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Future Of Energy: The Big Picture

Consumption

Summary

Overview of factors involved in determining energy prices.

How the various factors influence supply and demaind.

Major shifts coming in the energy sector.

A low risk, long-term investment in energy.

Introduction

This is the initial installment of a series I will be writing (at least once weekly until completed) to provide readers with a better understanding of what is coming in the energy sector and how investors can identify the lower risk stocks for long-term dividend income and potential appreciation. Not all of the stocks that will be covered in this series will be rated as an immediate buy but target prices will be provided for each company under various conditions.

The focus of this series will slant more towards identifying as many factors as possible that influence the prices of energy inputs, the long-term trends that seem apparent to me, and how we might be able to “connect the dots” to gain a better understanding of what price levels to expect over the short, intermediate and long term. I have written a similar series that was popular and wanted to drill down deeper into the sector for those who have an interest. Part I of that earlier series was primarily a review of the history of energy prices that many found helpful. Since the history has already been written I will not rehash that aspect, even though it is a very important understanding of which investors should be aware.

The other two parts of the earlier series were about what I expected of pricing for the intermediate and longer term. This series is meant to be an update to those expectations based upon the additional knowledge and experience accumulated since mid-2015, when the original series was published. I also wanted to provide more detail on my reasoning in terms of the factors.

Factors involved in determining (or influencing) prices in energy

The list in this section may seem exhaustive but is, by no means, complete. These are, to my knowledge, the most important factors that affect the pricing mechanisms of energy resources.

Supply and demand are, obviously the biggest factors that influence prices of nearly all things in a marketplace. But both of these factors are influenced by many other lesser factors. Such things as substitutes, often one energy resource for another, can impact demand in the short term and supply on a longer term basis. Examples are the use of ethanol as an additive in blending gasoline; coal, natural gas, crude products, hydroelectric, geothermal, wind, solar, methane (gas emitted from decaying garbage) and uranium are all used to generate electricity. Electric and hybrid vehicles use battery power to either replace or reduce use of gasoline. Fuel cells are still under development to power vehicles and generate electricity. More alternatives are in the early stages of exploration and development.

Government regulations that place requirements on specific industries within the energy sector, such as electric power generation, autos, renewable energies, and mining have direct impacts on energy consumption, the cost to produce energy and what energy resources are used (among other things). Also, some government regulations have indirect influences on demand and supply of energy. Environmental regulations governing pollutants affect costs of producers that are then passed on to consumers in multiple industries.

Of course, shale oil and gas production has created a new wrinkle in the evolution of energy availability. So much for peak oil! The once high cost of producing oil or gas from shale deposits are coming down at an incredible rate making shale far more competitive than it was once thought possible. New technologies are being created almost constantly to drive down costs in exploration, drilling and production. These advances do not only apply to shale fields but some will enhance conventional E&P (exploration and production) efforts as well.

Pricing itself can have a significant impact on either demand or supply. As we should all recall, when the price of oil dropped by 75 percent from June 2014 ($107.08) to January 2016 ($26.55) U.S. oil production, primarily in the shale fields, fell by more than 1.1 million barrels per day (see chart below). Likewise, when an imbalance in supply and demand occurs the price will adjust to bring the two components back into balance over time.

Source: Macrotrends.net

The drop in the price oil from its high in July 2008 ($145) to a low in December 2008 ($30) of 79 percent was even more dramatic and occurred over a much shorter time frame. This was the result of fear that was born out of a recession. It was temporary, but very painful for those invested in many energy stocks. Hopefully, investors understand that prices in this sector are very volatile.

Then there is the Paris Climate Accord that will likely have far-reaching implications for energy pricing over the very long term. This agreement, by extension, will create more innovation in the field to conserve energy, reduce the use of fossil fuels, and develop more renewable energy. This is not an argument in favor or against the accord. I merely include it because it is relevant to this analysis.

Technology was mentioned above, but referred primarily to that which directly impacts the energy industry in terms of production and cost. But, of course, there are (and will continue to be) innovative technologies being created to reduce usage of, to store, and to replace different current sources of energy. Other technologies may actually increase the use of energy. But reductions will more than likely outpace increases. Battery storage technology on a massive scale will eventually make renewable sources of energy more efficient and dependable sources for the electric grid. It will also enable large facilities to move almost entirely off the grid to produce electricity independent of utility company electricity generation. A good example of this becoming a reality is the newly planned data center by Apple (NASDAQ:AAPL) being built in Denmark. Completion is projected for 2019 and the facility will be powered 100 percent by renewable energy. This provides a good segue to the changes that are coming in energy.

Major shifts coming in the energy sector

I should mention at this point that this initial article is merely an overview and that I plan to delve deeper into each area within later installments of the series.

There was a time, not long ago, when OPEC (Organization of Petroleum Exporting Countries) was the recognized swing supplier of oil for the world. It was positioned (especially Saudi Arabia) with the only real excess production capability and able to influence the price of oil in a significant way by adjusting its aggregate production. There was a lot of cheating on quotas by some members but, by and large, the organization held sway over global pricing. That has changed somewhat and will change further as the cost of shale E&P operators continues to fall.

