When it comes to both the socio-economic and geopolitical circumstances in the world today, don’t forget…[to] invest accordingly. [Let me explain why and which assets could benefit and be hurt by such events.] Words: 528

The oil sands in northern Alberta are crucially important to the Canadian economy. People from all over the country are traveling there to find work. The news is filled with controversy over proposed pipelines (the Keystone XL and the Northern Gateway) to carry the oil to export markets. Here are 10 things everyone should know about the oil sands. Words: 878

So says an article* posted on www.sympatico.ca which Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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1. The oil sands are NOT the “tar” sands

(credit: Getty Images)

In the past, the oil sands were referred as tar sands because the bitumen – the very viscous oil found in the oil sands – was used for roofing and paving tar. This was an ineffective use of the oil sands because it did not harden enough.   2. Alberta has the third highest amount of proven crude oil reserves in the world (credit: Getty Images) After Saudi Arabia (260.1 billion barrels) and Venezuela (211.1 billion), Alberta with 170.8 billion barrels ranks third. Of that, 169.3 billion barrels are crude bitumen in the oil sands and 1.5 billion barrels are in conventional crude. Alberta holds 96% of Canada’s oil reserves.    3. Only 54% of the oil in the oil sands is currently recoverable (credit: Getty Images) There are 315 billion barrels of potentially recoverable oil in Alberta’s oil sands. Under current economic conditions – mainly the price of oil – and the technology available, only 170.8 billion barrels are worth recovering.     4. The U.S., Venezuela and Russia also have oil sands (credit: Getty Images) Oil sands are also found in Venezuela, the United States and Russia. Alberta’s oil sands are the largest, the most developed and use the most advanced production processes.    5. 2 methods are used to extract oil from the oil sands (credit: Getty Images) The two main ways are: surface mining: where the bitumen must be within 75 metres of the surface. Approximately 2 tonnes of sand is dug up to find one barrel of synthetic crude oil. Only about 20% of the oil sands oil is recoverable through this method   in situ recovery: uses steam, solvent or thermal energy to make it possible to pump the bitumen to the surface. Immense amounts of water are necessary to recover the bitumen and the oil companies involved are working on recycling and reducing the amount of water used.    6. Bitumen from the oil sands must be upgraded before it is sold as crude oil The oil sands bitumen has been degraded by million of years of organic processes which leave it with too much carbon or too little hydrogen.The upgrading, which is usually done near Edmonton, involves three steps: separating the compounds; improving the hydrogen to carbon ratio and removing contaminants such as sulphur.   7. Upgraded bitumen (known as synthetic crude) travels by pipeline to refineries across North America (credit: Getty Images) Most of the oil sands oil is moved through pipelines to refineries or to ports for shipping. Most of it is refined in California, the U.S. Midwest, the Gulf Coast and southern Ontario and Quebec. A small amount is refined in Alberta for local use. Two new controversial pipelines have been proposed: the Keystone XL would carry oil sands crude to the U.S. Gulf Coast, and Enbridge’s Northern Gateway project would travel over the Rockie Mountains to the British Columbia coast.   8. Producing oil from the oil sands creates more greenhouse gases than from ”conventional” oil (credit: Getty Images) In situ excavation creates two to four times the amount of greenhouse gases per barrel of the final product as conventional oil. In situ ”well to wheels” emissions – which includes combustion of final product – creates 5% – 15% more carbon dioxide than average crude oil, according to the consulting firm Cambridge Energy Research Associates.     9. Oil companies are required to return mine sites to their natural states once a mine is finished (credit: Getty Images) Once a company is finished with a mine site, the developer is required to restore the site so that the ecosystem is as healthy as it was before. For a surface mine, this means putting the sand, clay and gravel back into the mine, followed by topsoil so that the forests will regenerate. Surface mining has disturbed 715 square kilometres of oil sands land. About 71 square kilometres are under active reclamation, including more than 7.5 million newly planted seedlings. Most of the oil sands are only accessible by in situ methods that disturb only 10% to 15% of a similar sized surface mine.     10. The oil sands are the highest non-renewable revenue generator in Alberta (credit: Getty Images) In fiscal year 2010 – 2011, the Alberta government collected more than $3.7 billion in royalties from the oil sands. This was the second fiscal year that the oil sands were the top source of non-renewable resource revenue in the province. This money became part of the government’s general revenues, which funds hospitals, schools and infrastructure.  *http://finance.sympatico.ca/galleries/oil_sands.htm?feedname=FINANCE_GALLERY-Oil-Sands&pos=9&nolookup=true   If you enjoyed reading the above article then: Sign-up for Automatic Receipt of Articles in your Inbox or via FACEBOOK | and/or TWITTER so as not to miss any of the best financial articles on the internet edited for clarity and brevity to ensure you a fast an easy read.      Related Articles: 1. Canada’s Oil Sands: “The World’s Dirtiest Commodity”? When you think of Canada, which qualities come to mind: the world’s peacekeeper, the friendly nation, a liberal counterweight to the harsher pieties of its southern neighbour, decent, civilised, fair, well-governed? Think again. This country’s government is now behaving with all the sophistication of a chimpanzee’s tea party. Words: 1377 2. How ‘Crude’ are Canada’s Oil Sands? The carbon footprint left by Canada’s oil sands has been a target of criticism for years with many environmentalists suggesting that the extraction and processing of bitumen from Alberta’s northern oil sands is “two to three times worse” for the environment than any other supply of oil on the planet. Is that legitimate criticism? Words: 692 3. Crude Oil: How ‘Sweet’ it can be! Some people arbitrarily speak about oil as if it is a single, indistinguishably homogenous substance without any unique differentiation, but this is actually not the case at all! In fact, there are many different kinds of oil. Words: 1007 4. What Happens to Oil Prices if Israel Bombs Iranian Nuclear Facilities? We now believe that there is at least a 50% probability of Israeli airstrikes against Iranian nuclear sites… Iran has multiple retaliatory options at its disposal…[and it begs the question:] Which options would most adversely affect the price of oil? [Let's take a look at what those options would be.] Words: 544 5. What is Shale Oil? People often say: “You can’t squeeze blood from a stone.” However that’s exactly what shale oil is. An alternative fuel, created by squeezing our planet’s proverbial “Life Blood” out of rock. Words: 1066 6. Peak Oil: What a Farce! It wasn’t supposed to be this way. By now, Peak Oil was supposed to be a fact of daily life. People were supposed to be lined up at gas stations, struggling to buy US$10-a-gallon gas. Solar and wind companies were supposed to occupy prominent places on the Big Board instead of going out of business right and left. People were supposed to have diminished expectations – resigned to shivering in the dark. Free markets, a flawed system of commerce, were to be exposed as a misleading theoretical construct, incapable of providing for people’s needs…The world was running out of resources…Now, suddenly, there is a different tale to tell and the New York Times is up to the task. Up and down the Americas, we learn, there is an Oil Boom. Suddenly, we have gone from enforced austerity to an unheralded plenty. Middle East, watch out! [But all is not as it seems. Let me explain.] Words: 1440 7. Peak Oil Is Still With Us – Here’s Why In a recent article called There Will Be Oil in the WSJ, Daniel Yergin once again attempts to debunk the concept of peak oil and sees global production capacity growing to 110 mmbpd by 2030, followed by slow decline. In this short report I take a quick look at his key arguments in an effort to bring further convergence between the peak oil and business-as-usual camps. [Unfortunately, I failed to do so concluding that Peak Oil is still very much with us. Let me explain.] Words: 2032 8. Get Positioned: Oil & Uranium Going to Record Highs! Here’s Why As the world approaches ‘Peak Oil’ crude oil usage will begin to be rationed more and more and the world will turn to nuclear energy to meets its energy needs. As such, expect both oil and uranium to surpass their previous record levels of US$147 per barrel and US$140 per pound, respectively, within the next 2-3 years. Let me explain why. Words: 1446 9. Why Oil is Headed To $300 – Yes, $300! The price of oil is headed “unimaginably higher” in the next few years – to somewhere north of $300 a barrel – because of two very simple forces. Words: 708 10. U.S. Military Warns of Serious Oil Shortfall by 2015 The US military’s Joint Operating Environment report from the US Joint Forces Command has warned that surplus oil production capacity could disappear by 2012 and that there could be serious shortages by 2015 with a significant economic and political impact. Words: 455

Stocks and commodities are under pressure from the rising dollar. We have already seen a sizable pullback but there may be more to come in the next few trading sessions. While my negative view on stocks and precious metals will rub gold and silver bugs the wrong way, I just want to point out what is unfolding so everyone sees both sides of the trade. Let’s take a look at some charts and dig right in. Words: 222

So says Chris Vermeulen (www.thegoldandoilguy.com) in edited excerpts from his original article*.

