediction:
We'll be paying $5.00per gallon in less than two years, and sometime between 2018 and2020 there will be another 1970s-style energy shortage requiringrationing.
And this guy didn't just jump on the bandwagon;he's been saying for years that “the last days of affordable gas are behindus.”
He's been attacking our national energypolicy since the turn of the century,saying business as usual would leadus to an “energy abyss”.
And like an ever-increasing cadre of oil execs, headmits conventional oil production is in decline, and is convinced we must turnto unconventional sources to fill the gap — and avoid gas stationrationing.
There's still time to put this trend to work foryour portfolio. Oil at $200 per barrel implies a 122% increase from today'sprices.
Buying an oil or gasoline fund like
Gasoline (NYSE: UGA) or ProShares Ultra Crude Oil (NYSE: UCO) or topunconventional oil plays will ensure rising oil prices translate intopersonal profits... United States
Those stocks and funds are already marching instep:
It explains the future of drilling for hard-to-getoil, and the one company that will make shareholders rich as it unlocksbillions of barrels worth of unconventional reserves.
Call it like you see it,