In The News – Friday, December 19th, 2014 Edition
proof that these heathens need to be eradicated? How about this? Again, these half-wits aren’t
religious by any shape form or fashion. They are psychopathic killers who
should be shown no mercy.
Vlad isn’t a happy guy. He
gave one of those Bill Clinton speeches that just goes on forever. The gist was
that it’s all our fault. Vlad isn’t famous for his fluency with economic
reality. He offered no fix for the current malady facing his countrymen who are
cleaning out the local stores buying anything they can that is useful because
it is likely to cost more tomorrow. This mess is likely to test his
survivability as a politician. Capital has been
leaving Russia for
some time and has, as you might expect, accelerated.
where is thy sting? IRS warns of possible shutdown.
Oh! Please! Not that!
rallied big despite Crude giving up its early gains. The Saudis indicate that they need help
if production is to be cut. Opinion is all over the place as to where Crude
will stabilize. Here’s an interesting outlook from the “CEO of a very
successful private exploration company as posted on Powerlineblog.
Rate of Return (ROR) drops to 10% on our wells at $55 oil. However, this
assumption assumes no drop in costs to drill wells and no contraction in the
large differential ($10 to $12 per barrel) between Bakken and WTI oil. In
reality our ROR would actually be above 10% at $55 WTI oil price as our costs
to drill would also come down. There are plenty of drilling locations
that would have above 10% ROR at $40 oil. Even more drilling locations
would require $70, $80, or $90 oil prices for that ROR. Of course,
drilling will slow down long before you get down to a 10% ROR. Most will
want at least a 20% ROR. Of course the quality of the operator matters in
addition to the drilling location. . .
line is that the Saudis want to chill investment in new oil supply to help
protect OPEC’s future. In round numbers we have had about 5 MBOPD
increase in world oil demand over the last 5 or 6 years. Over the same
time period US oil production has grown from nearly 4 MBOPD (from 5 to 9 MBOPD)
— 80% of the increase in WORLD demand! This is NOT good for OPEC. I
suspect that we will have ugly oil prices ($60 – $75) for around a year as that
is long enough to stop many current oil supply investments and, more
importantly, serve to chill the appetite for future large investments in oil
supply growth (deep water, arctic, marginal shale, marginal tar sands, etc)
which is the Saudi goal in my opinion. I do not believe that the current
price ($65) is a sustainable price going forward. It would not encourage
enough new supply to balance world demand which itself would be goosed upwards
with the lower prices. I suspect that after this ugly price period ends,
we likely see oil bouncing around the $75 to $95 range or something like that.
course all of this depends on the state of world economy which has many
significant challenges such as at the required unwind, or more likely
significant revamping, of the unsustainable entitlement states over the next
two decades. I personally believe that the Euro currency was a very bad
idea from the start and is damaging for Europe and unsustainable as an
institution. The unwind of the Euro within the next 5 or 10 years could
also cause significant economic headwinds for the world economy.