Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on September 20, 2017

Bookmark and Share

kinda a shame you need a spreadsheet to compete

Consumption

It might just be me in my little echo chamber, but it seems as though oil is hardly being spoken about.

There was a time – in fact, there has been many a time – when the subject was on everybody’s lips.

Either because supply was about to run out (Peak Oil) or because of its spiralling cost, the West was in panic. Our modern lifestyle looked under threat.

But today it’s off the radar and we appear to be asleep at the wheel.

Is that wise?

Yawning our way towards dystopia

There is a common theme to just about every futuristic, dystopian novel: the oil has run out. Cheap energy has gone and mankind is screwed as a result. There never seems to be any wind power or solar energy or lithium ion batteries.

I now know somebody is going to post in the comments a list of dystopian novels that contain all three. (Please do, particularly if they’re any good).

But I think you take my point.

It’s no surprise that “the oil has run out” is such a common theme. For all the advances that have been made in alternative energies, humankind remains massively dependent on the black stuff for a modern way of living.

Oil – and the energy derived from it – has made so many wonderful things possible, from planes, trains and automobiles, to heat, power, pharmaceuticals and plastic.

Indeed, given what it has made possible, you’d think we’d be worshipping oil. Instead, it is largely reviled. Not entirely without good reason, the oil industry is accused of malignly influencing political affairs both at home and abroad, of greed and corruption, and of destroying the planet. Small things, really.

We hate ourselves for our dependence on oil, for the fact that, in using it, we are contributing to pollution and worse, and yet we go on using it, because the possibilities opened up to us – by travel on a jet plane or a car, or of using a computer or life-saving medical equipment – outweigh any dislike we feel.

And so we feel guilty and resentful, and we utter negative statements towards it, even if our actual actions are otherwise.

Here’s a chart of the price of a barrel of Brent crude oil over the last five years. It’s not so long ago it was trading at more than $100.

Oil price chart

You can see the incredible collapse, which began in the summer of 2014 from $115, and ended in early 2016 at below $30 a barrel.  My keener followers will remember that not long after that, I recommended my trade of the lustrum.

But since mid 2016 – for over a year now – the world seems to have gone to sleep on oil. Oil is hardly in the news. The commentariat is not arguing about it. It isn’t a priority in government policy. Oil stocks barely feature in newsletter write-ups.

As I say, it might just be me in my echo chamber, but it is a long way from being the sujet du jour. And the price has been stuck in a range between around $42 and $56.

It’s been moving up steadily since June and is now testing the upper end of that range. From a technical point of view, the next line of resistance, if it can get through $56, is $68. Once past $68, the next stop is $90. $90 oil! That would wake a few people up.

Here’s a 20-year chart so you can see the price action since the late 1990s, when we hit the generational low of $10 – a low I doubt we will ever see again. In fact, I doubt we’ll ever even see $27 again (famous last words).

Oil price chart

You can see the epic bull market of the 2000s – from $10 to $146. That was quite something. It makes even bitcoin look sober.

But there’s now plenty of “room” for the oil price to rise to, say, $120 and, from a technical point of view, to only be at the upper end of its range. (That’s not me saying oil is going to $120 by the way).

Here’s why I reckon oil could be heading higher

When one reads about investment ideas and market commentary, one often wants hard facts. We want to know what oil demand is, what rates of production are, how big new discoveries are and so on.

If you’re a technical guy, you might want to see trend lines, sentiment readings, moving averages and measures of momentum.

The last thing you want to hear is some bloke’s got a hunch.

Well, that’s it: I’ve got a hunch.

I can start hunting around for data that “proves” my hunch right – to confirm my bias. I could tell you, for example, that global oil demand has, for the third year in a row, risen by more than International Energy Agency predictions.

Chinese oil demand is of particular note. It is growing at double last year’s pace, rising by 690,000 barrels per day (bpd) in July, with year-to-date data showing average growth of 550,000bpd, compared to 210,000bpd growth over the same period in 2016.

I can start drawing all over charts, showing that the trend is this, while sentiment is that.

But I don’t want to. It would be almost dishonest to say anything more than the truth, which is that I’ve got this nagging feeling at the back of my mind – and I have had it for a while –  that oil is getting set for a run. I don’t think it necessarily starts tomorrow, just that something is brewing.

What’s more, I don’t think that many in the investment world, the business world or the political world are ready or prepared; and a price surge could take a lot of people by surprise.

You may think me a fool to rely on hunches. But I’ve found that my instinct – that voice at the back of my mind – is often a better investor and decision-maker than I am. (I certainly wouldn’t recommend relying on other people’s hunches, by the way – they have to be yours.)

But what do you think? Do we range-trade? Are further falls around the corner? Or is oil getting set for something – and the world is asleep at the wheel?

