The World Really is Full of Oil

John Ransom
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Posted: Mar 07, 2015 12:01 AM

Now into the seventh year of the Obama administration, what a change has been wrought in our energy security.Only half a decade ago liberals were predicting that oil production had peaked.Only last year analysts were saying that we’d never see oil below $100 again. Ever.

While the Keystone Pipeline lingers, private oil exploration and production in the United States has assured this country, for the first time in my lifetime, is the dominant player not just in oil consumption, but in oil supply, as well.

And oil price.

Analyst at UBS say the magic number is $65-$70 a barrel. Their point is that oil production in the United States has a breakeven price of $60-$65 a barrel. And since US production can better offset the production from OPEC countries than previously, the breakeven U.S. price will likely determine the overall price of oil in the market.

How did it happen? By good old fashioned U.S. innovation.

There have been shale booms in the past. My family was painfully affected by previous shale booms. But this one is permanent, thanks to technology. Just as shown way back in 1989 by Nova in the documentary The World is Full of Oil!

And that’s why liberals are so scared of fossil fuels and the Keystone Pipeline. The development has led to the best part of the recovery—jobs—and has given notable stimulus to an economy staggering under the weight of regulations.

And if I gloat a little bit today, it’s because I was right and liberals were wrong, in a "most-in-a-lifetime" way.

Here are some of the specious arguments made by the progressives against North American oil development:

Indisbelief wrote: Just throwing oil out on the market will not bring down the price. Keeping the oil here at home and causing a local glut will keep the price down. May 4th 2014-- Another Oil Train Explodes in Town; River Contaminated: Who Wants Keystone Now?

David206 wrote: Again .. You get the facts wrong ! NOT ONE DROP OF KEY STONE is for the U.S.A. All the oil is spoken for by Asian countries ALL OF IT !!!!! I fact if the pipe line is built , we will see an INCREASE of Gasoline and Diesel of at least 40 cents. Why? I'd tell ya but go look it up yourself I did. May 4th 2014-- Another Oil Train Explodes in Town; River Contaminated: Who Wants Keystone Now?

George257 wrote: As with any new technology, the first million purchasers are going to burn their fingers badly. It will be expensive until economies of scale kick in. But we have to wean ourselves off oil, unless you want the whole free world to continue funding the Muslims for the next few centuries until oil runs out anyway. – in response to Chevy Volt, Perfect Car for the One Percent, Suspends Production

Ken5061 wrote: John, it has come out that the Green River Shale Oil is still not recoverable. This came out since I told you I did not think we had found technology yet to extract that oil and it is not the same as reserves that we can use. You must have missed it. The Colorado reserves were cut by Interior because of the difficulties. Do your numbers reflect that reality or are you still in wishful thinking land? --Five Things Obama Could Do to be the Greatest President Ever, but Won’t

Here’s what I wrote back in 2012:

As I have pointed out all along, the Keystone issue isn’t about the safety of a pipeline…. The US contains well over 600 years of known reserves and that would allow the US to be a net exporter of oil. If that happens, the green economy ruse that the left has sponsored, already reeling from bankruptcies and cronyism, would collapse. It would show that there is no shortage of oil and “green” energy can not compete with fossil fuels.

Even liberals have to agree that I was right, and they were wrong.

Below you will find a report on the oil patch from my friends at Lucia Capital Management. I am not an affiliated person with Lucia Capital Management or Lucia Securities LLC.

You can watch me daily on their show Bucket Strategy Investing, which helps you put your money into short, medium and long-term buckets to help you get from here through retirement.

Oil Market Perspective

After falling 60% from a peak of $108 per barrel in mid-June, the price of U.S. crude oil (West Texas Intermediate) reached a low of $44 per barrel and has been range bound between roughly $45 and $55 during the past few months. Oil companies, investors, and even members of the Organization of Petroleum Exporting Countries (OPEC) appear to be scrambling to determine whether this is an inflection point or just a stop on the way to the bottom. While we cannot predict the future, we are taking this opportunity to put the current situation in context and provide our perspective.

The two charts below tell a great deal about the current oil price environment. Production in the U.S. peaked at an annual average rate of 9.6 million barrels of oil per day in 1970 and had declined to 5.0 million barrels per day in 2008, just as the “shale revolution” was gaining traction. Through the application of horizontal drilling and fracture stimulation technology, new supplies of oil were accessed from unconventional reservoirs such as shale. As a result, the trend was reversed, and U.S. production increased at a significant pace during the past five years, surpassing 9.2 million barrels of oil per day in early 2015.

Read more here.

This material should not be considered an offer to buy or sell any security or the provision of specific investment advice. Opinions expressed here are those of Lucia Capital Management as of March 3, 2015; are subject to change; and may or may not come to pass. Past performance is no guarantee of future results.