Dollar Index Daily Chart:

SP500 Futures Index Daily Chart:

Silver Futures Daily Chart:

Gold Futures Daily Chart:

Crude Oil Futures Daily Chart:

Conclusion

Overall, the charts are starting to look very negative which the majority of traders/investors around the world are starting to notice…Now that the masses are starting to get nervous and are beginning to sell out of their positions, I am on high alert for a panic washout selling day…when everyone around the world panics at the same time and bails out of their long positions [causing] prices to drop sharply and volume to shoot through the roof.

Hold on tight as this could be a crazy few trading sessions.

*http://www.thegoldandoilguy.com/articles/

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Related Articles:

1. Dr. Nu Yu’s Views on Gold ($1,400?), Silver ($24?) and China/India (Perfect Storm Developing?)

The Chinese and Indian stock markets have dropped over 20% in the last 6 months meeting the common definition of a bear market. Last week both of them tumbled further to below their lows of more than two years ago contributing significantly to the recent major sell-off in gold. In fact, elevated risk of housing and credit bubbles in China and India is creating the next financial perfect storm – which does not bode well for gold or silver. Words: 632

2. These Charts Say It All: GOLD Is STILL a BUY

With what is happening with the price of gold these past few days it is imperative to take a look at the long and short of it all (the trends, that is). In doing so it shows that we are still very much in a long-term bull market but in a short-term (yes, short-term) bear market. Let’s take a look at some charts that clearly outline where we are at and where we could well be going. Words: 625

3. Will Gold Drop as Low as $1,200 Before Spurting to $2,000?

In the long run developments in the financial markets and around the world seem to conspire to whip up a perfect storm for the gold price, taking it up towards $2,000 and further. That new upleg, however, could very well start from a much lower level than now. There are quite a few developments that could easily send the gold price lower in the coming months. Is $1,200 gold in the cards? Words: 739

4. The Case for $1,390 Gold Soon – and $1,000 Gold Later

The chief economist at HSBC Bank, Robin Bew, suggests that the price of gold will correct down to $1,390/ozt by the end of 2012 and to $1,000 per troy ounce by 2013. [Let's examine Bew's views more closely.] Words: 731

5. Where are We Now in the Bull Market in Gold – and How Many Years/Months are Left?

Gold is in a bull market and, [believe it or not,] so are the gold stocks despite their struggle as a group to outperform gold… but [neither] is anywhere close to a bubble, nor the speculative zeal we saw in 2006-2007. Thus, it begs the question” “What lies ahead and when can we expect the initial stages of a bubble?” To figure this out we first need to get an idea of how long the bull market will last and then where we are now based on various indice analyses. [Below I do just that.] Words: 785

5. Why Is Gold Falling? Should I Buy, Hold or Sell?

 

Gold falls when a financial crisis worsens for 2 basic reasons which make total sense when looked at objectively. Resultant government intervention then creates the environment for a future rise in the price of gold. This article explains the causes of the downs and ups in the price of gold and offers suggestions on how and when to act. Words: 868

A Barclays Capital research [report] notes that gold prices are vulnerable to a recession – more so than some of the other commodities. In the last recession of 2008, gold prices appreciated the least among precious metals. Below is a table that ranks 30 different commodities. Words: 571

So says an article* posted at www.zawya.com.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Gold’s Vulnerability

Of all commodities, gold is placed as the 8th [ see table below] most vulnerable in a recession, according to the BarCap study, which took into account inventory levels, correlation to emerging markets and their performance in the crisis of 2008.

Notes the BarCap research:

Gold’s fairly high ranking is interesting because it performed relatively well in 2008-09. However, this time around, gold prices have been stronger than they were prior to September 2008, whilst speculative positioning is also a little higher.

Gold’s strong performance in previous economic downturns is a positive, but not enough to offset these other negatives. It is important to note, however, that gold’s high ranking is also a function of fundamental factors such as costs and emerging market exposure, which are arguably less important in influencing gold prices than they are for other commodities.

Why spend time surfing the internet looking for informative and well-written articles on the health of the economies of the U.S., Canada and Europe; the development and implications of the world’s financial crisis and the various investment opportunities that present themselves related to commodities (gold and silver in particular) and the stock market when we do it for you. We assess hundreds of articles every day, identify the best and then post edited excerpts of them to provide you with a fast and easy read.

