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Biden Proves Democrat Voters Have no Idea What They’re Voting For

More proof Democrat voters have no idea what they’re voting for. – How many Democrats who voted for China Joe Potato Head Biden thought they were voting for this when they entered the voting booth?:

Yes, friends, the dementia-addled sock puppet occupying the White House reversed President Trump’s order lowering the cost of a variety of prescription medicines on Friday, including some that are crucial to millions suffering from diabetes and allergic reactions. This from the party that claims to be the advocate for healthcare in America.

From a story at Daily Wire:

President Joe Biden’s United States Department of Health and Human Services (HHS) on Thursday stopped executive orders from his predecessor designed to significantly lower prescription drug prices for Americans, including insulin and epinephrine.

The new administration will apparently re-evaluate the executive action from President Donald Trump toward the end of March. It remains unclear if it will be reinstated.

“The HHS Thursday froze the former Trump administration’s December drug policy that requires community health centers to pass on all their insulin and epinephrine discount savings to patients,” Bloomberg Law reported Thursday. “Centers that don’t pass on the savings wouldn’t qualify for federal grants.”

“This freeze is part of the Biden administration’s large-scale effort announced this week that will scrutinize the Trump administration’s health policies,” the report noted. “If the previous administration’s policies raise ‘fact, law, or policy’ concerns, the Biden HHS will delay them and consult with the Office of Management and Budget about other actions.”

report for Bloomberg Government said the Biden administration is on a “different page” about curbing drug prices than the Trump administration, noting of the Biden team awaiting “at least a dozen lawsuits … over Trump-era moves to lower drug prices”:

Yes, the Biden people are “on a different page,” i.e., they’re reversing a policy that actually worked and will replace it either with a policy that massively increases the cost of these drugs – as the cost of every drug in America increased thanks to Obamacare – or with no new policy at all.

If you’re one of the dimwits who voted for Biden expecting a man who has been in government for half a century without ever making anything better for the American people to somehow now suddenly start making things better, you are the problem. Frankly, you deserve whatever misery he throws your way. But the millions of other Americans who aren’t complicit in this farce don’t deserve it, and that’s on you, too.

Remember this incident, in which Biden told a union factory worker that “I don’t work for you!”? Well, what part of that did you nitwits not understand?

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Democrat voters have no idea what it is they’re voting far, Part II – The people of New Mexico are suddenly all verklempt today after the Swamp’s designated Sock Puppet signed an order last week imposing a senseless 60-day moratorium on new leasing on federal lands and waters in the United States. Seems that those New Mexico dimwit voters didn’t realize that about half of the oil and gas production in their state that pays for about half of their state government each year is produced from … wait for it … federal lands, and their state is now facing a big budget gap that will only grow larger thanks to China Joe’s demented act.

From a story at Fox Business:

ALBUQUERQUE, N.M. — President Joe Biden’s 60-day moratorium on new oil and natural gas leases and drilling permits is prompting widespread concerns in New Mexico, where spending on education and other public programs hinges on the industry’s success.

Top Republicans in the state as well as local leaders in communities that border the Permian Basin — one of the most productive regions in the U.S. — say any moves to make permanent the suspension would be economically devastating for the state. Half of New Mexico’s production happens on federal land and amounts to hundreds of millions of dollars in royalties each year.

Congressional members from other western states also are raising concerns, saying the ripple effects of the moratorium will hurt small businesses already struggling because of the pandemic.

“During his inauguration, President Biden spoke about bringing our nation together. Eliminating drilling on public lands will cost thousands of New Mexicans their jobs and destroy what’s left of our state’s economy,” Carlsbad Mayor Dale Janway told The Associated Press on Friday. “How does that bring us together? Environmental efforts should be fair and well-researched, not knee-jerk mandates that just hurt an already impoverished state.”

Steve Pearce, chairman of the state Republican Party, said drilling was beginning to pick up in New Mexico’s share of the Permian Basin because of rising oil prices. But he said he’s concerned that activity could evaporate.

“I think we’re going to see companies choosing not to invest in New Mexico and take their jobs and drilling to Texas just 3 miles away,” Pearce said. “They can just scoot across the border where they don’t have federal lands.”

[End]

Chairman Pearce, a former GOP member of congress, hits on a key part of this story that New Mexico Democrat politicians like to ignore: Texas is right next door, and Texas isn’t held hostage by half of the state being owned by the feds. The Permian Basin is a massive geographic area almost as large as the entire state of Wyoming, about 3/4ths of which lies on the Texas size of the border. The impact of Biden’s moratorium on federal leasing and his coming ban on fracking on federal lands will almost certainly result in companies focusing on drilling wells in Texas and reducing their activity in New Mexico.

Whether they realized it or not, this is what New Mexicans voted for when they went 55% for China Joe. After all, it wasn’t as if he and Kamala Harris made any secret about their intentions during the campaign. As is always the case with Democrats, they always telegraph exactly what they plan to do to you – all you have to do is pay attention to exactly what they say.

New Mexicans didn’t pay attention, and so the schools and hospitals and all sorts of programs oil and gas revenues have been delivering to them will suffer, and so will the people. Biden’s attitude about it all? “I don’t work for you.”

Tough.

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U.S. Oil Industry Has Bigger Problems than Biden Fracking Ban

The U.S. oil business has bigger potential problems than Joe Biden’s promised fracking ban. There is no doubt that the Biden/Harris promise to ban hydraulic fracturing on federal lands and waters would severely hamper the nation’s oil and gas business sector.

In addition to curtailing about 20% of U.S. oil production that comes from federal leases, such a move would cause capital flight away from oil projects in the U.S., regardless of land type since it would send a signal that government policy in a Biden administration would present a high degree of risk and uncertainty. This is an outcome an already capital-strapped industry can ill-afford.

But as impactful as that potential problem would be, U.S. oil and gas producers face an even larger looming headache this morning: Uncertainty about the continuation of the OPEC+ agreement, the deal among large oil producing countries to limit output and exports onto the global market. The existence of that agreement currently has its member nations withholding about 7.7 million barrels of crude per day from the market. It is the main reason why the current U.S. benchmark price for West Texas Intermediate, which currently hovers above $45 per barrel, hasn’t collapsed back down below the $20/bbl mark.

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Fracking Ban is Just One of Many Ways for Biden/Harris to Attack Oil and Gas

Assuming that the various challenges being filed by President Donald Trump this week to election results in several states fail and Democrat Joe Biden does become the next President of the United States, the potential impacts to the oil and gas industry in the U.S. would be numerous and severe. While only one significant oil and gas-related issue was raised to high prominence during the general election campaign – Biden’s promises to ban hydraulic fracturing at various times and levels – it is a mistake to assume that that would be the only way in which a Biden/Harris Administration would impact the industry.

The first tranche of impacts will come in the form of executive orders. Like the Obama/Biden presidency before him, a great deal of President Trump’s energy-related policy has been enacted via executive orders. The obvious vulnerability of any executive order is that it usually can be easily reversed by a successor in office. Thus, the most immediate impacts of a Biden presidency will come in the form of efforts to increase regulation on the energy industry via the reversal of various Trump executive actions. Biden and Harris repeatedly promised to take these actions throughout their campaign, so we should expect a quick follow through on what amounts to low-hanging fruit.

Those likely executive order reversals include:

·        Re-entry of the United States into the Paris Climate Accords

·        Re-entry of the United States into the Obama-era Iran deal, which would free up Iran to dramatically increase its exports and potentially impact crude prices;

·        Trump’s order to end the Council on Environmental Quality’s guidance that all federal permitting decisions and NEPA reviews must consider climate change impacts;

·        Trump’s order to disband the Interagency Working Group on Social Cost of Greenhouse Gases;

·        Trump’s various orders designed to eliminate delays in federal permitting processes.

We can also expect a Biden presidency to follow through on his promises to ban hydraulic fracturing on federal lands and waters, which represent a very sizable percentage of overall U.S. oil and gas production. This can be accomplished by an order from either a President Biden or from his future Secretary of the Interior, although we should also expect Interior to follow up and attempt to frame it in the form of regulations in order to make it more of a permanent change.

It is also important to remember that Sen. Kamala Harris promised to eliminate hydraulic fracturing entirely in the U.S. repeatedly during her own presidential effort in 2019, and never really backed off of that promise during the general election campaign as Biden’s running mate. On the few occasions when she was asked about it, she was always very careful to say that “Joe Biden will not ban fracking,” and no more than that.

