Monday, February 29, 2016

Frackers are the monkey on OPECs back: U.S. shale's message for OPEC: above $40, we are coming back

From Reuters via Yahoo News:
For leading U.S. shale oil producers, $40 is the new $70.

Less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; now some say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation.

Their latest comments highlight the industry's remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected.

Continental Resources Inc , led by billionaire wildcatter Harold Hamm, is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week.

Rival Whiting Petroleum Corp , the biggest producer in North Dakota's Bakken formation, will stop fracking new wells by the end of March, but would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70.
Yup.  Just like I said earlier.  And who is to blame?  Well, it's OPEC's fault.  They tried their Tet Offensive with shock and awe. And what a bloodbath there was!  And is!  We're not even finished with  the OPEC shock and awe.  But in the end, what good will it do them?

Frackers are throwing in the towel and defaulting on loans. And when liquidating their companies, the price of their assets aren't anywhere near what they had on the books.  Sure, you bought that proppant injection system for your fracking and that cost is on the books and looks good.  But the reality is, those bright and shiny machines are being liquidated at pennies on the dollar.  And these assets are getting picked up by other frackers, lowering their capital costs.

Add to that, more efficient ways to frack, you now have the ability to pull oil and natural gas out of the ground at a price much lower than what they thought it would cost a few years ago.

Now we find OPEC and other world oil providers in a short term crunch.  What is their way out?  There is only ONE way out. And that is when the world economies finally expand again. The world "pie" of buyers of oil starts to expand and is able to accommodate a natural rise in the price of the commodity.

But until we see that huge expansion of demand, OPEC is essentially dead in the water. They can never EVER raise prices whenever they want.  They are subject to market forces and are forced to abide by them.  From now until eternity.

But this is really not a bad thing for OPEC. It means that their reserves will last much longer.  But from what I can tell, that's the only advantage.

I'll say it again, but in big, bold letters (all upper caps) CAPITALISM HAS WON.

Sunday, February 28, 2016

Uncovering Covered California

This isn't a nightmare.  It's waterboarding.

Early February 2016: I receive my premium bill which is now seven times higher than my monthly premium instead of the three times it should be (to cover November ’15, December ’15, and February ’16). I call to find out what’s going on. I’m told they accidentally generated two accounts for my policy and applied the ’16 payments to the wrong account. My payment made on December 15th is returned to me on January 31st. I now owe for four months of coverage. I am unable to pay online or via telephone because their computer system was tied to the wrong account. I’m told I will have to pay for four months via cash or check in order to maintain my good standing. I do not have this amount of money on hand in cash as the previous payment was returned to the credit card.

Thursday, February 25, 2016

Beginning of a New Era: LNG Export

And so it begins.  I think that all the stars are aligned....
The first LNG shipment from the US Lower 48 will has departed Cheniere Energy's Sabine Pass liquefaction project in Cameron Parish, Louisiana, Reuters reported late Wednesday. The LNG was loaded onto the LNG carrier Asia Vision, chartered by Cheniere Marketing, and is bound for Brazil.

Earlier Wednesday, the Houston Chronicle reported Meg Gentle, vice president of marketing at the company, as saying at CeraWeek, “They’re still loading it at Sabine Pass and it’s expected to depart the facility later today as it makes its way to Brazil.” The Asia Vision departed the dock at the Sabine Pass terminal at 7.39 p.m. CST last evening, according to Reuters shipping data.

The first cargo of approximately 3 Bcf of LNG is being shipped to Petrobras, Gentle said, confirming a Bloomberg report from Tuesday.

Neal Shear, Chairman of the Board and Interim CEO of Cheniere Partners, said in a statement earlier Wednesday, "Today we will finish loading the first commissioning cargo of LNG from our Sabine Pass LNG terminal. This historic event opens a new chapter for the country in energy trade and is a significant milestone for Cheniere as we prepare Train 1 for commercial operations."
This also coincides with the bottom for the price of natural gas:

Monday, February 15, 2016

Tapping the Federal Reserve: Future inflation coming

Yep. The US Government is ending the complete independence of the Federal Reserve.  Congress has passed a bill tapping into the revenues that the Federal Reserve earning by holding a trillion or so in US Treasuries.  And also from the dividends the Feds have been paying the banks to hold onto the cash they've received.