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In addition, gold-supportive factors that are less important for other commodities, such as being a hedge of economic and financial uncertainty, have not been taken into account in the research [causing BarCap to express caution, as follows]:

Therefore, the implication of gold’s high ranking needs to be hedged somewhat. Nevertheless, it does suggest that if the financial factors that have supported physical investment buying were to fade, then gold prices could start to look very precarious indeed.

Crude Oil’s Vulnerability

The BarCap research ranks crude vulnerability at midlevel [Brent #13 and WTI (West Texas Intermediate) #16 out of 30 commodities], primarily due to low inventory levels, noting:

A relatively low level of inventories globally is supportive, but linkage to emerging markets is relatively low, whilst it has an above-average linkage to global growth and speculative interest is relatively high. Brent crude prices appear more vulnerable to a sharp slowdown in growth and oil demand than WTI, mainly because WTI oil prices have already fallen much further.

[The report also mentions that] crude prices have [also] benefited from disruptive supplies from Libya to Iraq, Yemen, Syria, North Sea crude and underperformance in oil production in Russia, China, Canada and Nigeria, saying:

Crude oil spare capacity is very low. At an estimated 2-3m bpd, most of it held by Saudi Arabia and made up of more sour, heavy crude types, the global oil supply industry has very little slack in its system. This means that, as was the case in 2008, OPEC should have little difficulty in cutting output significantly if required. The combination of low inventories and limited spare capacity suggests a high degree of support for crude oil prices even if demand conditions deteriorate significantly.

*http://www.zawya.com/story.cfm/sidZAWYA20111006051717/Why_golds_vulnerable

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One of the things we look for in the markets is anomalies or disconnects from historical tendencies that signal some element of a traditional relationship between two things is changing or has changed. Often, the relationship is eventually returned to “normal”, meaning money can be made if an investor is on the right side of the trade. Other times, the relationship has been fundamentally altered in some way, so understanding the reasons behind the shift can become a source of opportunity, since it can either provide understanding about relevant long-term trends or signal a shift in an existing one. [Such being the case let's take a look at] the ratio between natural gas and crude oil [and determine how best to play this investment opportunity.] Words: 1069

So says Dr. Stephen Leeb (www.leeb.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted (sub-titles and bold emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Leeb goes on to say, in part

Crude oil’s inexorable ascent back to… $100 per barrel has brought out all sorts of comparisons to the last time crude reached these levels, in the spring of 2008 and… it has brought the discussion back to ways that dependence on crude oil can be reduced. This got us thinking about natural gas…

Like with our silver and gold discussion this issue [see here (1)], the ratio of natural gas to crude oil is one that has traditionally been used to gauge the overbought or oversold nature of one of the two components…The ratio is now very near record levels, and will almost certainly be in uncharted territory near 30 once you read this issue. The ratio has traditionally run between 5 and 15 going back to the mid-1990s, and spikes have historically meant that the price of oil had risen too far. However, lately the relationship between the two seems to have come apart for a variety of reasons:

As you would expect, the heavily skewed nature of the ratio means one of two things can happen.

1. Either natural gas will rise in price, which is unlikely merely due to the supply overhang, or
2. crude will fall, [which is] equally unlikely, at least in the near-term future, given the geopolitical situation in the Middle East and the strategic demand from both emerging markets and the U.S.

Either way, the discrepancy highlights the fact that gas is incredibly cheap right now relative to oil. This got us thinking—where would this odd situation have the greatest impact? The short answer is not a natural gas ETF, which as a group were among the worst-performing ETFs in 2010 and are likely to remain low for the time being. Massive reserves around the world mean a large supply overhang is going to persist for some time regardless of what happens with oil, making a sustained rise in natural gas prices extremely unlikely. However, the low price of natural gas to crude oil makes Canadian oil sands extremely interesting, and thus we think a far more interesting way to play the situation is via the Guggenheim Canadian Energy Income ETF (ENY). As crude has risen, the economics of extracting oil from Canadian oil sands have vastly improved and made this avenue of production infinitely more competitive…