 

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America Is About To Have Its First Fracking Election

This has never happened before. The oil and gas business – the industry, its health and its impact on inflation and consumer prices – has always played some small role in presidential politics, at least since the oil shocks and embargoes of the 1970s. Most times in the past, the key issue surrounding oil and gas has related to the price of gasoline and what the candidates planned to do about it.

The issue of oil and gas has only arisen whenever gas prices were considered to be too high, never when consumers were benefitting from them being historically low, as they are today. Yet, suddenly this year, this key industry is playing a huge role in the 2020 presidential politics, and it is wholly unrelated to anything having to do with prices at the pump.

The issue in this election campaign is fracking, and whether or not it will remain legal should Democrat candidate Joe Biden become our next president. While this longstanding and well-regulated industrial process has hovered around the periphery of presidential politics since 2008, when the anti-development lobby decided to politicize it with a focused and highly-organized demonization campaign, it has suddenly become one of a handful of crucial issues that dominate the political landscape this year due to its job-creating and economic impacts in a single swing state: Pennsylvania.

How important is it? Early Monday morning, the Trump Campaign announced that President Donald Trump would be holding three separate campaign rallies that day. This is nothing unusual, given that the President has made a habit of holding multiple rallies each day during both of his presidential efforts. On Saturday alone he held rallies in the state of Florida, North Carolina, Ohio and Wisconsin.

What is unusual about Monday, though, is that all three of the Trump rallies will be held in Pennsylvania, which has become perhaps the single most crucial swing state in the 2020 election. Biden is also paying special attention to the Keystone State, holding events there on Friday and Saturday, and sending both ex-President Barack Obama and Senator Bernie Sanders there to campaign on his behalf over the weekend.

Pennsylvania was certainly a key swing state in 2016, but its importance was equaled by Florida, Wisconsin, Michigan and North Carolina as the race played out. This year, though, it has become increasingly difficult to see how either major candidate can prevail in the Electoral College without having Pennsylvania’s 20 electoral votes included in his total.

All of which explains why the issue of fracking and its continued legal deployment has become so elevated in the national discourse this year. Pennsylvania is, after all, the fulcrum for the development of the enormous Marcellus Shale/Utica Shale resource plays, the largest natural gas reserve in the Western Hemisphere.

 

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Gavin Newsom’s Unbridled Energy Hubris

Three big oil and gas-related stories this week were all interrelated with one another, though few really understand that to be the case. Those stories were:

 

 

For Governor Newsom, banning hydraulic fracturing – or “fracking” as it has come to be called – in his state is a relatively simple matter in what has become, for all intents and purposes, a one-party state. All he has to do is convince his overwhelming majorities in both houses of California’s state assembly to pass a bill mandating that all fracking operations cease within the state’s borders by a date certain.

Such a move would of course eliminate thousands of oil and gas-related jobs in the state, but most of those are concentrated in Republican Kern County and the surrounding parts of the Central Valley, over which the assembly’s Democrats would have little concern. Besides, they can all just respond to Republican and industry complaints with the Obama-era pretense that all those lost jobs and more will be made up by the heavily-subsidized wind and solar industries. It will be akin to former President Obama telling West Virginia coal miners and Ohio steel workers that their jobs are never coming back and they should all go learn to code.

Replacing the state’s millions of gas and diesel autos with electric vehicles will be far more complicated. Newsom’s order gets that ball rolling by requiring the California Air Resources Board to implement the phaseout of new gas-powered cars and light trucks in the coming years, and also require medium and heavy-duty trucks to be zero-emission by 2045 where possible. Sounds simple, right?

But here’s the thing about all of that: The generation and provision of energy is basically a zero-sum game. When you ban one energy source, you must figure out a way to generate the same amount of energy by another source. You either do that or you accept the reality that energy will become scarce, and thus far more expensive so that consumers demand less of it, and write off the negative economic consequences that will inevitably result.

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Did BP Really Say That Global Oil Demand Has Peaked? No, Not Really.

During a panel discussion in which I participated recently with three energy experts, the moderator asked us if we agreed with the recent projection by British oil giant BP that oil demand may have already peaked during 2019. Everyone on the panel answered with a firm “no.”

From my own perspective, I gave that answer in large part because all of the dozens of previous “peak oil” predictions – whether from the supply side or the more recent demand side reasoning – have turned out to be entirely wrong, often in hilarious fashion. From an historical perspective, it just seems like the safer position to take.

That’s not to downplay the position assumed by BP, whose internal expertise is undeniable. But it’s key to note that much of the media coverage the company’s findings have received portrays BP’s position as being far more absolute than it really is. The company’s position on “peak oil” is in fact highly-qualified.

As a part of its recently-released Global Energy Outlook study, the company ran three scenarios based on differing assumptions regarding how rapidly governments around the world would attempt to move to adopt emissions-reducing policies and subsidize renewables. The cases were labeled “Rapid” (the most aggressive assumptions), “Net-Zero” (assuming most governments would adopt ‘net-zero by 2050’ policies) and “Business as Usual”, in which progression would continue on the slower path seen to date.

In a COVID-19 hampered world in which governments across the globe are teetering on the brink of insolvency, the “Business as Usual” scenario certainly appears to be most likely to persist for the time being, given the multi-trillion dollar costs involved in the other two cases. Under that scenario, BP in fact projects that global demand will not only recover to pre-COVID levels seen late last year, but continue to grow through the year 2030.

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Biden Tries Again to Clarify His Fracking Stance, and Fails Again

The Biden/Harris ticket has been the source of a great deal of confusion during this campaign related to the candidates’ stances on the subject of hydraulic fracturing. Senator Kamala Harris firmly stated several times in the past that she is absolutely in favor of banning fracking, but has been attempting to walk all of that back in recent weeks as the polls have tightened in oil and gas states like Pennsylvania and Michigan.

Former Vice President Joe Biden, meanwhile, has been all over the place on this issue, promising repeatedly to ban fracking in whole or in part during the primary season, and more recently joining Harris’s efforts to modify that position in order to shore up his chances in those and other crucial swing states. Biden was asked the question again by an undecided voter during his CNN town hall appearance in Moosic, Pennsylvania this week, and again attempted to modify and clarify his position. Unfortunately, a reading of the transcript of that exchange doesn’t really clarify much at all.

Here is that transcript:

QUESTIONER: Good evening Mr. Vice President, Mr. Cooper. With the abundance of natural gas in northeast Pennsylvania. Do you support the continuation of fracking safely and with proper guidelines, of course, and growing the industry (garbled) additional jobs to our region?

BIDEN: Yes, I do. I do. In addition to that, we can provide for right now, as you know, for thousands of uncapped wells because a lot of companies gone out of business. Whether they’re gas or oil facilities, we can put to work right away 250,000 people from iron workers and other disciplines, making union wages. Capping those wells that are leaking methane and their danger to the community. And so, not only do I continue to support it.

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Chesapeake Energy Finally Succumbs With Chapter 11 Filing

One of the longest-running dramas in corporate oil and gas history finally came to a climax on Sunday when management for Chesapeake Energy announced it would seek Chapter 11 protection under the U.S. bankruptcy code. The company has traveled a long and winding road to reach this point.

Rumors about the company’s pending bankruptcy have run rampant over the past year as it teetered on the financial brink. But in reality, Chesapeake’s financial troubles go back much further, to the early years of this century, when founder and former CEO Aubrey McClendon famously made a bet on natural gas continuing to be a scarce resource in high demand whose price would remain strong for decades. Based on that market view, the company then went on a buying spree for the next several years, buying up natural gas assets and companies at very high prices. In one acquisition in which the company I worked for – Burlington Resources – was the second high bidder, Chesapeake’s winning bid was $3 per MMBTU equivalent higher. That’s a lot of excess capital deployment.

None of his assumptions about the future for natural gas turned out to be accurate, of course, but it must be pointed out that McClendon certainly was not alone in making them. For example, I personally played a leadership role in a 2003 National Petroleum Council study which attempted to project natural gas supply, demand and prices through the year 2025. The study was led by ExxonMobil and Anadarko Petroleum (acquired last year by Oxy), and included participants from many other industry companies, the Energy Department, the Department of Interior and environmental NGOs.

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The fundamental conclusions and projections of that study basically supported McClendon’s view of natural gas remaining a scarce resource with pretty high commodity prices as far as the statistical models we used could project. It was in fact the prevailing common wisdom in the industry at that time.

The NPC study projected that imports of Liquefied Natural Gas (LNG) would in fact have to make up an increasingly high percentage of U.S. natural gas supply. That incredibly wrong projection led to the building of a series of LNG import facilities in the U.S. and helped compel ExxonMobil to invest billions in its own fleet of new LNG tankers to help supply America’s coming needs.