There was also a time, not long ago, when the major oil companies were focused upon finding the formations with the potential to produce huge amounts of oil over a very long time. These were called the conventional wells and most were either on land or in relatively shallow coastal waters. Then, as these mega deposits became more difficult to find and the easy (and low cost) fields were becoming saturated, the majors began moving into deeper and deeper ocean waters. This has been going on for some time but, because it requires extremely large investments and development times spanning several years (not to mention the risk of hitting a dry hole), many such projects that were in the early stages got shut down because of the oil glut caused by both OPEC and U.S. shale production.

It sort of reminded me of my teenage years growing up in the Midwest when all the gas stations in an area would compete for business by lower the price per gallon. These were called “gas wars” and were very welcome by the locals and travelers alike. I recall making a trip from my home state of Nebraska to the Canadian border of Minnesota and never paying above 19.9 cents a gallon. The gas wars of old ended up with some of the weaker gas stations closing down and those with stronger financial footings taking market share, thus ending up more profitable when the war ended.

The most recent gas war was essentially between OPEC (again, mainly Saudi Arabia) and U.S. shale producers. At first it seemed like OPEC would win as more than 100 U.S. shale E&P companies filed for bankruptcy. But then something strange happened on the way to the forum. A few shale producers cut costs by using technology to assist in finding, drilling and producing more oil for much lower investments. Again, I will go deeper into this evolution later in the series with more specifics on the technologies and the results. Suffice it to say that some companies have cut drilling time by half or more and increased production from each well drilled by a significant amount. In 2015 the average cost of producing a barrel of oil from shale was estimated at about $60 per barrel (some companies in some fields were well below and others well above). By contrast, today several companies can achieve a reasonable profit margin with the price of oil above $45. From breakeven at $60 to profitable at $45 is a remarkable improvement; and the improvements are still coming. Breakeven in some fields in close to $25 per barrel and will ultimately drop below $20 with future improvements to technology.

Then there is solar power, which has recently come down in cost (on a grid-scale project) to near parity with gas and coal. Of course, there is still the problems of what to do at night or when thick layers of dense clouds block much of the beneficial rays from the sun. Solar panels still generate electricity on cloudy and rainy days but are generally less efficient in such conditions. There is also the problem of storage of electricity during peak sunny periods for use during evening hours when usage generally peaks. But this, too, will be solved eventually and open the doors to stronger adoption of solar electricity generation.

At least, that is the vision of folks like Elon Musk. He expects to create a battery storage system for homes and businesses that will make solar more efficient. Of course, his company’s huge investment in the current battery technology may become obsolete with the discovery of a better battery but that does not change the future for consumers, only investors in Tesla (TSLA). This is not intended to be a prediction of the downfall of Tesla, only a reminder of what could potential go wrong and the risk inherent to the significant investment already committed. It could turn out just fine but there is always risk of obsolescence in advanced (and advancing) technologies, especially when there are hundreds of $billions of potential revenues at stake.

Wind power has made great strides in recent years as well, with the cost coming down and large scale generation coming on line. As regulators consider allowing higher speeds of rotor rotation the efficiency of electricity generation via wind turbines may take another leap forward. That, in turn, could lead to additional expansion of wind turbines covering larger swaths of land and seas, replacing or supplementing traditional electricity generation using fossil fuels.

More efficient cars, trucks, buses, planes, ships and trains are always being planned and developed. More vehicles may no longer translate automatically to higher demand for fossil fuels. Traffic monitoring and apps that can be used to divert drivers away from potential bottlenecks will reduce fuel consumption by daily commuters. Autonomous cars should, in theory, also reduce fuel consumption overall.

There is, of course the other side of the equation. Millions more drivers will buy autos as the middle class expands in emerging economies around the globe. As population grows aggregate consumption of everything increases and energy is used to produce more than just electricity. Electricity is used to manufacture almost everything. So, more electricity generation capacity will also be needed. These are the primary factors that have been used historically to forecast energy demand and this method has been relatively accurate over the long run. However, many of the factors and changes mentioned in the preceding paragraphs were either insignificant or irrelevant due to lack of scale to have any meaningful impact on the forecasts. Today, and looking into the future, that is all changing. The old forecasting models will no longer work without substantial improvements to include the more relevant changes that are here and those yet to come.

A low-risk, long-term investment in energy

Because of the volatility in prices it is difficult to imagine any investment in energy as being low-risk. Any stock bought today, whether in energy or otherwise, has a relatively high risk of falling below the purchase price at some time in the future. But over time, there is appreciation potential in energy stocks if (and this is an important IF) an investor is patient and buys on dips or (preferably) crashes experienced by the industry. But there are several important aspects of energy investing, from my perspective, which investors need to keep in mind besides getting in at a good price.

The first is consistency and quality of management; second is the strength of its balance sheet and assets; third is the dividend, how much it rises consistently and the payout ratio relative to the industry average; fourth is how well the company is positioned to adapt to a changing environment; and fifth is how well the stock holds up during times of great stress, as in during recessions or global supply gluts.