ENY tracks a tactical allocation between oil sands stocks and higher-yielding Canadian energy companies. The fund is designed to combine the most profitable and liquid of these companies based on the price trend of oil. In times of rising oil prices, like now, this strategy makes sense.  When prices are heading the other way, the allocation shifts to 30% oil sands and 70% Canadian energy stocks, thus providing equity upside when oil is rising and additional income security when it is not. The fund is relatively small, at $270 million, but is liquid (around 90,000 shares per day) and it currently yields 2.2%…

Oil sands extraction is extremely expensive and uses tons of natural gas in production and refining—the Athabasca oil sands deposit in Alberta alone uses over one billion cubic feet of natural gas per day – and although natural gas is abundant and relatively cheap, it is still your average oil-sands producer largest operational expense. In other words, the current record-low ratio means a profit boon to the bottom line of oil-sands producers as costs for natural gas remain low and revenue skyrockets.

*http://www.leeb.com/content/playing-ratio%E2%80%94-high-oil-and-cheap-gas

Link and Title of Article Referenced Above:

1. Silver: The Party Isn’t Over Yet

Investing is often a study of inconsistencies and contradictions. If it weren’t, the markets would be a simple game and there would no back and forth between buyers and sellers, greed and fear and technical analysts, fundamentalists and momentum players. Our experience with silver since the end of last year illustrates this [but] we [still] think it makes sense to get exposure to the metal. [Let us explain.] Words: 820

Related Articles:

1. What Happens to Oil Prices if Israel Bombs Iranian Nuclear Facilities?

We now believe that there is at least a 50% probability of Israeli airstrikes against Iranian nuclear sites… Iran has multiple retaliatory options at its disposal…[and it begs the question:] Which options would most adversely affect the price of oil? [Let's take a look at what those options would be.] Words: 544

The current economic rebound [in the U.S.] is not a healthy and sustainable one. It is the result of the largest monetary and fiscal stimulus program ever [and, in spite of that,] neither housing nor employment are participating in the current rebound [while] budget deficits and transfer payments are at record highs! [As such, now is the time] to take action to protect your wealth from a potential economic setback and market decline. [Let me explain.] Words: 863

So says Claus Voigt (www.moneyandmarkets.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com,  has reformatted and edited [...]  further for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Voigt goes on to say: 

The deficit could hit a record $1.6 trillion this year, or 10.7 percent of GDP and, as shown in the chart below, it has been heading skyward since 2002.

The extremely high deficit as a % of GDP has put the housing and labor markets in dire straits. According to the Case-Shiller Home Price Index home prices are still in a freefall with December marking the fifth consecutive monthly drop – and the declines were not insignificant: 11 percent in December alone.

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As far as the labor market is concerned, a disturbing weak picture emerges…there are 7.5 million fewer jobs than in 2007 plus the employment-to-population ratio has dropped to a new low for the cycle — lower than at the depths of the recession! The chart below shows the percentage changes in that ratio so you can compare today’s labor market with what occurred during and after previous recessions. As you can see, the current period is indeed bleak.

The above pictures paint a crystal clear picture of a dangerously unbalanced and vulnerable economy that is exposed to …

 Two Major Risks

1. Soaring Oil Prices

With parts of the Middle East in turmoil, crude oil prices have risen considerably and every $10 increase per barrel translates into gasoline prices sucking an additional $30 billion out of consumers’ pockets. As shown in the following chart, the most recent price increase — some $20 per barrel since November — comes on top of an uptrend that started March 2009.

During this surge prices have increased to a degree that has historically triggered — or at least coincided with — recessions. As such, since the economy is now so unbalanced and fragile, risks are high that the recent oil price shock could set off another recession.

In the unlikely event that the economy as a whole can escape unscathed, profit margins cannot because they are already at levels not seen since 2007. Therefore, even without rising energy prices, profits are due to turn lower – and higher oil prices will accelerate and aggravate this process. [With] analysts’ earnings estimates for 2011 [so] very ambitious there is absolutely no room for either of these two events [to happen] without major earnings disappointments taking place.

2. Lower Money Supply Growth

China, India, Brazil, and many more emerging markets, have started to implement restrictive monetary policy measures, such as interest rate hikes and higher reserve requirements, which are having some effect in that most emerging stock markets have not joined the S&P 500 in making new cyclical highs during the past weeks. [On the other hand, however,] the Fed and the ECB have not followed suit and especially in the U.S. the QE2 has dominated the monetary policy discussion — and worked its way into the stock market.