While other operators held similar views about the future for U.S. natural gas, Chesapeake was without doubt the most aggressive in terms of pursuing new reserves. In addition to arguably over-paying for acquisitions of other companies or their assets, Chesapeake became infamous for radically driving up lease bonus prices in every new shale play, in the process running up a prodigious level of corporate debt. At one point, Chesapeake’s corporate debt exceeded that held by ExxonMobil, a company many times its size.

As natural gas prices collapsed in the late ‘00s, McClendon next turned to sales of his own company’s assets or portions of working interests in big play areas as a means of continuing to finance and pay down that debt. He sold shares of the company’s working interests in the Barnett, the Eagle Ford, the Marcellus and the Haynesville to various other players, like BP and CNOOC, but every sale also meant less and less cash flow coming into the company itself. Many in the business during that time joked about it being a sort of a pyramid scheme in which the debts would ultimately end up outstripping the company’s income and ability to pay.

 

 

 

 

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$70 Oil by the end of the Year? It Could Happen.

What a difference three months makes. Three months ago today, Russia and Saudi Arabia had just embarked on a completely irrational effort to flood the global oil markets after Russia had basically blown up the OPEC+ supply limitation agreement when it balked at making an additional few hundred thousand barrels of oil per day (bopd) in cuts.

But on Saturday, those same two big producers cajoled the rest of the countries participating in OPEC+ to extend the deep, 9.7 million bopd May/June supply limits through the end of July. The cuts had been scheduled to scale back to a combined 7.7 million bopd on July 1. Reuters reports that Saudi Arabia has now reduced its daily production by 2.24 million bopd from its market-flooding level in April, while Russia – which could not stomach a reduction of about 200,000 bopd back on March 4, has cut its own daily production by more than 900,000 barrels.

It’s pretty amazing how single digit – and even momentary negative – crude prices will change an oil minister’s perspective on what constitutes an appropriate level of output.

The OPEC+ members also pledged to monitor and reassess appropriate supply levels on a monthly basis, beginning with their next meeting, which is scheduled for June 18.

Combined with dramatic reductions in crude output in the U.S. and Canada and a more-rapid-than-expected recovery in demand, the extension of the OPEC+ May/June quotas sets the stage for a more rapid re-balancing of the global markets. Bjornar Tonhaugen, Rystad Energy’s head of oil markets, said that “Today’s deal is a positive development and, unless a second Covid-19 wave hits the world, it will be the backbone of a quick recovery for the energy industry. That is due to the oil stocks decrease that we will see as a result of the production deficit. Stocks are now what keep prices at relatively low levels and the quicker they fall, the faster we will see prices rise.”

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Oil is not the Only U.S. Commodity in Trouble

Guest Piece by Nathan Kaspar

A good deal of this audience follows DBDailyUpdate for updates on the oil market. Much beyond Shale Oil, the broader commodity market is very sick. No, not with COVID-19, but from the ongoing lock-down of the national economy. President Trump took action yesterday to address meat packing plants staying open, but food production is much more complex than simply slaughtering animals and packaging the meat to go to the grocery store.

The Oil and Food industries were forever linked in 2005 with the passage of the Renewable Fuel Standards. This mandated certain blending levels of ethanol into our gasoline. While support of this is key if you are running for president and want to win the Iowa Caucus, turning half of the nation’s corn crop into fuel is dubious even if the government weren’t largely subsidizing it. Over the last 15 years though, the food markets have largely stabilized and reached “new normal” for how, how much, and what crops we farm to support the ethanol, human food, and animal feed industries.

The problem with this food and fuel link means that when there is a problem on the 90% side of the gasoline equation, the 10% side (Ethanol) is going to get cracked like a whip. Just like our nation’s oil producers are stuck with a surplus of oil with nowhere to put it, Ethanol producers also have no place to store additional production. As “stay at home” orders went from 2 weeks to months, Ethanol producers have had to change from slow-down, to shut-down, to extended furloughs. This is having a dramatic impact on food commodity prices, and it isn’t for the better.

Those prices can be found at the chart linked at the bottom of this piece.

The connection between ethanol and commodity prices is through distiller’s grains (both wet and dry). The byproduct of ethanol production is extremely high in protein and fat, and is sold in it’s wet form to feed lots or dried and sold to feed producers and dealers. These animals can’t simply eat whole corn in their diet as a substitute, so the result is that any commodity with protein in it is trading MUCH higher than last year.

The numbers for DDGS on the linked USDA chart are not valid. While there may be some long term flex contracts being fulfilled, most traders are simply listing (NQ) for DDGS. Most feed companies have been told that they can’t even think about taking delivery of DDGS until the 1st week in June at the earliest.

Some examples from the USDA chart of note:

Cottonseed Meal. $320/ton now vs $260 a year ago.

Bone meal is $335/ton vs $230 last year.

Corn Gluten Meal (byproduct from making corn syrup) is $582 vs $400 last year.

Wheat Mids, $140 vs $95 last year.

Corn prices, however, are terrible (trading at $102 vs $128 last year). This is only going to get worse as the ethanol shutdown continues. With half the nation’s corn crop going to ethanol every year, take 2 months out of that production and that’s 1/12th of the nation’s corn that is going to sit in a silo. Commodity prices are only starting to reflect it, and the cost of feeding animals is going to get much, much worse before the situation resolves itself.

This could very likely have long-term ripple effects through the harvest season in fall through November. Just in time for the election.

COVID-19 will likely be gone by the summer, but the shock-wave from the (largely unjustified IMHO) economic shutdown of the entire country is going to be felt for years.

If you have freezer space, put some steaks in it now. The people who are feeding the animals you hope to eat in 3 or 4 months are looking at the feed prices and trying to decide to sell off now, or allow their animals to be malnourished. Feed Lots with captive animals are having to pay exorbitant prices for their feed, and aren’t going to be able to pay ranchers enough at market to justify putting the cows on the trailer.

The time to completely re-open markets was 3 weeks ago. If you have the ear of a politician who supports the lock down, you might want to let them know how they are killing the food supply.

https://www.ams.usda.gov/mnreports/ms_gr852.txt

Nathan Kaspar

 

 

 

 

 

 

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Negative Crude Oil Prices: Not A Matter For Celebration

The NYMEX price for West Texas Intermediate (WTI) fell into negative territory on Monday, the lowest level ever recorded, and the only real question is why was anyone surprised by this turn of events?

Think about it: As much as we like to talk about renewables and the Green New Deal and all the other pop-culture things, the global economy still runs by and large on oil and natural gas. Demand for oil is entirely dependent on economic growth. As the U.S., China and well over 150 other countries have gone about closing down vast swaths of their economies to try to deal with the COVID-19 pandemic, some are estimating that economic growth in the U.S. for April could be negative 25-30%, and May isn’t looking to be much better.

The result of this negative economic growth has very predictably been a collapse of demand for crude, with some experts again estimating it to be in the negative 25-30% range for April. The consequence of that particular train wreck is that tens of millions of barrels of produced crude with nowhere else to go are flowing into storage facilities in the U.S. and across the globe. Given that the NYMEX price for WTI is set on a forward month futures contract, that negative price we saw on Monday is basically a projection of the market’s belief that U.S. storage will be completely full by May 20.

When that happens, many producers without market leverage will be faced with a choice between shutting in their wells or actually paying someone to take their oil away. We have to remember that wells drilled into some reservoirs can lose pressure and be difficult or impossible to restart once they have been shut-in.

Even worse, that negative price in effect becomes a bleak leading indicator of what traders think the state of the U.S. economy will look like in late May barring drastic changes. Looking at the gradual, staged plans most state governors are now rolling out to govern the reopening of their respective economies, no such drastic changes appear to be in the offing. Thus, we should expect these negative or single-digit prices for WTI to linger for days or even weeks before beginning to recover.

Read the Rest at Forbes.com

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Texas Oil Regulator Poses The Fundamental Question: “How Do We Start?”

After taking more than 10 hours of verbal testimony from more than 50 witnesses at Tuesday’s hearing, the three members of the Texas Railroad Commission tabled any decision on whether to move to limit oil production from Texas wells through its power of prorationing. During the course of the hearing, Commissioner Christi Craddick hit on the fundamental impediment that will likely prevent the RRC from any quick implementation of limits: There is no institutional memory on how to do it.

“We don’t know how to do it at the agency anymore,” Craddick said to one witness who was around during the last time the RRC enforced prorationing back in 1972. “Do we start on Jan. 1? Where do we start? How do we start?”