Only if a company grades well in all of the above factors does it imply low, long term risk. Energy will always be a necessity for mankind and its form or source of it will evolve slowly over the coming decades. The best run companies will adapt and remain/become leaders in energy production in the future regardless of how dependent we are on fossil fuels. We are moving from a period of nearly complete dependence to a period (at sometime in the future) of declining dependence on fossil fuels. I will attempt to establish the level of probability and time frame of that transition later in the series.

There are few companies that I can check all the boxes for the aspects listed above. Let us take a look at one that stands out for its resilience that I believe is well positioned to evolve and thrive. Exxon Mobil (XOM) has been around for 135 years, far longer than I have. Management has guided the company through multiple crashes in commodity prices (most notably oil) and kept the free cash flow positive, even during the last two dramatic free falls. Many companies in this industry posted negative free cash flow in both instances.

It has a credit rating equal to that of the U.S. government and a strong balance sheet. Only two U.S. companies still have a better credit rating of AAA from Standard and Poor’s, Microsoft (MSFT) and Johnson & Johnson (JNJ).

The dividend now yields 3.84 percent and has risen for 34 consecutive years. The rate of increase has decreased to 2.7 percent in each of the last two years, but at least it is above the rate of inflation. The compound annual rate of increase over five years has been 10.4 percent; ten years, 9.2 percent; 20 years, 6.8 percent; 30 years, 6.5 percent; and 40 years, 7.2 percent. I cannot tell with certainty what the future rate of increases will be but suspect that, over the very long term, it will get back to around five percent. Considering that the yield is already higher than most dividend-paying companies, the lower rate of increase may still put more money in a retirees pocket for some time to come. The payout ratio is currently above 100 percent and is a concern, but higher crude oil prices and cost cutting after posting two consecutive down years in 2015 and 2016 will bring that ratio down dramatically as the year progresses.

XOM is an integrated major energy company, not just an oil company. The company explores for and produces oil and natural gas on six continents. It operates through three segments: Upstream, Downstream, and Chemicals. The E&P operations make up the upstream segment. The downstream segment primarily includes transport (collection, shipping and pipelines) refineries, storage and terminal operations. What the Chemicals segment does should be obvious. The advantage of integration is that when one portion of the business is suffering another may benefit. When the price of oil and gas fall both the refineries and chemicals segments experience lower input costs. The transport business is not reliant on prices but throughput, so as volumes increases over time its revenues and margins tend to increase accordingly. When there is a glut of oil the storage and terminal operations do better even as the upstream segment is hurt by lower prices. Integration also allows the company to control costs better. When the industry is booming, owning all the pieces allows the company to restrain the costs that other, smaller companies must purchase through contracts and ever-increasing prices. There are disadvantages due to restraints on downsizing during recessionary periods but those are primarily offset by the benefits over time.

XOM is well positioned to adapt to future demands and has the financial wherewithal to make acquisitions in order to move into new areas if the times so demand of it. The company could easily afford to make a large purchase in solar, wind or any other areas where profitability becomes more enticing than its current core endeavors. The company is currently planning to build multiple petrochemical facilities in the U.S. to take advantage of the low input costs of feedstocks available for the foreseeable future.

The stock is more resilient than the broader market taken as a whole during recessions. The stock fell by 39 percent during the financial crisis of 2008-09 compared to 52 percent for the S&P 500 (SPY). The XOM ride has been far more volatile since then but it did bounce back strongly. Then the price of oil rocketed higher once again and XOM hit new highs. That is not very likely in the near term, but the stock is resilient and, because of the quality of the balance sheet and excellent dividend history, falls less during times of overall market stress.

Then when the price of oil collapsed again from 2014 into 2016, XOM stock fell in price (27 percent) less than the Energy Select Sector SPDR ETF (XLE), which dropped by 43 percent. It also rebounded more strongly in the aftermath.

As many of my readers know I rely heavily on the Friedrich algorithm when analyzing equities. I will provide the Friedrich data file for XOM in another article where I plan to compare it to Chevron (CVX) in the near future. In addition to the Friedrich algorithm, I rely on a tool that I find to be very useful in verifying our work. The Forensic Accounting Stock Tracker (FAST Model) helps identify companies that may be resorting to more financial tricks to make analyst estimates. The model helps pinpoint where management might be aggressive with revenue recognition, cash flows, the balance sheet, and also takes into account valuation and other metrics. Here is an example of the FAST Models results for XOM:

Source: forensicstocks.com

As you can see, there are no signs of problems on fraud, accounting manipulation or potential bankruptcy with this company. That is like a breath of fresh air in the current atmosphere where companies everywhere are doing everything possible to make earnings look better than reality to support overvalued stock prices.

All of this is not to say that I believe XOM to be selling at a bargain presently. But, simply stated, I do feel that XOM, despite all the volatility, can produce good, rising stream of dividend income with less future risk that most of the energy sector. It is highly unlikely to go bankrupt and, if an investor is patient enough to find a good entry price, mine being below $75 per share, I believe it can provide long-term appreciation potential in addition. The current P/E (price to earnings ratio) is higher than normal but I expect it to come down for the same reasons I listed earlier related to the payout ratio. This is not a growth stock, but one that a retiree might consider for a reliable income that beats bonds and is likely to stay ahead of inflation regardless of how the energy market evolves.