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It seems now, [though,] that an important change has taken place behind the scene. In July, 2010 the 3-month annualized growth rate of MZM declined 1.5 percent. Then in August Fed chairman Ben Bernanke stepped up and announced QE2. Money supply growth quickly responded. The 3-month annualized growth rate of MZM jumped to 9.2 percent in October, more than 11 percent in November, and more than 11 percent in December. In January it was back to 6.8 percent, and now it’s down to 1.9 percent.

Bernanke has bragged how QE2 caused the recent stock market rally [and] I have no doubts that QE2 did, indeed, play a major role in rescuing the economy from double-dipping and the stock market from another severe slump. If so, however, the above described considerable slow down in money supply growth should be seen as another major risk for the economy and the stock market. The NASDAQ-100 index, for example, with a price/earnings ratio of 24 and a dividend yield of a miniscule 0.4 percent, looks massively overvalued.

Conclusion

[Now is the time] to protect your wealth from a potential economic setback and market decline.

*http://www.moneyandmarkets.com/two-weak-spots-in-the-economy-and-two-major-risks-43165?FIELD9=1

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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Oil Price Hikes Have Preceded 5 of the Last 6 Recessions!

An analysis of the effect that rising crude oil prices is having, and will continue to have, on America’s standard of living is very revealing. For every $1 increase in a barrel of crude oil the cost of what you pay at the pump for a gallon of gasoline goes up $0.03. That may not seem like much but the recent spike in the price of oil, were it to remain at its current level of $105 per barrel, would cost the median household somewhere in the neighborhood of $700 in 2011 – yes, $700! Words: 345

Jenn Johnson, in comments at www.ragingdebate.com which Lorimer Wilson, editor of www.munKNEE.com,  has reformatted and edited for the sake of clarity and brevity to ensure a fast and easy read, had this to say on the subject: 

Watch for the speculative bubble in [crude] oil to re-inflate[the economy] thanks to the geopolitical turmoil in the Middle East…  Local gas stations we have seen prices rise 30 cents a gallon in the last [week].  This hurts the consumer and hurts the local economy.  If high prices continue, watch for CMBS (commercial real estate) to come under pressure again.  Hotels will have a difficult time filling rooms.  Retail will slow.  As debt comes due, refinancing will once again be tough. It may be a rough ride once again this summer.  Whereas the consumer was largely complacent in 2007, the stress of the last three years has put some fire in their bellies.  Consumers may not be as complacent this time around.   They may be demanding action.

The above chart is courtesy of Zero Hedge and John Lohman.

*http://ragingdebate.com/economy/oil-prices-and-the-us-consumer

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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‘Peak Oil’ To Soon Push Oil & Uranium Prices Beyond Previous Record Highs! 

As the world approaches ‘Peak Oil’ crude oil usage will begin to be rationed more and more and the world will turn to nuclear energy to meets its energy needs. As such, expect both oil and uranium to surpass their previous record levels of US$147 per barrel and US$140 per pound, respectively, within the next 2-3 years. Let me explain why. Words: 1446

So concluded  Puru Saxena (www.purusaxena.com/) in the above paraphrased comments from an article*  reformatted and edited [...] below by Lorimer Wilson, editor of www.munKNEE.com, for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Saxena goes on to say: 

The day of reckoning is approaching and the world does not have a contingency plan… The world’s output of conventional crude oil peaked in 2005 and global oil exports are also past their prime. Furthermore, the unconventional sources (oil sands, heavy sour crude, ethanol, natural gas liquids, bio-fuels and shale) are struggling to keep up with the ongoing depletion in the world’s largest oil fields. As such, it is probable that the world’s current production of total liquids is at or near maximum capacity. [That suggests that Peak Oil is fast approaching.]

Up until 2007 various government sponsored energy agencies were extremely optimistic about their oil production forecasts. In fact, before it commissioned its first field-by-field analysis in 2008, the IEA used to claim that the world could easily produce over 110 million barrels of total liquids per day! Ironically, other agencies such as CERA and the EIA were even more liberal with their oil production projections and ‘Peak Oil’ was dismissed as a lunacy.

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In November 2008, [however,] the IEA released its World Energy Outlook 2010 report, which was a thorough analysis of the world’s 800 largest oil fields [and] in that study, the IEA admitted (for the first time) that most of the world’s largest oil fields were depleting at a rapid clip and serious capital spending was essential to avoid an energy crunch in 2020. Although this report was a step in the right direction, in our view, the IEA was still painting an unrealistic picture. Fortunately, it has taken the IEA only two years to realise its mistake and its latest World Energy Outlook 2010 report presents a far more realistic scenario.