Exactly. As much as many struggling independent producers would like to think the Commissioners possess some magic bullet power that would boost prices and help them survive the most severe oil industry downturn in modern times, reality tells a different story. No one working at the RRC today was there in 1972, and even if they were, the industry the Commission regulates has fundamentally reinvented itself at least half a dozen times since then. The Commissioners and their current staff can read all the history books on the market about the golden age of prorationing, but that wouldn’t be much help to them in implementing new production limits soon.

Commissioner Craddick’s mention of a possible January 1 date for trying to implement the change is very telling. If professional industry analytical firms like Rystad EnergyIHSMarkit and Wood MacKenzie are accurate, the immediate crisis in global oil over-supply will have been resolved well before then, and oil prices should be well on their way back up to higher levels. It is equally likely that dozens of Texas oil producers will have been forced into bankruptcy in the meantime.

Another potential logical date of implementation would be September 1, which is the start of Fiscal Year 2021 for the Texas government. Even if the RRC currently possessed the budget and staff to meet that quick goal (it possesses neither) it is quite likely that the Texas industry will have already lost upwards of 2 million barrels of daily oil production by that time due to dramatically-lowered drilling activity and voluntary shutting-in of production.

Then there is the other practical limiter that the commissioners must consider: The budget. The Texas government famously operates on a two year budget cycle, with the legislature meeting for 140 days in odd-numbered years to make biennial adjustments. The RRC is currently operating under a budget that does not expire until August 31, 2021. Any upward adjustments to that budget designed to enable the Commissioners to hire in additional staff and build new computer systems to implement and police prorationing would have to be authorized by a special session of the Texas Legislature, subject to a call by Governor Greg Abbott.

Think of how unlikely that is to take place at a time when Texas is currently functioning under an executive order to avoid gatherings of more than 10 people due to the COVID-19 pandemic. Also consider how unlikely Gov. Abbott and the legislature would be to agree to increase any agency’s budget during this time of massive economic destruction.

Read the Rest at Forbes.com

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OPEC+, G20 Produce A Very Dim Light At The End Of A Long, Dark Oil Price Tunnel

After the OPEC+ countries produced an oil supply reduction agreement on Thursday that amounted to a half-measure at best, industry observers had pinned some hope on a firm commitment to further cuts coming from G20 call that took place on Friday. Those hopes were not fulfilled, as the G20 communique included only vague language indicating those nations would work towards “market stability.”

The language in the comminique reads as follows: “We commit to ensure that the energy sector continues to make a full, effective contribution to overcoming COVID-19 and powering the subsequent global recovery. We commit to work together in the spirit of solidarity on immediate, concrete actions to address these issues in a time of unprecedented international emergency. We commit to take all the necessary and immediate measures to ensure energy market stability.”

In this political season in the U.S., that reads like issue-specific talking points from a candidate trying to say something to placate the public and media without really taking either side of the issue.

Leaving matters even more up in the air, Mexico refused to commit to its full share of the OPEC+ cuts, saying it could only reduce its own production by 100,000 barrels of oil per day (bopd). U.S. President Donald Trump intervened to commit to his country to supporting Mexico’s part of the deal by supplying 250,000 bopd in cuts of its own, but left the process of how he would achieve that level of firm supply reduction unclear. This is a key question since the national U.S. government has very limited power to force firm reductions in production by the private companies that operate all wells in the country.

Canada, which has not been a participant in any previous efforts to control supply, also remained non-committal in terms of committing to any firm reductions of its own.

Read the Rest at Forbes.com

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The OPEC++ Deal: Calling it a Half-Measure is an Exaggeration

Let’s be honest: The so-called OPEC++ agreement to cut 10 million barrels of oil per day from global crude oil supply is a half-measure. Really, with Rystad Energy reporting that demand for oil will drop by 27 million bopd from January 1 levels during April, calling it a half-measure is an exaggeration.

Even this half-measure has still not been finalized, as Mexico’s government still has not committed to holding up its end of the bargain as of this writing on Friday morning. So, anything could still happen. All of which explains why the oil markets reacted negatively to the OPEC++ announcement, with oil prices dropping by more than 15% in just a few hours.

But here at least are the parameters of the agreement that are being reported Friday morning:

– OPEC++ (the OPEC nations plus Russia, Mexico, Canada, Brazil and several others) agree to cut 10 million barrels per day of exports from April through July;

– The cuts drop to 8 million bopd from August 1 through December 31;

– The cuts further fall to 6 million bopd beginning January 1, to continue for the next 16 months;

– The cuts include no formal contribution from the U.S. oil and gas industry.

President Donald Trump will discuss his views of America’s contribution to a reduction in global supply in a call involving the Group of 20 – or G20 – on Friday.

 

Read the Rest at Shalemag.com

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Russia’s Skepticism Over U.S. Oil Production Cuts Is Well-Grounded

Bloomberg reported Wednesday that Russian oil representatives are expressing skepticism about the potential for the the U.S. oil industry to participate in global deal to cut crude production in a real, sustaining way. That skepticism is well-grounded in reality.

With the Trump Administration thus far offering only what it calls “automatic” cuts that will take place in the U.S. as drilling activity drops and oil wells are shut-in as the result of low demand, Russian government spokesman Dmitry Peskov told reporters, “You are comparing the overall demand drop with cuts aimed at stabilizing the global market. These are completely different things.”

He’s right.

The problem is, as I pointed out over the weekend, is that, absent quick and certain action by regulators in Texas and other states or an emergency declaration by the Trump Administration designed to shut down production in the Gulf of Mexico and on federal lands, any U.S. contribution to a global supply reduction deal must by law be market-based, and thus, temporary. Unlike Russia, Saudi Arabia and many of the OPEC nations, the U.S. oil industry consists of thousands of companies competing in a free market, and the national government cannot cause production to rise or fall on a whim. The situation is further complicated by the fact that any such move by the federal or state governments would be politically controversial and opposed by certain segments of the U.S. industry itself.

Today In: Energy

There is little doubt that, should current market dynamics persist into the third and fourth quarters of this year, overall U.S. crude production will drop dramatically, with Citigroup, Inc. projecting it to be down by over 1 million barrels per day by October. Frankly, that seems to be a conservative estimate. The trouble in the context of this envisioned global agreement is that, once demand is to a large extent restored, the U.S. industry would simply come roaring back to fill the void, absent some artificial governor on its activities.

Read the Rest at Forbes.com

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State Regulators Hold The Key To U.S. Participation In A Global Oil Supply Deal

The energy media was filled with speculation on Friday and Saturday about how much higher crude prices might spike on Monday as OPEC and Russia prepared to hold an emergency conference call meeting that day. That speculation has now evaporated as the call has been postponed, now scheduled to take place on Thursday.

As the Wall Street Journal reported on Sunday, “Saudi Arabia and Russia have said privately they are unlikely to cut oil output unless North American producers join in.” While Canada has signaled its willingness to be a part of a larger, global approach to cutting supply, it is unclear how exactly officials from Russia and Saudi Arabia envision the United States joining the party.

I’ve written about this several times in the past, but it deserves repeating here: America is simply not like these other countries. It is called the “United States” for a reason. The federal government of the United States has no existing authority to just cause oil wells to be turned off and on at the snapping of a president’s fingers.

Yes, as we saw in the wake of the tragic Macondo blowout and spill in April, 2010, a president can declare an environmental emergency and cause all production to be shut in in the Gulf of Mexico. But beyond 3 miles of the coastline (roughly 12 miles offshore Texas) the Gulf of Mexico is a federal province. The order issued on May 27, 2010 by President Barack Obama to shut-in Gulf of Mexico production applied only in waters of 500 feet or more in depth, limiting it to areas safely within the federal province. In this way, he avoided challenges from state governors that would have certainly resulted had he attempted to shut down the entire Gulf, including all state waters.

This is what the United States calls “federalism,” and it is a concept that leaders in many other countries appear to have a very difficult time grasping. Given that the great preponderance of U.S. oil production comes mainly from beneath state and private lands, solving the conundrum of any U.S. participation in any global agreement to limit oil supply will necessarily involve participation from key state regulators.

In states like Texas, North Dakota, Oklahoma, Wyoming and New Mexico, which together are producing the preponderance of U.S. crude oil, regulatory bodies possess various authorities to limit production within their state borders. Those states combined to produce about 68% of the oil produced in the U.S. in January, the latest month for which the U.S. Energy Information has data. Another 15% was produced in federally-owned waters in the Gulf of Mexico and off the Pacific coast.