If you have any questions, please feel free to ask them in the comment section below and don’t forget to hit the “Follow” button next to my name at the top of this article. I hope that readers will stick with the series as I do my utmost to peel the onion that is the future of energy. There is a lot more detail underlying the preview you just read.

For those who would like to learn more about my investment philosophy, please consider reading “How I Created My Own Portfolio Over a Lifetime.”

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27 Comments on "Future Of Energy: The Big Picture"

  1. Cloggie on Fri, 14th Jul 2017 10:00 am 

    Future Of Energy: The Big Picture

    Easy:

    https://cleantechnica.com/files/2016/08/solar-energy-potential.png

  2. Apneaman on Fri, 14th Jul 2017 11:22 am 

    We Talk the Thermodynamics of Civilization with Professor Tim Garrett

    “Professor Tim Garrett of the Dept. of Atmospheric Sciences at the University of Utah, joins us to discuss the thermodynamic implications of our energy consumption and the possible collapse of civilization that is the result of our Greenhouse Gas by-products. Are we just a flash in the pan, so to speak? Listen-in Saturdays, 9am PST on KKRN Community Radio or stream us live at KKRN.org. Audio of this show below.”

    http://kkrn.org/broadcasts/1220#volume

    Long-run evolution of the global economy: 1. Physical basis – Tim Garrett

    “In the interest of establishing a common theoretical framework, this article treats humanity like any other physical process; that is, as an open, nonequilibrium thermodynamic system that sustains existing circulations and furthers its material growth through the consumption and dissipation of energy.”

    http://onlinelibrary.wiley.com/doi/10.1002/2013EF000171/full

    “My work describes a model for global economic growth based on physics rather than traditional macroeconomics. Looking at how energy and matter are transformed by the economy taken as a whole, it accounts for the past with a minimum of bells and whistles and provides guidance for what we can expect from the future. Instead of focusing on what should be done, it asks rather what will happen given the very general thermodynamic constraints that govern how systems emerge, survive, and grow.

    The core finding is that simply maintaining our current economic wealth requires continual energy sustenance. Like a living organism, civilization requires energy not just to grow but also to maintain its current size or wealth. All components of civilization, whether human or physical, have no innate value; instead they acquire economic value through mutual connections since these enable the circulations that define humanity. These circulations between and among us and our stuff require a consumption of energy. Viewed very generally, our total civilization wealth is directly tied to this energetic power through a constant.”

    The physics of long-run global economic growth

    “My work describes a model for global economic growth based on physics rather than traditional macroeconomics. Looking at how energy and matter are transformed by the economy taken as a whole, it accounts for the past with a minimum of bells and whistles and provides guidance for what we can expect from the future. Instead of focusing on what should be done, it asks rather what will happen given the very general thermodynamic constraints that govern how systems emerge, survive, and grow.

    The core finding is that simply maintaining our current economic wealth requires continual energy sustenance. Like a living organism, civilization requires energy not just to grow but also to maintain its current size or wealth. All components of civilization, whether human or physical, have no innate value; instead they acquire economic value through mutual connections since these enable the circulations that define humanity. These circulations between and among us and our stuff require a consumption of energy. Viewed very generally, our total civilization wealth is directly tied to this energetic power through a constant.”

    http://www.inscc.utah.edu/~tgarrett/Economics/Economics.html

    The universe exists to increase complexity, therefore, so do the humans. This is done with ever greater energy use (and efficiency) and under the dictates of the MPP. There is no choice.

    http://prosperouswaydown.com/principles-of-self-organization/empower-basis/maximum-empower/

  3. Apneaman on Fri, 14th Jul 2017 12:13 pm 

    Diesel is now better than gas, study says

    “”Diesel has a bad reputation because you can see the pollution, but it’s actually the invisible pollution that comes from gasoline in cars that’s worse,” said Hayes, 36, an assistant professor at UdeM.

    “The next step should be to focus on gasoline or removing old diesel vehicles from the road. Modern diesel vehicles have adopted new standards and are now very clean, so attention needs to now turn to regulating on-road and off-road gasoline engines more. That’s really the next target.”

    https://phys.org/news/2017-07-diesel-gas.html

    “Modern diesel vehicles have adopted new standards and are now very clean,”

    Like VW?

  4. Plantagenet on Fri, 14th Jul 2017 1:25 pm 

    “”Diesel has a bad reputation because you can see the pollution, but it’s actually the invisible pollution that comes from gasoline in cars that’s worse,” said Hayes, 36, an assistant professor at UdeM.”

    ———————–

    Someone needs to explain some chemistry 101 to Asst. Prof. Hayes. He is apparently such a dope that he doesn’t know that Diesel is also a fossil fuel, and also emits “invisible pollution”, i.e. CO2 just like conventional gasoline.

    Cheers!

  5. Apneaman on Fri, 14th Jul 2017 2:40 pm 

    Plantard, the quotation marks are supposed to “encompass” the comment, not go “”beside it. How’s that for explaining?

    You remind me of Edith on Archie Bunker – dingbat.

  6. Apneaman on Fri, 14th Jul 2017 3:00 pm 

    plantard, how’re the roads in your town? Looks like AGW consequences are taking Alaskans for quite a ride.

