Why I Don?t Care About Oil
With the price of oil closing at a low on Friday of $43.77, you?d think I might be concerned.
In actual fact, I could care less, am indifferent, unconcerned, and even could give a rat?s ass.
There?s nothing like seeing your long term forecasts vindicated.
When I warned the oil majors in the late 1990?s that fracking technology was about to change their world beyond all recognition, they told me I was out of my tree, in the politest way possible, of course.
Their argument was that the technology was untested, unproven, and a huge liability risk. If they accidently polluted underground fresh water supplies, the ambulance chasers would make a beeline towards the deepest pockets around, and that was theirs.
They were telling me this after I supplied them my data showing 17 consecutive successful wells drilled in the depleted oilfields of the Barnet Shale, in West Texas (in the old Comanche country).
Today, I received the chart below from my friends at Business Insider. And guess what? Some 15 years later, and the energy industry has been changed beyond all recognition. The majors finally jumped in after building legal walls against the liability that so concerned them, and started fracking like there was no tomorrow.
The message is pretty clear. In the last five years, US oil production has skyrocketed from 8 million to 11.3 million barrels a day. America is now the world?s largest oil producer, eclipsing Saudi Arabia at 11 million b/d, and Russia at 10.5 b/d and falling.
Oil imports have collapsed from 10.3 to 7 million barrels a day. The share coming from the volatile Middle East has shrunk to a miniscule 2 million barrels a day. Some 80% of Persian Gulf oil exports now go to China. OPEC surplus oil production capacity is soaring (see table below). It couldn?t happen to a nicer bunch of people.
The chart also predicts that the US will achieve energy independence within four years, or at least parity in its imports and exports or energy and distillates. The administration is doing what it can to help along this trend, permitting the first exports of distillates in half a century, to South Korea, it turns out.
Is it any wonder that President Obama is turning a blind eye to recent horrific developments in the Middle East? This explains why I really don?t care about oil prices anymore.
There is another upshot to all of this. About the time that America gets its energy independence, it should also get a balanced budget. That is coming primarily from the big cuts in defense spending. The twin deficits, energy and the budget, are intimately linked. It is no surprise, then, they will disappear together.
By the way, did I mention that this is all great news for the long term future for stock prices? The stock market certainly thinks so, with its stubborn refusal to fall substantially.
Just thought you?d like to know.