Thus, at least in theory, roughly 83% of U.S. oil production could be artificially limited by the federal government and state regulators on a coordinated basis. It is important to note that this kind of coordination is the only real way for the U.S. to become a meaningful part of any such deal.

Read The Rest at Forbes.com

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Putin Is Ready To Cut Oil Supply, But Demand Destruction Still Grows

Russian President Vladimir Putin said on Friday that, after sending the oil markets into a massive crash a month ago by blowing up the OPEC+ exports limitation agreement, his country is now ready to work with OPEC and other countries to implement far deeper cuts to crude production than OPEC+ had ever envisioned.

Speaking in a televised video conference, Putin proposed an arrangement that would result in removing 10 million barrels of crude oil per day from global supply. As reported by the Khaleej Times, “Putin’s dramatic change of tack from his unyielding stance of non-cooperation with the Opec in further output cuts came in the wake of a truce brokered by US President Donald Trump ahead of the upcoming Opec plus meeting scheduled for April 6.” The price for West Texas Intermediate closed at $28.34 per barrel on Friday, up by 40% since Wednesday, when news of Trump’s engagement with Putin and Saudi leader Mohammed bin Salman became public.

Has President Trump, the famous deal-maker, worked a deal that will save the U.S. domestic oil and gas industry? Let’s don’t get ahead of ourselves. While a global deal that would remove 10 millions barrel from daily oil supply would certainly help firm up oil prices, we have to remember that the effort by Russia and Saudi Arabia to flood the market only impacted the supply side of a two-sided equation. Crude prices had already dropped by more than 30% into the low-$40 range in early March before OPEC+ blew up, thanks to massive global demand destruction caused by the COVID-19 pandemic.

With the U.S. intentionally shutting down its own economy during March in a strategy to slow the spread of the virus, that demand destruction has only intensified over the past 30 days, with some projecting as much as 25% of world-wide demand for crude oil having been lost, or about 25 million barrels per day. We should also realize that, with so much anticipation now focused on it, if the upcoming emergency meeting of the OPEC+ countries should somehow fail to bear fruit along the lines proposed by Putin, then the price will come crashing back down.

And even if a new deal does get done, it will only address one side of the equation. There will still be much work to be done to return the domestic oil and gas industry to some level of health.

Read the Rest at Forbes.com

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The Shale Daily Update – 4.3.2020

Here are 10 things you need to know about oil and gas for April 3, 2020:

Trump calls on Russia and Saudi Arabia to cut oil production – Excerpt:

The Trump administration is pressing OPEC to hold an emergency meeting as early as next week to try to end the standoff in the oil market that has threatened to cripple the U.S. oil industry, three industry and government officials familiar with the talks said.

The U.S. pressure is aimed at persuading Saudi Arabia — which has also called for a meeting — and Russia to declare a ceasefire and reverse the export increases that have drowned the global market in crude even as the coronavirus pandemic has decimated international demand.

The White House has not yet decided who, if anyone, it would send to a possible OPEC meeting next week, the industry and government officials said. Candidates included Secretary of State Mike Pompeo, Department of Energy Secretary Dan Brouillette and Trump’s son-in-law and adviser Jared Kushner, the people said.

Oil Extends Gains As OPEC Leaders Call Emergency Meeting To Discuss Trump Production Cuts – Well, guess the pressure from the President worked, as OPEC called a special meeting overnight. The cartel will hold its meeting next week via “emergency teleconference,” which one supposes must be more urgent than just your ordinary, everyday OPEC teleconference.

OPEC+ Debates Biggest Ever Cut as Virus Destroys Oil Demand – It’s worth noting that Russia’s oil minister denied the narrative told in this New York Times report, but Russia says all sorts of things that end up not being accurate. Let’s hope this is one of them.

 

Read the Rest at Shale Magazine

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Why Does Joe Biden Ignore Fracking Science ?

Today’s Campaign Update, Part II (Because the Campaign Never Ends)

Joe Biden and his fellow Democrats are fond of pointing fingers at others and accusing them of ignoring science. They resort to this canard whenever they are trying to avoid having to form a rational, fact-based argument around “climate change,” but they like to use it as a crutch against logic on other topics as well.

But in Sunday night’s debate, when Biden once again demonized hydraulic fracturing – or “fracking” – and promised his administration would invoke a “no new fracking” policy should he actually stumble into the White House next January, it was Biden and no one else who was ignoring real, actual science.

Ironically, in ignoring the actual science around the very safe, well-regulated industrial process of fracking, Biden was ignoring the advice of the senior officials who held regulatory sway over oil and gas-related activities while he served as Vice President. These officials include, but are far from limited to:

Steven Chu, Stanford PhD. Nobel Prize Winner (Physics) DOE Secretary

U.S. Senator Ken Salazar, (Juris Doctor from University of Michigan) DOI Secretary

Sally Jewell (Mechanical Engineering, University of Washington) DOI Secretary

Gina McCarthy (Master of Science in Environmental Health Engineering and Planning and Policy, Tufts University) EPA Administrator

Lisa Jackson (Master of Science in chemical engineering from Princeton University) EPA Administrator

Each and every one of these cabinet-level appointees by President Barack Obama testified and commented on the record on multiple occasions throughout the Obama/Biden administration that hydraulic fracturing was a safe and well-regulated process that offers no threat to groundwater and produces very little air emissions. These senior Obama-era officials were literally forced to make these admissions after spending years in the conduct of a vain search for examples of fracking polluting groundwater or releasing major, harmful air emissions.

The effort at the EPA rose to such hyperbolic levels that one EPA Region 6 administrator, former SMU professor, Dr. Al Armendariz, was removed after his allegations of groundwater contamination by Range Resources were proven to be false. However, that proof did not prevent the State of New York from using Armendariz’s findings in its own doctored report that was used to justify banning fracking within its state borders.

Mr. Biden loves to talk about his years of serving as Vice President to President Obama. Yet, when it comes to fracking and the science his own administration developed and communicated during those 8 years in office, the former VEEP seems to have developed a mental block.

But no worries – we will continue to remind him – and you – of the real, extremely well-developed body of science that surrounds this safe and well regulated industrial process. Because facts are stubborn and important things, especially during troubling times such as these.

That is all.

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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For the U.S. Oil and Gas Industry, the Time for Alarm Has Arrived

Today’s Energy Update 

I’m no fan of alarmism, whether it be about energy, the environment or any other subject, but the situation for the domestic oil and gas industry has grown somewhat alarming over the past two months. Since early January the S&P Oil & Gas Index has plunged 32%. Investors appear convinced not just that there is oodles of oil in the world but that the spread of Coronavirus brings the risk of economic flatlining in the biggest growth market for oil — China.

With the virus set to spread and the OPEC+ group running out of options to contain the oil glut, the price of West Texas Intermediate (WTI) crashed through the important $50 level this week, and promises to slide further. Chevron yesterday sent home 300 workers in London over virus fears. Thus, a year that began with a fairly promising outlook is rapidly devolving into one that will present a fight for survival for some domestic producers.

The statement on Tuesday by Dr. Nancy Messonnier, an official at the U.S. Centers for Disease Control and Prevention (CDC), that spread of the Coronavirus in the U.S. was “inevitable,” and that citizens here should begin preparing for an outbreak will certainly work to further inflame the markets. President Donald Trump has reserved television time for a statement designed to calm the situation on Wednesday night, but it could come too late to prevent further disruption in the commodity and financial markets.

Meanwhile, the U.S. market for natural gas remains chronically over-supplied with no real relief in sight. Although the NYMEX price per MMBtu has remained fairly stable during the first two months of the year, it is stable at a price that is far too low for many natural gas producers to remain profitable.

All of these factors now combine to create a precarious situation for heavily-leveraged companies as they head into debt re-determination season. Chesapeake Energy is a good example. When I wrote about that company’s long, difficult struggle to survive last November, Morgan Stanley had just lowered its price target for CHK stock from $2.25 per share to $1.25.

But it isn’t only independent producers who are finding the current market conditions to be challenging: Even ExxonMobil, despite its prime position in the Permian Basin and major international discoveries over the past two years, is experiencing a disturbing rate of value destruction. As noted by Bloomberg, XOM stock dropped to a 15-year low on Monday and fell further on Tuesday, “just over a week before Chief Executive Officer Darren Woods is scheduled to present the oil explorer’s long-term strategic plan to investors and analysts.” For the year, XOM is now down by almost 25%.