    ‘The permafrost is dying’: Bethel sees increased shifting of roads and buildings

    “Chief Eddie Hoffman Highway, seen on June 28, is the main thoroughfare in Bethel, and one of few paved roads. It has become a roller coaster of a ride over the past couple of years”

    “BETHEL — Along the main thoroughfare here, drivers brake for warped asphalt. Houses sink unevenly into the ground. Walls crack and doors stick. Utility poles tilt, sometimes at alarming angles.

    Permafrost in and around Bethel is deteriorating and shrinking, even more quickly than most places in Alaska.

    Since the first buildings out here, people have struggled with the freeze and thaw of the soils above the permafrost. Now those challenges are amplified.

    “What they are saying is the permafrost is dying,” said Eric Whitney, a home inspector and energy auditor in Bethel who has noticed newly eroding river banks, slanting spruce trees and homes shifting anew just weeks after being made level. “I’m just assuming it is not coming back while we’re around here.”

    https://www.adn.com/alaska-news/rural-alaska/2017/07/07/the-permafrost-is-dying-bethel-sees-increased-shifting-of-roads-and-buildings/

  7. bobinget on Fri, 14th Jul 2017 3:02 pm 

    Reuters News
    13-Jul-2017 13:10:14

    John Kemp is a Reuters market analyst. The views expressed are his own

    Chart 1: http://tmsnrt.rs/2tM4mAO
    Chart 2: http://tmsnrt.rs/2thOpza
    Chart 3: http://tmsnrt.rs/2thBJYM
    By John Kemp

    LONDON, July 13 (Reuters) – Saudi Arabia is trying to support oil prices by reducing its crude shipments to the United States in a bid to cut the amount of oil in commercial storage.

    U.S. crude imports from Saudi Arabia averaged less than 900,000 barrels per day (bpd) in the four weeks ending on July 7, according to the U.S. Energy Information Administration.

    U.S. imports from Saudi Arabia are running at the slowest rate since 2015, and the slowest for the time of year for over five years (http://tmsnrt.rs/2tM4mAO and http://tmsnrt.rs/2thOpza).

    Imports from Saudi Arabia will fall even further to less than 800,000 bpd in August, according to a Saudi industry source familiar with the kingdom’s oil policy.

    “Saudi Arabia is keen to see an improvement in the oil market and accelerate the balancing process,” the source told Reuters on Wednesday (“Saudis to cut August oil exports to lowest level this year”, Reuters, July 12).

    Saudi Arabia is cutting exports to all destinations but reducing shipments to the United States is especially important because U.S. stocks are the most visible and have the biggest impact on prices.

    The United States accounts for more than 40 percent of the commercial crude and product stocks held in the OECD and its stocks are reported weekly rather than monthly as in most other countries.

    U.S. crude and product stocks therefore receive disproportionate attention from oil traders and analysts, and can have a major impact on global oil prices.

    Changes in U.S. crude and products stocks are often (misleadingly) interpreted to reflect changes in the global supply-demand balance.

    Saudi Arabia is the largest supplier of crude oil to the United States after Canada, providing an average of 1.1 million bpd to U.S. refiners in 2016.

    By restricting shipments, Saudi Arabia hopes to reduce U.S. stocks and demonstrate to sceptical traders that the long-awaited rebalancing of the global market is finally underway.

    The strategy seems to have had some early success with U.S. crude stocks falling earlier and faster than normal so far in the second and third quarters of 2017.

    U.S. crude stocks have fallen by 40 million barrels since the end of March, compared with a drawdown of just 8 million barrels over the same period in 2016.

    U.S. crude stocks are now just 3 million barrels higher than at the same point in 2016, compared with 35 million barrels higher at the end of March.

    Most of the drawdown in crude stocks is attributable to record refinery runs but slower imports likely played an important supporting role.

    Senior officials from Saudi Arabia and the rest of OPEC are hoping U.S. stocks will continue to decline rapidly through the rest of the summer driving season.

    Saudi Arabia plans to use big stock draws to convince the oil market that rebalancing is happening and oil prices and calendar spreads need to rise.

    The strategy has a fair chance of success but it could be threatened by rising U.S. imports from other OPEC and non-OPEC members or a diversion of Saudi shipments from the United States to other markets.

    While Saudi Arabia’s crude shipments to the United States have fallen, Iraq’s shipments have risen to their highest seasonal level in almost five years (http://tmsnrt.rs/2thBJYM).

    The International Energy Agency reports compliance with OPEC’s production agreement declined sharply in June to its lowest level in six months (“Oil Market Report”, IEA, July 2017).

    OPEC output rose from Nigeria and Libya, which are not capped by the agreement, and as a result of weakening compliance among other members.

    Some of this extra crude could end up refilling U.S. storage tanks, which would undercut Saudi efforts to drain them.

    Oil traders will also be alert for any signs crude shipments are being diverted causing stocks to grow in other less visible locations.

    Beyond August, there are questions about what happens to shipments and stocks when the U.S. driving season finishes and Saudi Arabia and Iraq start burning less crude as the summer air-conditioning season winds down.