How to play a rising oil price

There are various ways to play oil. I don’t like the exchange traded funds (ETFs) that track the oil price, as they don’t always end up tracking it as closely as you would hope. There is the spreadbetting option for those with an appetite for such things – not recommended unless you know what you’re doing, which most don’t.

There are the majors, such as BP (LSE: BP) and Shell (LSE: RDSB), which again don’t always follow the oil price as closely as you might hope, though Shell’s dividend at around 7% is quite compelling and I own it in my self-invested personal pension (SIPP).

BHP Billiton (LSE: BLT), funnily enough, given that it’s known for mining, often tracks the oil price very well (oil is its biggest product), but it is not a pure play. And owning specific companies in the oil and gas space is a risky business – there is a lot that can go wrong, as owners of Petrofac (LSE: PFC) will vouch.

Myself, I’ve gone for SPOG (LSE: SPOG) as a way to position myself for this. SPOG is the iShares oil and gas exploration and production ETF, which, as you may expect, gives you exposure to a broad range of companies involved in exploring for and producing oil and gas. If oil goes up, a diversified range of companies operating in the sector should too.

It, along with a few other goodies, is now in the locker with a sign next to it saying “do not touch”.

Whenever I write about oil, the hit count on my articles drops by about two thirds. People just aren’t interested. That, in itself, is a contrarian indicator. Will this time be any different?

Let’s see how my hunch plays out.

MoneyWeek



15 Comments on "kinda a shame you need a spreadsheet to compete"

  1. Davy on Wed, 20th Sep 2017 8:03 am 

    “What’s more, I don’t think that many in the investment world, the business world or the political world are ready or prepared; and a price surge could take a lot of people by surprise.”

    Part of this depends on if the economy holds and how fast and far renewables with EV transport integrate. It is clear the various peak oil dynamics are not on hold. There is a clear lack of investment. Depletion marches on. Unconventionals and other liquids are marginal replacements economically for high quality easy to get oil. That is one side of the rope. On the other side of the rope tugging is global economic health and a renewable transformation. Generally these discussions always treat the global economy’s health as a given. There will be average growth with some hiccups case closed they always say. Renewables are a real force of change now but have yet to become the force of change. We should take pause with both of these tensions. The oil complex is not healthy and the global economy is not stable in its late term QE and interest rate repression. Renewables have yet to explode into a full blown transformation. I think we are in a zone of the unknown with the direction of oil at least longer term.

  2. rockman on Wed, 20th Sep 2017 9:17 am 

    “We hate ourselves for our dependence on oil, for the fact that, in using it, we are contributing to pollution and worse, and yet we go on using it…” Hmm, hmm,hmm…somebody is going to get really pissed off hearing that. Especially when he follow ups with: “And so we feel guilty and resentful, and we utter negative statements towards it, even if our actual actions are otherwise.” With emphasis on “resentful” which translate to blaming anyone and everyone else for being primarily responsible despite the obvious FACT that it’s the fossil fuel consumers who DIRECTLY GENERATE the great majority of the GHG.

    They can blame the petroleum industry for providing the fossil fuels the consumers DEMAND it produces. They can blame the politicians for not passing laws that greatly restrict fossil fuel consumption despite the fact that consumers would vote those politicians out of office if they did. They can blame other consumers for using an excessive amount of fossil fuels…an impossible position for US consumers to take given the
    very disproportionate share of oil they consume. They can blame the technology creators for not providing solutions despite there are many options available but not at a price consumers are willing to pay.

    But as Pogo said many decades ago: “We have met the enemy. And he is us.”

    Which isn’t really fair to lay it 100% on the consumers since burning fossil fuels provides a better life. But some criticism could be made towards what many might classify as excessive/unnecessary consumption. And along those same lines the lack of aggressive efforts by the consumers to switch to alt energy sources. Which, unfortunately, returns to an economic issue.

  3. Outcast_Searcher on Wed, 20th Sep 2017 10:33 am 

    If technical chart reading meant anything, then technicians would be investment stars as a class.

    However, as a class, they are solidly outperformed by passive buy and hold investing, which means that after trading expenses, following active investment strategies — including advice from technical chart readers, has no value whatsoever.

    Any idiot can look at a chart and point out that the trajectory from $10 to $146 was rapid. However, “reckoning” that oil is heading higher and mentioning such charts as a reason is only statistically going to make money for the clown being paid for the article.

  4. Anonymouse1 on Wed, 20th Sep 2017 5:35 pm 

    Just can’t stop flogging that dead ‘consumer’ donkey, can you narrativeman?

  5. Plantagenet on Wed, 20th Sep 2017 5:48 pm 

    Oil prices can go higher at any time.

    But first the oil glut will have to come to an end.

    Cheers!