Read the Full Piece Here

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Democrats Present a Stark Reality for the Oil Industry in 2020 Elections

The time has come for people in the oil and gas business — especially its senior executives and those who do government affairs work within the larger companies — to wake up to the reality of the Democratic Party as it exists today, as exemplified by its current crop of presidential contenders and caucuses in both houses of Congress.

Simply put, this is not your father’s Democratic Party.

Gone are the days when there existed a subset of fairly moderate Democratic members of Congress in both the House and Senate who could be classified as strong supporters of the oil and gas industry. There are no more Mary Landrieus in today’s United States Senate, nor even a Heidi Heitkamp to be found. In the House, you still have one identifiable Democrat — Texas Rep. Henry Cuellar, who can be said to be a real supporter of the oil and gas industry, but that’s pretty much it. And even Rep. Cuellar was so cowed by Speaker Nancy Pelosi that he cast a “yes” vote to impeach the most pro-oil and gas president in U.S. history on the flimsiest grounds imaginable in December.

Gone are the days when a startup industry trade association, America’s Natural Gas Alliance (ANGA), could be effective by hiring a former Clinton operative to be its president and hiring a raft of pro-Democrat contractors to shape its messaging. ANGA, created at the outset of the Obama Administration in early 2009, was able to quickly become a force for promoting the benefits of natural gas using that model a decade ago. A decade later, pretty much none of the Democrat senators and congressmen with whom ANGA formed effective working relationships remain in Congress. All have been replaced by Republicans, or by more radical left-wing, anti-oil and gas members.

While ANGA and other industry trade associations were able to form working relationships with many Democrats of the time — even in those years, those Democrats could not be counted on for industry support on the truly big votes. ANGA and the rest of the industry, for example, were unable to secure a single Democratic vote during the battle over the national carbon cap-and-trade bill that barely failed in 2010.

I know all of this to be true because I was intimately involved in ANGA’s work during those years when I was Director of Government Affairs at El Paso Corporation. Working to form those relationships with Democrats in Congress made sense at the time since a number of them really were pro-oil and gas, at least to some extent, and because there was a Democratic administration in place that was decidedly hostile to the industry’s interests.

Read the Rest Here

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READ: the U.S. Army Letter Notifying Iraq of Coalition Withdrawal – UPDATED

Today’s Campaign Update, Part III
(Because The Campaign Never Ends)

Today, President Donald Trump called the Iraqi government’s bluff, authorizing the commanding general of joint coalition forces in Iraq to send a formal letter to the Iraqi commanding officer notifying him of pending operations for coalition forces to depart from Iraq. This comes in the wake of the vote of the Iraqi parliament over the weekend to demand U.S. forces leave the region.

Here is a photo of the letter that is circulating on social media:

Image

Text:

sLTG Abu Amir
Deputy Director, Combined Joint Operations,Baghdad
Iraq-Ministry of Defense

 

Sir: In due deference to the sovereignty of the Republic of Iraq, and as requested by the Iraqi parliament and Prime Minister, CTJF-OIR will be repositioning forces over the coming days and weeks to prepare for onward movement.

In order to conduct this task, Coalition Forces are required to take certain measures to ensure that the movement out of Iraq is conducted in a safe and efficient manner.

During this time, there will be an increase in helicopter travel in and around the International Zone (IZ) of Baghdad. This increased traffic will include CH-47, UH-60 and AH-64 security escort helicopters.

Coalition forces will take appropriate measures to minimize and mitigate the disturbance to the public. In addition, we will conduct these operations during hours of darkness to help alleviate any perception that we may be bringing more coalition forces into the IZ.

As we begin implementing this next phase of operations, I want to reiterate the value of our friendship and partnership. We respect your sovereign decision to order our departure.

Very respectfully,

 

WILLIAM H. SEELY, III
Brigadier General, U.S. Marine Corps
Commanding General, TF-Iraq

[End]

As we have repeatedly pointed out here at the Campaign Update, one of the main reasons why Donald J. Trump was elected to the presidency in 2016 was his promise to get U.S. armed forces personnel out of the myriad interminable Middle East conflicts into which his predecessors in office had gotten our country entangled.

Trump’s basic message during the campaign was that these wars between various Islamic countries and factions have been going on for eons, and nothing the U.S. can do – no amount of treasure or lives sacrificed – will end that reality. So, let the Islamic states in the region fight it out amongst themselves, and focus U.S. military efforts in the Middle East on protecting our assets and few real allies there – Israel and Saudi Arabia, mainly.

The Iraqi parliament’s demand over the weekend, whether serious or not, plays directly into the President’s hands in this regard.

It is also key to note that this strategic gambit would not be possible were it not for the fact that the U.S. today enjoys a much higher level of energy security than it did during past presidencies, thanks mainly to the shale oil and gas revolution that has taken place here over the past decade. The U.S. is not completely energy “independent” and probably never will be, but our country today has very little compelling national interest in risking American lives and treasure to keep the oil spigots in countries like Iran and Iraq open.

So, this letter from Brig. General Seely now puts the ball squarely back in the Iraqi government’s court. President Trump has basically said, hey, if you want to become a client state of the mullahs in Iran, go for it.

It will be interesting to see how Iraqi Prime Minister Adil Abd Al-Mahdi responds.

UPDATE: Well, maybe it’s not quite goodbye after all. Here is an official Pentagon statement on the matter:

Joint Chiefs of Staff Chairman Mark Dilley earlier stated that the letter is real, but the version released on social media is a “draft” that should not have gotten out. Prior to that Defense Secretary Mark Esper said that the letter was not real.

Did someone just get caught in a mole hunt?

I will update this story if the official version keeps changing.

 

That is all. For now.

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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What You Need to Know About the Attacks on Saudi Arabia

Today’s Energy Update
(Because Energy Fuels Our Lives)

Crude oil prices closed today up about 15%. They escalated throughout the day as it became increasingly obvious that the production outages in Saudi Arabia will likely continue for weeks, and as rhetoric between the U.S., Iran and Saudi continued to become more heated. How many weeks the Saudi outages will last is anyone’s guess.

You should expect prices to continue to rise until – and if – the situation calms down and we have hard information indicating Saudi production is being restored.

In case you missed my story at Forbes.com linked and excerpted below, this is the largest sudden outage of crude production in world history, even larger than the Arab Oil embargoes of the 1970s.

It’s a big deal.

Excerpt:

Here are a dozen things everyone should know about the past weekend’s strikes on a major Saudi oil refinery, and the likely fallout from them:

  • The Houthis, a rebel army fighting against Saudi-led interests in Yemen, claimed credit for launching the attacks on Saturday. However, the U.S. government now says it believes the assault was launched from Iran, and that it may have involved cruise missiles rather than drones.
  • The strikes centered on Saudi Arabia’s Abqaiq refinery. Abqaiq is the world’s largest oil refinery, processing about two-thirds of the total Saudi supply each day. Saudi Arabia is the world’s second-largest producer of crude oil behind the United States.
  • Several large Saudi oil fields were also attacked. Those attacks, along with the disruption of the Abqaiq refinery required the Saudi government to shut-in about half of its current production, or about 5.7 million barrels of oil per day.
  • According to the U.S. Energy Information Administration (EIA), that amounts to the single biggest sudden disruption on record, more than the loss of Kuwaiti and Iraqi supply during the Gulf War in August 1990, and the 1979 decrease in Iranian output following the Islamic Revolution.

Read the Rest Here

 

That is all.

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Democrats’ Climate Town Halls: A Direct Assault on Texas

Today’s Campaign Update, Part II
(Because The Campaign Never Ends)

“On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.” – Elizabeth Warren

I was asked by a radio host this week for my initial takeaway from CNN’s 7-hour marathon of Democratic Climate Change talking points that aired on September 4. My response was the only thing that came into my head: God help us if any of these people wins the election.

By “us” I mean the oil and gas industry, in which I spent a 38-year career, and everyone in Texas, where I’ve lived my entire life. Because the reality of that 7 hours of talking points by 10 leading contenders for the Democratic Party’s 2020 presidential nomination is that pretty much every idea advanced by the candidates was a direct assault on the industry’s continuing license to operate in the United States, and thus on the Texas economy.

The Texas economy has diversified significantly since the bad old days of the 1980s, when the oil bust collapsed the state’s savings and loan and banking industries and more Texans were out of work than anytime other than during the Great Depression. But despite that diversification, oil and gas still drives more economic growth here than any other business sector.