Bloomberg article:
The highway measure would be financed in part by a one-time use of Federal Reserve surplus funds and by a reduction in the 6 percent dividend that national banks receive from the Fed. The dividend would be reduced by an amount tied to yields on 10-year U.S. Treasuries, currently about 2.2 percent. If Treasury yields rose higher than 6 percent, the Fed wouldn’t pay the banks more. Banks with $10 billion or less in assets would be exempt from the cut.

The Fed’s surplus capital comes from the 12 reserve banks. The highway bill would allow for a one-time draw of $19 billion from the surplus, which totaled $29.3 billion as of Nov. 25.
So, what everyone has been waiting for:  Inflation.

It will be a terrible, shrill wife from whom we cannot be unmarried.  Thank God...the marriage will be short; the only sliver of good news in an almost unbearable and suffocatingly pile of bad news of what is in store for our nation.

PRESIDENTS DAY:Why is there a monument to Abraham Lincoln in Edinburgh?

The very first monument in Europe of an American President.  Several Scotsmen joined in the battle between the North and South.

Built in 1893, it can be found in the Old Calton Cemetery in Edinburgh city centre, and commemorates the Scots who fought on behalf of the Union during the American Civil War.

Six sons of Edinburgh signed up to fight on Lincoln’s behalf - Sergeant Major John McEwan; Lt Col William Duff; Robert Steedman; James Wilkie; Alexander Smith and Robert Ferguson.

THE FOLLIES OF GOVERNMENT HEALTHCARE: Cancer patients snagged in health law's tangled paperwork

What...a disaster.  Why aren't people SCREAMING to get it stopped.

Ana Granado was scheduled for reconstruction after breast cancer surgery when she was notified that her coverage would be canceled because of questions about her immigration status. Legal aid attorneys got that cleared up quickly, but Granado's financial assistance for her premiums was suspended. million people.

Lynn Herrin got irritated when she had to pay $700 to the IRS after it determined she got too big a tax credit for premiums under the health law.million people.

Since she was also having trouble finding a doctor who accepted her insurance, Herrin canceled. It was a costly mistake. She was diagnosed with oral and neck cancer and depleted her family savings to pay for treatment.million people.

Not every case is as distressing, but coverage disruptions due to complex paperwork requirements seem commonplace in the health law's system of subsidized private insurance, which currently covers about 12.7 million people.

Sunday, February 14, 2016

EPA: We are so past the point of diminishing returns

There is something called the Law of Diminishing Returns:
The law of diminishing returns states that in all productive processes, adding more of one factor of production, while holding all others constant ("ceteris paribus"), will at some point yield lower incremental per-unit returns.[5] The law of diminishing returns does not imply that adding more of a factor will decrease the total production, a condition known as negative returns, though in fact this is common.
The EPA is constantly taking us past the point of diminishing returns.  What do they expect to happen with the new regulations on racing vehicles?  There will be fewer of them and they will kill a popular sport.
Page 862 of the document states, “[The] EPA is proposing in 40 CFR 1037.601(a)(3) to clarify that the Clean Air Act does not allow any person to disable, remove, or render inoperative (i.e., tamper with) emission controls on a certified motor vehicle for purposes of competition. An existing provision in 40 CFR 1068.235 provides an exemption for non-road engines converted for competition use. This provision reflects the explicit exclusion of engines used solely for competition from the CAA definition of “non-road engine”. The proposed amendment clarifies that this part 1068 exemption does not apply for motor vehicles.”

If the wording is then ratified to include competition vehicles, it could have serious implications for motorcycle racing and the industry as a whole. It would then mean the sale of parts such as aftermarket exhausts would be illegal under U.S. law and force racing championships such as MotoAmerica to run any and all parts that come stock from the OEM in regards to emissions control, not to mention the wide reaching implications the ruling could have on amateur racing and track days.  
This is not a clarification.  This is a complete REWRITE.

When are we going to defund this outlaw agency?

BTW, notice the reference to page 862?

THE SOCIALIST STATE: Venezuela malls scale back hours as government cuts energy

The Death Spiral continues for Venezuela.  When are the people going to say they've had enough of the control?
Shops in malls across Venezuela closed their doors Wednesday afternoon to comply with a government electricity rationing order.