Oil Output Forecast To Increase By Only 9% Over Next 25 years!

According to its latest study, the IEA now expects global total liquids production to increase to just 96 million barrels per day by 2035! Bearing in mind the fact that the world currently produces 88 million barrels of total liquids per day, the IEA is now essentially implying that output will only increase by 9% over the next 25 years!

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It is notable that in 2009 the IEA stressed the importance of oil for economic growth and concluded that 106 million barrels per day would be required by 2030 ( representing an increase of approximately 18 million barrels per day above current output) [but,] interestingly, in last year’s report, the IEA predicted that global production will peak at only 96 million barrels per day in 2035! So, within the course of a single year, the energy watchdog for the developed world lowered its production estimate by 10 million barrels per day!

New Oil Discoveries Are Very Optimistic Projections!

To complicate matters further, the IEA’s latest forecast of 96 million barrels per day of peak production depends on the assumption of finding an extra 900 billion barrels of oil over the next 25 years! However, given the fact that over the recent past, we have managed to discover only 10 billion barrels of oil each year, we cannot help but take the IEA’s rosy forecast with a pinch of salt… At the current rate of discovery, it will take us 90 years to discover 900 billion barrels of oil yet the IEA somehow believes that this task can be accomplished by 2035!

Projections of Future Oil Developments Just Wishful Thinking!

The chart below is taken from the IEA’s World Energy Outlook 2010 report and it does a good job of capturing the sorry state of affairs. As you can see, the IEA now expects the output from the currently producing fields (dark blue area on the chart) to drop from approximately 70 million barrels per day to only 16 million barrels per day by 2035. Furthermore, the IEA also believes that 60% of oil production in 2035 will come from oil fields not yet found (light blue area on the chart) or developed (grey area on the chart)! Call us skeptics but we do not believe that oil fields yet to be found or developed will somehow succeed in offsetting the ongoing depletion.

Peak Oil Could Arrive Within the Next 2-3 Years!

It is our contention that the world will struggle to produce more than 91-92 million barrels of total liquids per day and global demand will collide with available supply. Of course, we do not know the exact timing of this event but if global consumption continues to grow by 1.5% per annum, we will get there within the next 2-3 years.

Needless to say, when aggregate demand hits available supply, the price of oil will rise sharply. More importantly, if demand continues to increase in the developed world, there will be a permanent shortage of crude and governments will probably end up rationing petroleum. Furthermore, it is our firm belief that, ultimately, oil will only be used for its highest uses (agriculture and aviation).

Oil Prices Expected to Surpass Previous Record of $147 Short-term Then Tumble Again!

If history is any guide, the price of oil will not rise in a straight line and the secular uptrend will be punctuated by severe economic recessions. After all, the cure for a high oil price is a high oil price! At some point during the course of this business cycle, as the price of oil continues to rise, it will (once again) cause economic pain for the overstretched citizens of the developed world. When that happens, consumption will slow down and we will experience demand destruction in some parts of the world.

In our view, the next economic recession will be caused by yet another spike in the price of oil and during the next business slowdown, crude will get whacked again. This is the reason why we will liquidate all our energy related investments prior to the onset of the next economic recession.

Turning to the current situation, the price of oil is trading around US$90 per barrel and during the course of this business cycle, we expect it to surpass its previous record of US$147 per barrel.

Peak Oil Will Increase Demand for – and Price of – Uranium

As the world approaches ‘Peak Oil’ and crude is conserved, demand for electricity will surge. Either that or the world will go back to horse drawn carriages, which we seriously doubt! Furthermore, given the environmental damage associated with burning poor quality coal, the world will turn to nuclear energy to meets its energy needs. Therefore, worldwide consumption of uranium will appreciate over the following years and this will exert enormous pressure on mined supply.

At the time of writing, the price of uranium has climbed to US$61.5 per pound and it is probable that it will at least double from this level. In the previous cycle, the price of uranium peaked around US$140 per pound and we will not be surprised to see that level exceeded within the next 2-3 years. Such a bullish scenario for uranium is great news for the unhedged uranium mining companies and a modest exposure to these stocks seems like a reasonable bet.