    For now, though, OPEC hopes traders will interpret a sustained draw in U.S. crude stocks as a sign the market is rebalancing and that prices need to move higher.

  8. bobinget on Fri, 14th Jul 2017 3:03 pm 

    Venezuela’s only source of cash is quickly dwindling as the country faces mounting unpaid bills, violent political protests and citizens starving due to food shortages.
    Oil makes up nearly all of Venezuela’s exports, and with the country in a full-blown crisis, oil is only thing it can sell.
    But production is down to its lowest levels since 1989 — excluding an oil strike in 2002 — according to data compiled by Rice University professor Francisco Monaldi.
    Powered by SmartAsset.com

    SMARTASSET.COM
    Production has declined 10 out of last 11 years, according to BP statistics. And in the first half of this year, it was down sharply, 12%, compared to the same time last year, OPEC numbers released on Wednesday show.
    Central to its production problem is that oil service providers, such as Halliburton (HAL) and Baker Hughes (BHGE), have cut back on pumping out oil until President Nicolas Maduro pays them back for millions of dollars in unpaid bills.
    Related: Venezuela raises minimum wage for third time this year
    Venezuela separately owes about $5 billion in outstanding debt payments to investors this year. Fears are rising that Venezuela can’t pay, and S&P downgraded the nation’s credit rating on Tuesday deeper into junk status.
    “This is much worse than we ever expected,” says Monaldi, a former consultant to the World Bank. “It really takes some special talent to destroy an economy in such a way.”
    Venezuela has more oil than any country in the world. But the South American nation is enduring a self-inflicted economic crisis. Extreme government overspending, mismanagement of natural resources and corruption pushed Venezuela into a recession in 2014.
    The country’s political opposition have staged months of street protests against socialist President Maduro, claiming he has abandoned democracy and violated human rights. Nearly 100 Venezuelans have died in demonstrations and clashes with police since late March.
    Meanwhile, Venezuela’s plummeting production means it has less money to ship in food for its people, and prices have skyrocketed for whatever food is available as the local currency has been deemed nearly worthless.
    Related: Venezuela’s unbelievable currency collapse is getting worse
    Venezuelans are starving: Those living in extreme poverty last year lost 19 pounds on average due to food shortages, according to a national poll. People are crossing the border to Colombia to buy toilet paper. Venezuelans are now the top asylum seekers in the US, ahead of citizens from China and Mexico.
    Peel back the layers of Venezuela’s oil problem, and it gets worse. While it produces 1.9 million barrels per day, it’s only getting paid for about 700,000 to 800,000 barrels per day, experts say.
    Venezuela is paying back loans from China and Russia by shipping oil for free. Gasoline also costs next to nothing in Venezuela as the government essentially subsidizes the cost for drivers.
    As oil sales dwindle, cash is drying up too. Venezuela only has $10 billion in reserves — a scary low amount. In 2015, it had $20 billion and in 2011 it had $30 billion, central bank data shows.
    “It’s really bad,” says Russ Dallen, managing partner at Caracas Capital, a firm based in Miami. “They can’t invest any money, they can’t pay their providers…It keeps circling the drain.”

  9. Hello on Fri, 14th Jul 2017 3:24 pm 

    Strange, bobinget.
    Why don’t they quickly pay back all their debts with inflated money? Should be cheap now.

    Did they make the mistake of takeing on debt in hard currency instead? Not the smartest bunch, them south americans, are they?

  10. Hello on Fri, 14th Jul 2017 3:27 pm 

    But instead of finally getting rid of tool Maduro, they flee to the US, from where they send back by inadvertly propping up the Tool.

  11. Apneaman on Fri, 14th Jul 2017 3:54 pm 

    bobinget, I haven’t been to Venezuela, have you? I have not conversed with anyone who, I know for a fact lives there either, have you? Like everyone else around here my sources are the inter-tubes and I don’t trust any American and allies corporate owned and establishment/deep state/overlords controlled/influenced/guided MSM. Do you?

    I do believe that Venezuela is a very troubled country, but I do not believe every MSM story at all. There is an underlying theme here that goes – if the socilist country is struggling then it PROVES how awesome capitalism and America are….and plenty of average internet sheeple are more than happy to spread it. Most of them could not pick out Venezuela on an map even if the names were on it.

    Abby Martin is a firecracker and very political which means she has a big bias and agenda, but I trust her as a source more than that any empire MSM bullhorn. Plus, she’s kinda hot;) Oh and she actually went to Venezuela and down on street level. It’s still second hand news and could easily be faked just like MSM and ‘white helmets’ and a hundred other NGO empire productions for the sheeple back home, so pick your poison I guess.

    Abby Martin Busts Open Myths on Venezuela’s Food Crisis: ‘Shelves Fully Stocked’

    “As part of the episode “Abby Martin in Venezuela – Supermarkets to Black Markets,” Martin enters local grocery stores, big and small, with hidden cameras to see if they are completely out of stock — as they are commonly depicted by mainstream media.

    She notes, “We just went to five different supermarkets and the shelves were fully stocked. And this is all type of neighborhoods, all types of classes. From Nestle chocolates to coco cola products, fish, meat, vegetables and fruits.”