Venezuela's socialist government is asking more than 100 malls to close or generate their own power four hours each day, from 1 p.m. to 3 p.m. and from 7 p.m. to 9 p.m.

Dozens of mall workers and would-be shoppers waited out the closure at a shopping center in upscale Caracas Wednesday. They complained about the new policy, which comes amid a general economic breakdown that has led to chronic shortages and triple-digit inflation.

THE SOCIALIST STATE: Fingerprints for food: Venezuela rolls out new plan to keep shelves stocked

The bad news in Venezuela keeps rolling in.  How bad could it really get?  Could it get North Korea bad?

How about this for New Speak: It's called "The Superior System for Secure Supplies"
Call it fingerprints for food. In the latest effort to keep shelves stocked in Venezuela, the government on Tuesday will begin registering the biometric information of customers who use state-run grocery stores.

President Nicolás Maduro says the measure will prevent hoarding and help keep price-controlled food from being resold for a profit on the black market. Food Minister Félix Osorio said those who sign up for the program by registering their fingerprints will be eligible for discounts and prizes.

But critics warn that the scheme — which is not mandatory for the moment — will be one more way for the state to keep tabs on the population, or might be a precursor to rationing.
And wow!  You could get a discount or win a prize!  Sounds like a win win! And it WILL be mandatory.

The impact of the shopping cards also remains to be seen. Last year, in the state of Zulia, the governor tried to implement a rationing system at state-run stores but aborted the plan amid a backlash. This time the roll-out has been more muted. And Maduro says the program will deliver results.

“Once we get started,” he said, “we’re going to take food contraband to zero.”
A system that is able to track all that you buy.  That's what American needs!

Tech pipeline to Texas: Tax money, people flow out of Bay Area

Austin is looking to be a favorite alternative to SF.  Housing in Austin is CHEAP.  I think the quality of life is much better.

Along with household names like Google, Apple, Dropbox and Oracle — which all recently built or expanded major campuses in Austin — nearly two dozen Bay Area tech companies also reportedly relocated to Texas or opened outposts there since 2014. Thousands of residents made a similar trek throughout the 2000s, taking roughly $1 billion in taxable income out of California and into the Lone Star State, according to a Chronicle analysis of Internal Revenue Service data.

Texas’ growing tech sector doesn’t mean the Bay Area’s is faltering; Silicon Valley is still the heart of the industry. It also doesn’t mean the state’s economy is hurting; most forecasts show strong job growth and shrinking unemployment in California. The expansion of Bay Area firms into Texas does, however, reveal a strong business pipeline between the two regions, particularly for companies trying to escape California’s high taxes and the Bay Area’s soaring cost of living.

Tuesday, February 9, 2016

U.S. Supreme Court blocks Obama carbon emissions plan

On a 5-4 vote, the court granted a request made by 27 states and various companies and business groups to block the administration’s Clean Power Plan. The move means the regulations will not be in effect while litigation continues over their legality.

The brief order from the justices said that the regulations would be on hold until the legal challenge is completed. The court’s five conservatives all voted to block the rule. The order noted that the four liberals would have denied the application. A U.S. appeals court in Washington had turned away a similar request on Jan. 21.
Too bad it's not permanent.

Saturday, February 6, 2016

Fun with numbers: The real story behind the unemployment report

When a Republican is elected to the White House, all of a sudden the MSM will wake up and discover how deceptive the unemployment numbers are.  And then without even blinking, it will all be the new President's fault.
On the surface, the January jobs numbers appear to be "not bad." There were 151,000 jobs created, and the official unemployment rate dropped below 5%. But the story inside the numbers is really, really awful.
Just terrible.

Thursday, February 4, 2016

Never Bet Against The Capitalists Part II

This story expounds on something I mentioned in an earlier post.  In that post, I quoted a magazine that mentioned that the fracking technology was getting better and more efficient.

Now, another story with more WOW! factor on the American landscape of shale oil.  Should the Saudis and Russians give up?  I really, really think they should consider something besides what is almost like a brute force DNS attack.  Some of the American producers have break even costs of  $22.52?  $23.40?  This is almost hard to imagine!  And it's a LOT of oil.

Yes, American Capitalists can keep this game up for a LOT longer than anyone ever thought possible.