How to Benefit From the Looming Energy Crunch

In summary, given the reality of ‘Peak Oil’ and our bullish bias, we have allocated approximately 30% of our clients’ capital to those assets which will benefit from the looming energy crunch. At present, we have exposure to upstream oil companies, integrated energy giants, oil services firms, renewable energy stocks, uranium and electric car/rechargeable battery manufacturers. It is our contention that these businesses will prosper over the following years, thereby rewarding our investors.

* http://dailyreckoning.com/welcome-peak-oil/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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Oil

Less Supply & Higher Demand Mean Ever Higher Oil Prices 

A bunch of bobble-heads and tongue-waggers are saying that the recent decline [in the price of crude oil] shows the top is in… [for] this year. Sheesh, gimme some of what they’re smokin’! Words: 1215

So says Sean Brodrick (www.UncommonWisdomDaily.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited [...] below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Brodrick goes on to say:

Cycle Charts Suggest Major Lows Coming for Stock Markets – and Gold!

Larry Edelson’s proprietary cycle analyses suggests that we could experience declines in the Dow 30 and S&P 500 to 9,000 and 1,000, respectively, by April of 2011; a potential decline in the price of gold to as low as $1126 by August of 2011 and a decline in the price of crude oil to as low as $69 next year - before taking off to record highs. Words: 781

So concludes Larry Edelson (www.uncommonwisdomdaily.com) in his article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited [...] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Edelson goes on to say:

My cycle charts - my market roadmaps - for the Dow, gold and oil are based on actual signals from my computer models… [the result of] 32 years of research and development…are right far more often than they are wrong. [In fact,] they are my main forecasting tools. [Let's take a look at what they reveal.]

Future Dow 30 and S&P 500 Stock Market Cycle

All of my cycle indicators continue to strongly suggest that the March 2009 low at 6,469 in the Dow and 667 in the S&P 500 were major lows and that the broad stock markets are now back in long-term bull markets [and are] headed to new record highs by late 2015, early 2016. That’s not to say there won’t be any pullbacks in stocks going forward. There will be.

For the next four years, the Dow and S&P 500 will cycle up and down in a very wide trading range, then blast off to new highs in late 2015. You can see the projected pattern in this monthly S&P 500 cycle chart. Some key cycle signals to watch:

a) in the Dow Industrials:

i) a closing above 11,256 will lead to a cycle rally to 11,887.19 [with] support going into April of next year at 9,034.

ii) in between 11,256 and 9,034 the Dow cycle is essentially neutral in trend on a long-term basis.

iii) a close above 11,887.19 is an all-out buy signal.

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b) in the S&P 500:

i) in between 1,292.90 and 1,007.40 on the downside the S&P 500…will swing wildly and, as such, the cycle is effectively neutral in trend.

ii) [there will probably be a test of] the 1,000 level going into April of next year, but

iii) any close above 1,292.90 is an all-out buy signal.

The Cycle for Gold: Downside of $1,246; Upside of ?

Short term, the cycle indicates that gold is topping and likely headed into a cycle low due in August of next year… [which] could simply mean that gold trades sideways with the sideways cycle trend ending in August, and then gold blasts off again.

a) If the cycle for gold closes below $1,246 …we will likely see a move down to the $1,126 level heading into August 2011 but that’s about it for the downside in gold. Even in the worst of cases, I do not see gold moving lower than that.

b) On the flip side, if gold closes above its recent record high… at any time… gold will blast off and cycle sharply higher into August of next year.

c) So right now, in between $1,246 on the downside and gold’s current trading levels — the cycle for gold is effectively neutral, neither in danger of falling sharply, or taking off to the upside.

Market Cycle for Crude Oil: $69.15 – $125

Oil is still very much in a long-term uptrend cycle. I expect it to reach an intermediate-term high next September, somewhere north of $125 a barrel and then, after a cycle decline into 2012, I expect new record highs in oil in November 2013.

a) for the next few months the price of oil is likely to continue to cycle in a very wide range defined by $84.55 on the upper end and $69.15 per barrel on the lower end.

b) a weekly close above $84.55… will then [lead to] $125 oil next year.

c) the cycles now show the next major turning point for oil in September 2011. Could we be facing another 911 (9/11/11) then? I am not the superstitious kind but every cycle has an uncanny way of shedding light on the future – in more ways than most would like to believe.

Conclusion

Keep the above signals and cycle turning points on your radar!