  6. MASTERMIND on Wed, 20th Sep 2017 7:20 pm 

    Cloggie look how BLM treats white woman?

    https://imgur.com/a/Opets

  7. Apneaman on Wed, 20th Sep 2017 9:27 pm 

    rockman, what about your Cancer industry’s multi decade, yearly billion dollar plus denial & lying campaign? What is it’s purpose? To trick the consumer. It’s no secret, yet you come on here and shop that “consumer” horseshit straight out of Heartland Institute and the other hired guns .For fuck sake y’all hired the same PR firm and lawyers as big tobacco did. Fuck you rockman. You have blood on your hands. Perhaps you can see it from your kitchen window? You don’t have blood on your hands from being a cancer extractor. Nope, it’s the denial and lying that has lead to deaths and destruction of peoples homes, businesses and the city infrastructure. Your beloved consumers make choices based on the information they have and what they have are lies from talk radio, think tanks, bought politicians and an army of true believe deniers y’all created with the propaganda. Congratulations, it has been (and still is) the most successful propaganda campaign in history. Hell half the government IS the Cancer industry or completely owned by them. It’s a slaughter. I wonder why you are still playing apologist since it’s total victory for y’all? You guys got everything and are operating with impunity, yet you are still lying snd defending. Why is that? See the destruction of your city? What’s the latest estimate? $180 billion? Good work rockman & Co. Have you been reading any of the dozens of articles of how unprepared Houston was and how the authorities let the development proceed even though they were warned by scientist and engineers what was coming? That other city engineer is a denier and he is guilty just like you. That is the other side of your denial campaign – people are not prepared, cities are not prepared, your country is not prepared and the main reason is because your denial campaign has been so successful. Big difference between responsibility and guilt. You are guilty rockman. AND you are still lying. Shame on you – SHAME.

  8. makati1 on Wed, 20th Sep 2017 9:43 pm 

    Perhaps Maria, and her followers, will blow that big hat off of the blowhard Texans as the result of their oily cancer business comes home? We can only hope.

  9. Apneaman on Wed, 20th Sep 2017 9:58 pm 

    US Says No Money for Social Programs, But ‘$700 Billion to Kill People? Yeah That We Have’

    “Note ‘where will the money come from?’ deficit trolls will be silent on this $700 billion defense spending bill.”

    “Where were the pundits and elected lawmakers who complain about the cost of providing healthcare to all Americans when the Senate voted to spend $700 billion on the military?

    Many critics were raising this question Monday after the Senate—in what was portrayed as yet another indication of bipartisan support for endless war—overwhelmingly approved the 2018 National Defense Authorization Act (NDAA), which will dump a larger sum of money into the military budget than even President Donald Trump asked for while also authorizing the production of 94 F-35 jets, two dozen more than the Pentagon requested.

    Passage of the NDAA—which this year approves a $700 billion defense budget, an annual increase of $80 billion—is something of an automated process in Washington, one that often flies under the radar and garners little opposition.”

    https://www.commondreams.org/news/2017/09/19/us-says-no-money-social-programs-700-billion-kill-people-yeah-we-have

  10. GregT on Wed, 20th Sep 2017 11:04 pm 

    “deficit trolls will be silent on this $700 billion defense spending bill.”

    Defence? Defence against what?

  11. makati1 on Thu, 21st Sep 2017 12:01 am 

    GregT, maybe defense against becoming a 3rd world country that no longer can ‘consume’ five times its fair share of resources?

    It is being pushed out of first place by other countries (Asian) which have more advantages, native resources and intelligence. All the FSofA has left is polluted, chemical infested GMO food crops, polluted water and air, and a military industrial system that can no longer even build reliable weapons at huge costs. A malfunctioning government and a navy that can not avoid colliding with huge freighters or running aground on reefs. Losers.

    If you throw in State Department and “security” costs, the number would easily double.

  12. Boat on Thu, 21st Sep 2017 2:48 am 

    The poor white man’s pain will just increase with more military spending. That’s’ how the cheeto won the election. Republican statergery. OTOH replacement parts will be needed after N Korea.

  13. makati1 on Thu, 21st Sep 2017 2:59 am 

    No
    Boat, After Korea the US will too poor to replace anything. IF it still exists. Any military action by the US against NK will result in WW3. Trumpet is just blowing smoke out of his ass.

  14. Boat on Thu, 21st Sep 2017 3:24 am 

    mak,

    If N Korea were to be nuked, the wind from war/cheeto smoke, is predominantly NW. China, Mongolia, and Russia are downstream.

  15. makati1 on Thu, 21st Sep 2017 4:07 am 

    Boat, what does wind direction have to do with anything?

    BTW: The wind today, over NK, is blowing directly north over Mongolia and Russia.

    https://earth.nullschool.net/#current/wind/surface/level/orthographic=-237.84,38.39,1953

Leave a Reply

Your email address will not be published. Required fields are marked *