According to a report by the Bloomberg Intelligence analysts William Foiles and Andrew Cosgrove, Saudi Arabia may have its work cut out for it as it will be far harder to kill many U.S. E&Ps than analysts originally thought.

The reason: a break-even model for the Permian Basin and Eagle Ford shows that oil production across five plays in Texas and New Mexico may remain profitable even when WTI prices fall below $30 a barrel, according to a 55-variable Bloomberg Intelligence model for horizontal oil wells.

The Eagle Ford's DeWitt County has the lowest break-even, at $22.52, followed by Reeves County wells targeting the Wolfcamp Formation, at $23.40. The diversity of breakevens highlights the hazard posed by looking for a single number, even within a play.

These counties together produced about 551,000 barrels of liquids a day in October. Taking into account drilled but uncompleted wells boosts the number of potential survivors to 19. The wide range of break-evens undermines efforts to come up with a single threshold for U.S. shale producers.
It's not pretty out there at all, but this story is nothing short of astonishing.

But I called it. I knew from past history, unless they tilt the board, whole countries with more money than anyone can imagine can not compete against Capitalists.

America....has won.

Wednesday, February 3, 2016

California's evaporating gas tax

I'm sorry guys, but you can not eat your cake and have it, too.  Grow up!

Last month, the California Transportation Commission said the state would cut transportation funding by $754 million — a 38% decrease. Why? Because revenue from the state's levies on gasoline sales, which provide much of that funding, plummeted as gas prices dropped and more fuel-efficient vehicles proliferated. Those falling prices cut the state's gas excise tax revenue from 18 cents a gallon two years ago to 12 cents last year, and revenue is expected to sink to 10 cents in July. Every penny in revenue lost per gallon means a $140-million drop in transportation funding.

As a result, not only will no new projects be funded, but more than 200 projects already in development also would be de-funded or delayed. In Los Angeles County, for example, the cut could jeopardize the purchase of new light-rail cars, the construction of a pedestrian bridge at the Burbank Airport Metrolink station, and the widening of State Route 138 in the Antelope Valley.
Put in toll booths.

Will Environmentalists Force California to Choose "Dirty" Energy Over Clean Nuclear?

When are the CA'ians going to stop listening to the radical environmentalists?

On Sunday, Breakthrough Institute co-founder Michael Shellenberger and former Missouri Botanical Gardens head Peter Raven, published an op-ed in the San Francisco Chronicle explaining that those people who are concerned about the future of climate change should be in favor of keeping the Diablo Canyon plants open. Why?

"Diablo Canyon produces twice as much power as all of California’s solar panels, 24 percent more than all of its wind, and 40 times more than its largest solar farm," observed Shellenberger and Raven. "Also, Diablo Canyon provides power to 3 million Californians on a patch of land the size of three football fields. Achieving the equivalent from a solar farm would require 145 times more land; from wind, 500 times more."

Interestingly, an article today on the controversy in Mother Jones points out that California's "rate of reducing carbon emissions is slower than the national average—a 7.5 percent reduction since 2000, compared with 9.6 percent nationwide." Replacing Diablo Canyon reactors with natural gas plants would make that record even worse.

Why California gasoline is so expensive

So, the author tries to determine the "evil" profit and who is to blame for the high price.  The answer?

They only have themselves to blame.

We begin with taxes. California’s combined state and federal taxes add 59 cents to each gallon of gas at the pump. That’s 11 cents above the U.S. average, reports the American Petroleum Institute.

Subtracting 11 cents in higher taxes from our 73-cent gouge gap leaves 62 cents of unexplained cost.

California has tacked on about 12 cents in fees for its “cap and trade” market and low-carbon fuels standard. This gets us to 50 cents.

State regulators also mandate a pollution-reducing blend that costs more to produce, although how much varies by refiner. When you compare the U.S. average for reformulated gas to California’s, the unexplained gap narrows further by 20 cents. Notably, the public overwhelmingly supports such environmental costs.

To review, taxes and environmental mandates directly account for 43 cents per gallon of the 73-cent cost we paid Monday above the U.S. average, leaving us with 30 cents to go.

Market forces — meaning profits for somebody — generally explain this 30 cents per gallon. If you guessed that regulators play a role here, too, go to the head of the class.

So, the crux of the story,without being a jerk about it, is "just live with it and shut up, because this is what CA wants."

Yeah.  Whatever.