    Speaking with Venezuelan economist Pascualina Curzio, Martin discovers that while there are food shortages in Venezuela, these are a product of an “economic war.”

    “In the past four years, Venezuela’s per capita has been 9 percent higher compared to the per capita in the last 30 years. The unemployment rate is 6.6 percent. So we can’t call it a generalized economic crisis,” Pascalina adds.

    “What we see is that there are several aggressions, focused on affecting the entire population and it has to do with market manipulation and of the economy as a whole.”

    Talking about some of the missing items from the stores’ shelves, such as toilet paper, oil, flowers — products that have “high consumption and are under the control of huge monopolies” — Curzio explains: “There is a difference between the economic crisis and the economic warfare. These products are very particular, and they have very specific characteristics. These are responsible for food lines and even illegal markets due to the scarcity being caused.”

    http://www.telesurtv.net/english/news/Abby-Martin-Busts-Open-Myths-on-Venezuelas-Food-Crisis-Shelves-Fully-Stocked-20170711-0031.html

    The lying from the empire is so ubiquitous that one example even has a wiki page. Everyone knows and no one cares.

    https://en.wikipedia.org/wiki/Nayirah_(testimony)

    The managerial class of empire – media, politicians, academia – cannot be trusted. Regardless of which tribe, left – right, they belong to at home, when it comes to legitimizing the empire, they are all on board. Even when they protest like the NYT and WaPo did for the 2003 Iraq invasion/slaughter, they put pressure on them until they cave. It’s in the interest of the empire to have Venezuela taken over and run by pro US/west interests, or at least that is how they see it.

  12. Makati1 on Fri, 14th Jul 2017 6:54 pm 

    Read into the first paragraph, hit the words “how investors can identify the lower risk stocks for long-term dividend income and potential appreciation…” and stopped.

    I do not read advertising, even disguised as an informative article. More bullshit from the Stock Market Casino Dealers and their Pimps. Their way of life is dying along with the capitalist system. So be it. The sooner the better, I think. Maybe some form of a One World Government would not be a bad idea? We shall see.

  13. Makati1 on Fri, 14th Jul 2017 7:03 pm 

    Ap, thanks for the “facts” on Valenzuela. It is obvious that most of the news on V is bullshit propaganda from TPTB in America, not facts. The “news” changes according to how high up on America’s shit list the country is and/or if it is the next CIA/NED target. I see that ‘bias’ here in the Ps with the actual conditions vs the “news” from American sources. The Ps has moved up the list because of their new prez.

    If you do not live in a country, you do not know that country. Most Americans don’t even know the country they inhabit. Maybe not even the next state. lol

  14. Makati1 on Fri, 14th Jul 2017 8:22 pm 

    ““Who controls food, controls the people, who controls energy controls entire continents, and who controls money controls the world”. – Henry Kissinger

    http://www.globalresearch.ca/food-wars-and-pharma-trailblazing-the-way-to-human-demise/5599187

    “The food war like the pharmaceutical war fit perfectly the pattern of the Dark State that masterminds Washington. They are joining the war of bombs, canons and guns. These wars show clearly that there are deeper and darker forces at play than we realize. The world population needs to be reduced drastically that the elite can live happily with the limited resources our planet will leave behind. Kissinger and the Rockefeller sponsored Bilderbergers have been advocating this for a long time. We pay no attention. They eat well. Look how old they become? That’s not by accident. Not only that, a smaller population is easier managed, enslaved than a large one.”

    The visible sign that they are wining … Obesity.

  15. deadlykillerbeaz on Fri, 14th Jul 2017 9:43 pm 

    The future of energy stretches from Texas to Alberta up to the Athabasca tar sands.

    The oil and coal there up and down the Great Plains and over to the Missouri Plateau is plentiful, the land harbors a high number of oil wells and coal mines.

    Not the whole enchilada, the rest of the planet makes the enchilada plate complete.

    Without fossil fuels, the future is bleak, a dark age that will be darker than the current dark age we are in but just don’t know it.

    Never enters anybody’s brain.

    The only real energy future is fossil fuels.

  16. Makati1 on Fri, 14th Jul 2017 10:03 pm 

    FF is not the future, DKB, famine, death and disease is. The whole global financial system is about to disintegrate and when that happens most of the world you know will be history. The new world will be more 3rd world than ever. No 1st world.

    There will be many billions of barrels of oil in the ground and giga-tons of coal, when that happens, and there they will stay, for eternity. Debt is all that is propping up the FF industry today and that is coming to an end. It will happen sooner rather than later. Wait and see.

  17. Cloggie on Sat, 15th Jul 2017 3:25 am 

    You remind me of Edith on Archie Bunker – dingbat.

    And you remind me of Meathead, the eternal, incurable 1968 leftist.

    http://tinyurl.com/y8xhe6zx

    #LongLiveArchie&Edith

    http://tammybruce.com/wp-content/uploads/2017/06/meathead.jpg

    P.S. Note that the entire thread is about oil and Venezuela and how we are all going to die, where there is a clear way out of this situation.

    #CantDoMentality

  18. Davy on Sat, 15th Jul 2017 5:42 am 

    ““Who controls food, controls the people, who controls energy controls entire continents, and who controls money controls the world”. – Henry Kissinger”

    That is something you should worry about in your food insecure Asia, makati.

