Monthly Archives: October 2011
Crude Realities And The Price Of Oil
In 2010 the world consumed about 88.2 million barrels of oil per day–2.7 million barrels per day more than in 2009. Whether you look at the incremental increase in demand or the percentage gain, oil demand in 2010 increased at the second-fastest pace in 30 years. Much of this rebound stemmed from the snap-back in consumption that followed the severe 2008-09 recession. But the magnitude of this recovery took many analysts and industry participants by surprise.
Investors should also remember that although US oil demand remains well under its 2004-05 high, global oil demand hit a new peak in 2010. Demand growth in 2011 won’t match up with last year’s resurgence. However, the International Energy Agency’s (IEA) forecast still calls for global oil demand to grow by more than 1 million barrels per day to 89.3 million barrels per day. This uptick in consumption hardly qualifies as weak; oil demand has grown at an average annual rate of 1.05 million barrels per day since 1990.
The IEA has raised its estimate of 2011 crude oil demand sharply higher since July 2010. Although the agency has trimmed its projection by about 300,000 barrels per day since August, these estimates remain far higher than they were six months ago…READ MORE.
My Take: The piece linked above provides a great overview of projected oil demand with some industry insights in terms of how investments are likely to react given a run-up in price of a barrel of oil. Elliott Gue is an expert in energy related investments and does a great job explaining some of the industry’s mechanics (investing related) in a way that is accessible to a wide audience.
Allana Discovers More Potash in Ethiopia
Allana Potash Corp announced on Tuesday that it has intersected three zones of strong potash mineralization in hole DK-11-28, found in the northwestern region of the company’s potash concession in Ethiopia.
Allana is encouraged by the consistently strong potash mineralization seen in the results from the northwestern part of its concession according to Farhad Abasov President and CEO…READ MORE.
My Take: I highlight Allan Potash on this site for a number of reasons. For one, it’s a small cap stock with a lot of opportunity to grow in the coming years, but another reason pertains to illustrating global trends and opportunities.
Allan’s potash (fertilizer) rich property is in Ethiopia. Ethiopia is part of Africa, which in the coming decades will boast some of the highest fertility rates in the world (Asia and South America are declining.). In terms of population growth, hungry mouths are one area that do not benefit from economies of scale. Nothing miraculous happens when you have a larger population in terms of food needs.
Based on demographic growth alone, Africa should expect to have greater demand for higher crop yields as more consumers appear on the continent. In addition, if other developing countries increase their standard of living, they will demand more food, while they experience an increase in energy consumption. These two factors could make the importing of various foods more expensive for residents of Africa. Thus, extra pressure would fall on Africa’s domestic growers to produce more with the farm-able land they have.
As an investor that is focused on the long-term, it is very important to understand long range trends and how companies of today are positioned to meet the needs of these trends. Keep this information in mind when considering potential investments.
Almost Half of US Viewers Watch Online Video
Roughly half (48%) of Americans now watch video online, compared to 10% for mobile and 97% for traditional TV, according to the latest findings of Nielsen State of the Media Q2 report.
Mobile subscribers watching video on their phone increased approximately 36% since Q2 2010, and watching video on the internet continued to flourish. Interestingly, the new screens do not impact the time spent viewing traditional television, which saw an increase of 2 hours 43 minutes per month…READ MORE.
Note: This Internet and mobile trends noted above have huge investment implications. You are dealing with a massive shift in consumer behavior that will continue to increase in the coming years. One play that comes to mind is Cisco Systems, which I wrote about in October’s edition of TheMarketCapitalist.com newsletter.
Discount Oil on Sale Now
Canada is sitting on the second-largest reserves in the world. When you’re talking about oil investing, you’re really talking about the oil sands in Canada. We have 179 billion barrels of reserves here; 175 billion—the lion’s share—are in the oil sands. The beauty of investing in oil-sands assets right now is that they’re cheap. Oil is trading roughly in the $80 to $90 range right now, but the equities are discounting $70 oil…READ MORE.
The “New Normal” Is About As Good As It’s Going To Get
There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero percent interest rates and a developed world growth rate closer to 0 than the 3 – 4% historical norms. There is only a New Normal economy at best and a global recession at worst to look forward to in future years…READ MORE.
Say no to wind farms: Shale of the century
The UK Spectator has an interesting article that reaffirms the point made on this site over the past year; new drilling technologies have caused the current and projected supply of natural gas to balloon. With natural gas being a relatively green energy, especially when compared to oi and coal, the environmental and price considerations make it the clear winner in the alternative energy war.
As I’ve noted before, the shift toward greater consumption of natural gas will be a slow process. A lot has to do with infrastructure changes and changes in the way current machinery is powered. With a glut in supply, pricing should remain low for natural gas until we start seeing a major shift to natural gas powered devices.
We live in a world filled with scarcity. Energy resources certainly are a scarce resource. Thus, the explosion of natural gas production over the past 7 or so years is great news for the world.
Article: Say no to wind farms: Shale of the century
The October Edition of Market Capitalist Newsletter is Here!
What you will find inside…
- Perspective & an investment play on the developing world’s infrastructure growth
- Updated model investment portfolio
- Explanation of shareholder yield in relation & why it matters when evaluating a company
- Understanding what actually constitutes a deal in the personal finance section
Oil Production in North Dakota Increases Significantly
North Dakota’s daily oil production in July reached a new record high of 423,550 barrels a day from 5,756 oil wells, an increase of 40,000 barrels a day over June. Daily natural gas production reached an all time high of 427,446 MCF per day, according to the Oil Patch Hotline.
If the current rate of increase continues, the state could surpass California, which now produces 540,000 barrels a day as the third largest oil producing state in the US, according to Lynn Helms, director of the ND Department of Mineral Resources. In the next two years, there could be at least 10,000 wells producing as much as 700,000 barrels a day, said ND Governor Jack Dalrymple…READ MORE.
Thinking About “Occupy Wall Street” Protests
We believe that the straw that broke the camel’s back and ignited the Occupy Wall Street rallies were: 1) the recent considerations by the Federal Reserve to re-initiate its inflationist, quantitative easing policies; and 2) the global, government-coordinated efforts to bail out European and even U.S. banks in the wake of the PIIGS sovereign debt crisis. The message American labor hears is: the U.S. economy is getting worse, our leaders will continue to inflate the dollar in a misguided effort to bail out the economy, which will only accelerate rising living costs, and banks could receive hundreds of billions of dollars in additional government support as opposed to the consumer. Of course, these protests will take place at the regional Fed banks and the Treasury…READ MORE.