So, when you see every candidate on that stage – including Texans Julian Castro and Beto O’Rourke – call for the banning of “fracking,” you see a proposal that would throw the Texas economy immediately into a recession and toss tens of thousands of Texans out of work. When you see Kamala Harris and several others demonize the plastics industry, you see a direct attack on Texas, whose chemicals and plastics industry has boomed in the past decade, with hundreds of billions in new capital investments, thanks to cheap natural gas prices.

When you see Andrew Wang and others talk about banning internal combustion engines and forcing everyone to drive an electric vehicle, you see a direct attack on Texas, home to the nation’s largest refining industry. When you see Elizabeth Warren and Joe Biden talk about the need to end the use of all fossil fuels in power generation, you see a direct attack on Texas, where natural gas powers more homes and businesses than all other fuel sources. Those attacks on natural gas are also attacks on the environment, given that U.S. carbon emissions have dropped to 1980s-levels in recent years thanks mainly to natural gas displacing coal in power generation.

The attacks on Texas and its economy were not limited to energy alone: Agriculture is the state’s second-most prevalent business. When you see Pete Buttigieg telling Americans that if they eat a hamburger, they’re part of the problem, you’re seeing a direct attack on Texas and its ranching industry.

When you see O’Rourke and others talk about the need to end “corporate farming,” you’re seeing a direct assault on Texas and its farmers, given that, when you look into the details of their various plans, you see that they all call for ending the use of diesel-fueled farm equipment like tractors and combines, not to mention all those Ford F-150s. That’s not just for “corporate” farmers, but for all farmers.

This stark reality, of course, is one of the main reasons why the Democratic National Committee denied requests from Washington Gov. Jay Inslee and a few other candidates to hold a formal debate focused solely on Climate Change. The party’s leaders actually entertain the notion that Texas’s shifting demographics might give their presidential candidate a shot to win the state’s electoral votes in 2020. But they also know that, if Texans become educated on the realities of how the candidates’ various “solutions” would impact their daily lives, those chances will fade accordingly.

Those DNC concerns were well-founded, and CNN did the party no favors by airing those proposals in such great detail. In presidential politics, some promises are better left unmade.

That is all.

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Bernie Sanders’ Dorian Tweet Proves he is an Ignorant, Shameless Hack

Today’s Campaign Update
(Because The Campaign Never Ends)

Grand Bahama this morning looks a lot like Galveston did on September 9, 1900. – On September 8 of that year, the deadliest hurricane in American history slammed into Galveston Island with winds in excess of 140 mph – which would make it a Category 4 hurricane – and a storm surge that inundated the entire island.

Captains and sailors from ships coming into port had been warning islanders for days in advance of a large storm lurking in the Gulf, and a prominent local weather man, Isaac Cline, also tried to warn locals that a big storm was coming. But government officials assured residents that a major hit on the island was virtually impossible due to the shallow waters of the Gulf of Mexico and other factors, and predicted that any storm in the Gulf of Mexico would be most likely to make landfall in Florida. Thus, few people evacuated Galveston in advance of the storm, and, without air travel or gasoline powered automobiles, evacuation for most residents would have been difficult if not impossible in any event.

Thus it was that more than 8,000 Galvestonians died in the resultant inundation. Cline himself lived in a two-story home near the downtown area, and was only able to survive the rising flood waters by climbing onto the roof of his house along with his family. The destruction of all but the sturdiest of buildings on the island, like the famous Moody Mansion and many of the downtown business establishments, was utter and complete.

For many months afterwards, the refuse and debris from those buildings that had been carried out to sea was washed back up onto the island’s shores, along with the rotting carcasses of human beings, farm animals and pets who had perished in the storm. The cleanup operations were grim and seemingly unending; the stench was horrible and reportedly lingered for years afterwards.

The story we see coming out of Grand Bahama this morning is similar and tragic. The island was largely inundated by the storm surge, and thousands of houses and non-sturdy buildings have been destroyed. The refuse and debris from those buildings that was carried out to sea will wash back up onto shore in the months to come.

But that debris and refuse will not be accompanied by the rotting bodies of thousands of dead human beings. Many of the island’s pets and other animals were also taken to safety and even evacuated off the island, thanks to volunteer animal rescue operations. That happy result is largely due to modern means of predicting the path these storms will take days in advance. But it is also due to the existence of modern means of travel that allowed so many of the residents there to evacuate the island.

Virtually all of those means of travel, whether by boat, by plane or by automobile in the case of mainland U.S. residents in several states who are evacuating their own homes in advance of the storm’s path, are powered by gasoline or diesel fuel. Almost 100% of them. Even the growing number of electric vehicles on the roads now obtain their charge from power stations whose electricity is generated by a U.S. energy grid that is more than 80% powered by fossil fuels, including coal.

These modern, fossil-fueled means of transportation are why, when the ultimate death toll from this very strong hurricane is totaled up, the number most likely will consist of two digits instead of four or five.

So, when you see craven Democrat/Socialist presidential candidate Bernie Sanders issue a tweet like this:

…remember that the deadliest hurricane in American history occurred in 1900, when Americans were traveling using horses and buggies, almost a full century before the climate change scam was invented by the global socialist political movement.

Next time you run into someone who works in America’s oil and gas industry, thank them for producing the fuels that help save so many human lives in advance of these terrible storms. I guarantee you they will appreciate the gesture.

That is all.

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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The Oil and Gas Situation: Reviewing 6 Predictions

Today’s Energy Update
(Because Energy Fuels Our Lives)

As Q1 2019 comes to a close, it is time to review the status of some predictions I made here the day after Christmas for what we would see during the first half of 2019. Accurately gauging where the industry will be several months into the future is always a crap shoot, and as usual, I find myself feeling glad I didn’t go out and bet the farm on any of these.

First, let’s look at what I had to say about the domestic rig count as calculated by the folks at DrillingInfo:

…my first prediction is that we will see a gradual fall in the domestic U.S. rig count throughout the first half of 2019. Indeed, the DrillingInfo Daily Rig Count already fell by about 3% during December, from 1160 to 1120 on December 25. I’m betting that, by June 30, that measure will be below 1050…

This particular count finished the quarter at 1049, after falling slowly but steadily throughout the first three months of the year. This represents a 9% drop since Christmas day, and there is no real reason to expect this trend to change during the second quarter, with so many upstream companies prioritizing stock buybacks and other programs designed to return capital to investors and lenders over the mad rush to increase production we saw throughout 2017 and the first 8 months of 2018.

A reasonable updated guess would be that we will see the DrillingInfo count fall to right around 1000 by the time June 30 rolls around.

What about crude prices? Here’s what I predicted they would do in Q1:

…my second prediction is that the price for WTI will rise again, but will not exceed $60 during the first half of 2019.

As things turned out, I had the general direction of crude prices right, but underestimated how rapidly they would rise, as WTI closed at $60.14 in Friday’s trading. The basic market dynamics that advocated in December for what has been a 20% recovery in the WTI benchmark remain in place today. Global demand continues to rise more rapidly than all the experts thought it would at the first of the year, and the OPEC-plus nations still maintain pretty strong compliance with their export quotas.

 

Read the Rest Here

 

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Is an Oil Price Train Wreck Hiding Around the Bend?

Today’s Energy Update
(Because Energy Fuels Our Lives)

The energy media has recently featured headlines that seem at odds with one another and that, when taken together, portend the possibility of a coming train wreck somewhere down the road where crude oil supply and prices are concerned. Let’s look at some of the more recent headlines as examples:

“The U.S. Shale Boom is About to Get a Major Upgrade” – Investors Business Daily, Feb. 19

“Wall Street Calls for Better Returns; Shale Gets Thrifty” – Gulf Times, Feb. 17

“OPEC Cuts Send Crude Exports to Lowest Since 2015” – Financial Times, Feb. 19

“U.S. shale oil output to hit record 8.4 million bpd in March: EIA” – Reuters, Feb. 19

That Investor’s Business Daily story begins by stating “The U.S. shale oil boom is about to get a whole lot bigger. The reason: Giant oil companies like Exxon Mobil (XOM) are leveraging their massive scale to unleash more production from the top-producing shale oil formation.”

The EIA projects that the domestic industry will push U.S. oil production past the 12 million barrels of oil per day (bopd) level for the first time in the nation’s history in March, with 70% of that coming from shale plays. Fully 1/3rd of all oil produced in the U.S. in March will come from the Permian Basin alone.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Some Stunning New Facts About Texas and its Oil Industry

Today’s Energy Update
(Because Energy Fuels Our Lives)

#GodBlessTexas. – Last week at Shale Magazine, I put up a piece detailing some “Fun Facts” about the state of the oil and gas industry in Texas. That piece began with the following statement:

“Here’s a fun fact: If Texas were an independent country, it would now stand as the 5th-largest oil-producing nation on Planet Earth, behind only the rest of the U.S., Russia, Saudi Arabia and Iraq. According to projections by the U.S. Energy Information Administration (EIA), Texas will pass Iraq in this measure of economic might later this year.”