  19. Makati1 on Sat, 15th Jul 2017 6:32 am 

    Davy, my food is more secure than yours or have you ignored the droughts, floods, heat spells and cold snaps at the wrong time for crops to grow and be harvested? The U$ imports at least 20% of it’s food that is not grains. It’s “food independence” depends on chemicals that come from oil wells and cost money, mega farms that rely in mono crops to be profitable, and many chemicals to keep the pests and weeds under control. When they end, and they will, it will be a different picture in America.

    Temps and weather here is the same every day, year round. They vary by about 10F from January to December.

    80s to 90s as the high. 60s to 70s as the low. Showers or a thunderstorm most days. Green and flowers year round. No wild swings or variations, thanks to the wide Pacific. Try again.

  20. onlooker on Sat, 15th Jul 2017 6:42 am 

    As we have said each region faces its own overshoot consequences. Asia is far too populated for its food/water supply. Witness this: http://www.greenpeace.to/publications/gpsea_agrochemical-use-in-the-philip.pdf
    According to the recent
    Food and Agriculture Organization of the
    United Nations (FAO)
    data, between 1961 and
    2005 fertilizer applications in the Philippines
    increased by 1000%,
    and
    From 1977 to 1987 pesticide use increased by
    325%,

  21. Makati1 on Sat, 15th Jul 2017 6:59 am 

    onlooker, you, and most here, lump every country in Asia as if they were one country. That is like saying every state in the U$ is identical in every area. Or every country in the Americas are alike. Not so, obviously. India and Bangladesh are not the Ps or even China. Japan is not Vietnam. South Korea is not North Korea, yet ALL are Asian countries.

    All countries have their problems, but the West and it’s wannabees, has the most obvious problems and the farthest to fall. That too should be obvious to anyone who can think for him/herself. The Great Leveling is in progress. Wait and see.

    BTW: you might want to update you so called facts. Yours are 10 to 30 years old. lol

  22. onlooker on Sat, 15th Jul 2017 7:07 am 

    oh and the nexus of climate change and its effect on the poor South:
    Unlike people of wealthier developed countries, the people of the developing world do not have the means to fight global climate change. They will be the first and worst to be hit. A temperature rise of 2 to 4 degrees will cause a decreased yield in agriculture and increase rural-to-urban migration that will eventually lead to political unrest in already unstable governments.

    Much of the developing world will experience climate-change induced declines in agricultural output, poorer health outcomes, disruption of rainfall patterns, and more frequent natural disasters, rendering some areas less habitable or inhabitable, and hinder poverty reduction and economic growth.

    Agriculture is one of the most important economic sectors in many poor countries,” says a report from the institution. “Unfortunately, it is also one of the most sensitive to climate change given its dependence on weather conditions, both directly and through climate-dependent stressors (pests, epidemics, and sea level rise).”
    Impacts: Rising sea levels place the Philippines in a particularly vulnerable position, and increase the threat of storm surges that inundate vast coastal regions, threatening their populations who will be forced to migrate en masse if they are to escape the effects of food insecurity and loss of shelter and livelihood that result. Manila, the country’s capital, is at particular risk due to a combination of factors: exposure to climate-related hazards, poor socio-economic factors, and low adaptation capacity. Predicted to grow by 2.23 residents by 2020, an increase of close to 20% of its population, the risks of flooding and typhoons affecting Manila threaten millions.

  23. Makati1 on Sat, 15th Jul 2017 7:15 am 

    onlooker, Did you check the timeline on those ‘facts’? When is the Ps supposed to be in trouble? 2050? 2100? Later?

    And what is the source of this article? U$M$M?

    You better look in the mirror or at least at the place you live now, not try to make someone else’ home as worse than yours. I am not concerned with 2050 or even 2040. I will be gone by then from old age. lol

  24. Makati1 on Sat, 15th Jul 2017 7:18 am 

    “Much of the developed world will experience climate-change induced declines in agricultural output, poorer health outcomes, disruption of rainfall patterns, and more frequent natural disasters, rendering some areas less habitable or inhabitable, and hinder poverty reduction and economic growth.”

    There fixed it for you! LMAO

  25. peakyeast on Sat, 15th Jul 2017 7:51 am 

    http://www.sciencealert.com/a-mini-ice-age-is-coming-in-the-next-15-years

    “We found magnetic wave components appearing in pairs, originating in two different layers in the Sun’s interior. They both have a frequency of approximately 11 years, although this frequency is slightly different, and they are offset in time. Combining both waves together and comparing to real data for the current solar cycle, we found that our predictions showed an accuracy of 97 percent.”

  26. Davy on Sat, 15th Jul 2017 8:12 am 

    makati is dreaming about climate and food security. Poor guy is in denial of how bad it will soon get in Asia. Oh, anti-Americans, when the trucks stop so will the US. I am not in denial like makati.

  27. Kenz300 on Sat, 15th Jul 2017 9:51 am 

    Investments in coal mining are dropping and investors are loosing money are companies go bankrupt.

    How soon before other fossil fuel industries begin to decline.

    What happened to the tar sands investments?

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