In The News – Monday, December 1st, 2014 Edition
OPEC’s decision not to cut production
shouldn’t have been a big surprise as Saudi Arabia had been sending messages to
that effect. Nevertheless, the reaction was violent. At Friday’s closing price of $66, Eagle Ford is still in the black, but Bakken and Permian
Basin are in the red.
It’s worth noting that this may not be a fact. The IEA indicates that the
Bakken remains profitable at or below $42/bbl. Interesting! OPEC is feeling the
squeeze along with non-OPEC members like Russia. American consumers are
benefitting from an average price of $2.79/gallon. And guess what? This boom
has taken place pretty much despite the government as Glenn Reynolds points out.
Interestingly, Jeremy Grantham is not a true believer. He is more of a
Malthusian in the he believes the fracking boom has been a large red herring. I don’t buy his argument, partly because
it is predicated on his embrace of
global warming climate change. “The overall
thrust of Grantham's letter is that the world will soon be
devoid of the resources it is going to need to sustain our current economic
model, which over the last 150 or so years has been predicated on cheap energy,
namely oil.” This is classic Malthusian theory which had been debunked time and
again. He’s worth reading, nevertheless, for his contrary point of view.
the possibility that the Saudis have miscalculated. The IEA points out that the
break-even price in McKenzie County, the most productive county in North
Dakota, is only $28/bbl. The price floor is falling due to technology and
drillers switching to lower-cost spots. According to Citigroup, “The price
floor is falling and may not be nearly as firm as the Saudi view assumes.” The
other consideration is that the Saudis may have put other Middle-Eastern
producers in a bind, not to mention folks like Russia and Venezuela. As the old
saying goes, Saudi Arabia could be hoist by their own petard.
Kudlow has some comments on the situation. He considers lower oil prices
“unambiguously positive.” It is in effect a $125 billion tax cut. He
suggests we be a bit more optimistic about the current situation.
everyone wasn’t duking it out over big screen TV’s on Black Friday. The FBI
processed about one background check every 3 seconds as gun buyers took
advantage of deals. Somewhere over 144,000 background checks were processed.
Interesting poll. Apparently President Obama is polling
just below the embodiment of universal evil, Emperor Palpatine. Darth Vader
would defeat Hillary if the election were tomorrow. “Hello, I’m Darth Vader and
I approve using the Death Star to