Boy, things sure do escalate quickly in the oil industry. Here we are, barely a week later, and the truth about that little factoid has already changed again, at least if the U.S. Energy Information Administration (EIA) has its numbers right.  EIA now says that the U.S. averaged 12 million barrels of oil per day (bopd) in January, the first time it has ever reached level. The agency further projects that the Permian Basin alone will produce 4 million bopd in March, roughly 1/3rd of total U.S. production.

So, before we get to some new amazing facts about all of this, let’s do a little math.  First, roughly 85% of total Permian Basin production comes from Texas, which in March would come to about 3.4 million bopd. Next, add in EIA’s estimate that the other behemoth Texas shale play, the Eagle Ford, will produce about 1.3 million bopd, and you are at a stunning 4.7 million. Oh, and there’s also all that oil coming out of deep south Texas, east Texas and the Texas panhandle, and all of a sudden you find Texas producing in excess of 5 million bopd.

All of which means that as of today, the great State of Texas, all by itself, would now rank 4th globally in crude oil production if it were an independent country, having now blown past Iraq.  Oh, and if the EIA’s projected trend for Permian production growth holds true, Texas will in all likelihood surpass the rest of the United States in total production at some point in either late 2021 or early 2022, and become the third-largest producer in the world.

But that’s not all.

EIA’s March projection of 4 million bopd coming out of the Permian Basin alone means that single basin, were it to secede from the union, would suddenly rank as the 5th-largest oil producing nation on earth, behind Iraq as well as the other countries mentioned above. The other amazing but little known fact about the Permian is that it ranks as one of the largest natural gas plays on earth, second in the U.S. only to the mammoth Marcellus Shale play in the northeast.

How incredible is that? Look at it this way:  Just a decade ago, the Permian Basin was considered to be a “dead” oil play. Downtown Midland was basically a ghost town, and the only real oil business going on out there was a bunch of small companies buying up old, depleted oil fields and going in to rework the wells in order to squeeze a few more barrels per day out of them.

Today, just 10 year later, it is the focal point of the global oil industry, the driver of booming economies of Texas and New Mexico, the main driver of the country’s burgeoning oil and LNG exports businesses. Because industries like chemicals, plastics, fertilizers and many, many more use petroleum products and natural gas as feedstocks, the Permian is also one of the the major facilitators of our country’s manufacturing renaissance over the last few years.

Stunning. And a real blessing.

God Bless Texas, indeed.

That is all.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Why Electric Vehicles Don’t Spell the End for the Internal Combustion Engine

The Afternoon Campaign Update
(Because The Campaign Never Ends)

Answering reader mail. – A reader in Houston emailed me this morning ([email protected]) with an energy-related question that is very timely. Here follows the email and answer I provided:

Email:

David,

I really enjoyed listening to your appearance on the BYU podcast and reading this article:

7 Key Things To Know About Oil and Gas

Your last point contained this tidbit that caught my attention:

“The reality is that, despite the growing intervention into the auto market by electric vehicles, the demand for gasoline and crude oil in the U.S. continues to rise, and is projected to keep doing so into the future.”

  • How will the shift to electric vehicles impact the demand on Oil and Gas?
  • Roughly what % of global consumption is for vehicle fuel?
  • Do you think we’ll fully go to electric vehicles and how will this shift effect Houston’s economy in the near and far term?

I’ve got a chunk of my net worth wrapped up in my house [near Houston], and am wondering what a drop in global demand would do to all these O&G companies and the local housing market.

Your daily updates are my favorite read of every morning.  Press on!

Answer: [Edited and expanded slightly for clarity.]

The potential for EVs is wildly over-hyped in the media. The shift to EVs is far outpaced by the ongoing increases in demand for crude oil, not just in the U.S. but even moreso globally. That is not going to change anytime soon.

Why? Because that electricity to recharge them has to come from somewhere, and today mainly comes from power generated by coal and natural gas in the U.S. That’s another stark reality that is not going to change anytime in my lifetime, which I figure is another 25 years or so. [Every reliable projection – even those by the U.N. – project that fossil fuels will still account for the vast majority of global power generation in 2050.]

Here’s reality: The world has a choice where fossil fuels are concerned. First, we could burn more and more coal in power generation because it is not replaceable by intermittent power sources like wind and solar. Germany and Spain have clearly demonstrated this over the past decade, as they almost bankrupted their economies trying to do just that.

The alternative is to burn more and more gasoline in automobiles.  You cannot have a geometric leap in EVs without burning far more coal than we do today, and the alternative to burn more gasoline is a much cleaner environmental solution. It is also a far more affordable solution for consumers.

Thus, it is a virtual certainty that we will continue to burn more gasoline in internal combustion engines for the next half century, and probably beyond.

Houston’s going to be fine.

[Expansion]

Now, to expand on that a bit, here are a couple of other reasons why the world will continue to produce and consume increasing amounts of oil in the coming decades:

First, you have the fact that thousands of other products that ordinary people rely on every day are produced either in whole or in part from petroleum. From plastics to chemicals to polyester to fertilizers to makeup to toothpaste, even to the computer on which I am typing this, people all over the world are heavily reliant on a vast variety of products that use petroleum as a feedstock.

Second, look at this incredible graphic:

What amazing progress in just ten years! Here’s the simple truth: None of that progress would have been possible without oil and natural gas. The developing nations of the world need access to plentiful, scalable and affordable sources of energy in order to join modern society and elevate their people out of squalor. This can only be achieved through the use of fossil fuels.  Period.

So, bottom line, if you are worried about the oil and gas industry collapsing anytime soon, you need to find something else to worry about.

That is all.

 

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

 

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Trump Puts the Lie to “Russia Collusion” With Venezuela Actions

The Afternoon Campaign Update
(Because The Campaign Never Ends)

In case you’re still thinking  this whole “Trump is Putin’s puppet” narrative has legs, well, think again. Vladimir Putin is a decidedly unhappy hombre’ today, and it all has to do with the ongoing efforts by the Trump Administration to depose his real puppet, Venezuelan socialist thug Nicolas Maduro.

Earlier today, National Security Advisor John Bolton and Treasury Secretary Steve Mnuchin announced the U.S. would place severe sanctions on Maduro’s regimen and Venezuela’s national oil company, PdVSA:

Steve Mnuchin:  “As a result of today’s action, all property and interests in property of PdVSA subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.”

At his press conference, Mnuchin said these actions basically place a quarantine on $7 billion in PdVSA assets in the U.S., and would represent $11 billion in foregone oil exports to the U.S. over the next 12 months. Mnuch said the U.S. decided to target PdVSA because it has long been used by the Maduro regime as “a vehicle for corruption.”:

“A variety of schemes have been designed to embezzle billions of dollars from PdVSA for the personal gain of corrupt Venezuelan officials and businessmen.  For example, a 2014 currency exchange scheme was designed to embezzle and launder around $600 million from PdVSA, money obtained through bribery and fraud.  By May 2015, the conspiracy had allegedly doubled in amount, to $1.2 billion embezzled from PdVSA.  Abraham Edgardo Ortega, a Venezuelan national who was PdVSA’s executive director of financial planning, pled guilty to one count of conspiracy to commit money laundering for his role in the billion-dollar international scheme to launder funds embezzled from PdVSA.”

The ongoing, aggressive efforts by the Trump Administration to depose Maduro put the lie to Democrat/media allegations that the U.S. President is some sort of “puppet” or ally to Russian President Vladimir Putin. Putin has, over the last several years, invested billions of dollars in efforts to prop up the Maduro regime, often taking ownership of Venezuela’s oil assets in return.

As Reuters reported in 2017, Putin’s Russia had by that time already made at least $17 billion in such investments, a total that has only grown in the intervening two years. Thus, any sanctions on Venezuelan oil assets strike directly at the Russian Bear.

Putin’s spokesman at the U.N. made Russia’s displeasure with the efforts to oust Maduro very clear, as Russia led the effort to deny a unanimous U.N. Security Council vote in favor of an effort by the U.S. and European Union to impose international sanctions on Maduro, and endorse opposition leader Juan Guaido.

All of which adds up to completely refute the ongoing joint efforts by the Democrat Party and our fake news media to portray President Trump as a Russian agent.  These people really are shameless.

That is all.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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