Will Offshore Drilling and ANWR Solve Our Problems?
There are three main heated debates involving energy right now including John McCain's Gasoline Tax Holiday, who is responsible for gasoline prices, and what effect offshore drilling and ANWR (the Arctic National Wildlife Reserve) can have on the United States.
I've already covered the McCain Gasoline Tax Holiday and I plan to cover all three of these topics.
All three of these topics are going to be very important when it comes to the the next presidential election and I am currently under the impression that most Americans really don't understand the issues thoroughly because of the poor job that the media does explaining all sides of these issues.
I wouldn't expect the American public to have any deep understanding of these issues, most of them are not economists or in energy related fields and really don't have the context and background needed to formulate fully thought out conclusions.
This would be the equivalent of me saying, 'I have a stomach pain so based on what I've heard on the evening news today it's pretty obvious that I'm going to need surgery because I have a stomach cancer.
' I am in no way bashing the American public, I believe our intellect has allowed us to achieve great things in this country's history.
I am saying that not everyone knows everything about everything, and when the media isn't helping the cause, it's hard to know almost any correct information in the first place.
To give you some context about the situation, I'll need to lay out some basic facts and fundamentals.
World crude oil supply is somewhere between 84-85 million barrels per day while world crude demand is somewhere between 86-87 million barrels per day.
The most recent numbers show that through April the United States was using 19.
96 million barrels of crude oil per day, or somewhere between 23-24% of all daily demand.
The United States only produces roughly 30% of the crude oil it uses domestically, which means we are importing roughly 14 million barrels per day.
It's easy to see how at the current prices of ~$130 per barrel this can add up very quickly.
Until some portion of demand is completely destroyed to balance out supply and demand, don't expect a relief in crude prices and don't expect this argument to go away.
Most experts believe that there are a minimum of 14 billion barrels of oil in ANWR alone, although some estimates are over 18 billion barrels.
I personally believe the actual number could even surpass the high end of the estimates because there have not been tests run recently to determine the size of the reserves.
With how quickly technology has advanced due to companies like Schlumberger Limited SLB with their 4-D Seismic Mapping technology and others, it is definitely important that we allow a service company to conduct tests so that we know exactly with what we are dealing.
Most experts also believe that offshore in the continental shelf and American deepwater that we could have as many as two times the reserves that are located in ANWR.
Using the low end of these estimates we could have 1,000 days of not having to import oil due to ANWR and 2,000 days worth of not having to import oil due to the continental shelf and our deepwater territories (This includes 6 million barrels per day of continuous domestic production that is already online).
Obviously, we couldn't produce this oil tomorrow at a rate of 14 million barrels a day, but if we don't start now, when will we start? Many politicians don't want to drill because, "It will take 10-20 years to begin pumping oil.
" By this logic, we will never drill because it will always be 10-20 years away.
If Clinton had not continued the ban on this drilling, we would already have this production online.
The 10-20 year argument is a lie according to Anadarko Petroleum APC CEO Jim Hackett who says we could be able to have this production online in 2-4 years, if there were no interference from the government or environmentalist groups.
The interference of politicians is not something new in the energy markets and even in a crisis, the politicians will not stop playing their games.
Don't believe for a second that once oil makes a short term pull back that the politicians will not take credit for the market forces that caused the pullback because there is no doubt that they will.
It will be much more humorous to see the look on their faces and hear their bumbling excuses when crude breaks $200 a barrel and gasoline is over $6.
00 a gallon.
As I have stated before, even without a direct short or middle term effect on prices, these issues are a matter of national security.
If we go to war in the future with a country who has control of the world's oil markets, they could effectively shut down the United States without firing one bullet or using one soldier.
Our Strategic Petroleum Reserve only has about ~700 million barrels, and including current online production, that would last us just 50 short days.
The government should have never stopped filling the SPR as it has placed our country at extra risk.
So who would benefit if this new legislation is passed? The first place to look would be the drilling companies, both shallow and deepwater.
Some of the intriguing shallow water names include Ensco International ESV, Atwood Oceanics Inc.
ATW, Rowan Companies Inc.
RDC, and W&T Offshore, Inc.
WTI.
These players could potentially have more upside than some of the deepwater players when it comes to the United States' oil supply as a large portion of it is located in the continental shelf.
Many of the deepwater names already have contracts locked up for long periods of time in other areas around the world.
They would still stand to benefit from an opening of the United States Continental Shelf as it would drive up spot market rates for drilling rigs around the world.
The more interesting names include Noble Corporation NE, Transocean, Inc.
RIG, and Diamond Offshore Drilling, Inc.
DO.
With a new glut of rigs, service companies could also benefit, namely some of the smaller players, as the new level of demand will cause new and smaller players to enter into the marketplace.
Another key point is that you shouldn't believe that this "energy run" is over just because crude oil has gone from ~$147 a barrel to ~$126 in recent days.
Don't believe that these small blips in American demand are long term if gasoline prices come back into the $3.
XX range.
We are so reliant on crude oil to run our economy that it is important not to underestimate the elasticity of demand in this case.
Those investors who are able to cut through the noise and analyze the facts will be rewarded with great returns in the long run.
I've already covered the McCain Gasoline Tax Holiday and I plan to cover all three of these topics.
All three of these topics are going to be very important when it comes to the the next presidential election and I am currently under the impression that most Americans really don't understand the issues thoroughly because of the poor job that the media does explaining all sides of these issues.
I wouldn't expect the American public to have any deep understanding of these issues, most of them are not economists or in energy related fields and really don't have the context and background needed to formulate fully thought out conclusions.
This would be the equivalent of me saying, 'I have a stomach pain so based on what I've heard on the evening news today it's pretty obvious that I'm going to need surgery because I have a stomach cancer.
' I am in no way bashing the American public, I believe our intellect has allowed us to achieve great things in this country's history.
I am saying that not everyone knows everything about everything, and when the media isn't helping the cause, it's hard to know almost any correct information in the first place.
To give you some context about the situation, I'll need to lay out some basic facts and fundamentals.
World crude oil supply is somewhere between 84-85 million barrels per day while world crude demand is somewhere between 86-87 million barrels per day.
The most recent numbers show that through April the United States was using 19.
96 million barrels of crude oil per day, or somewhere between 23-24% of all daily demand.
The United States only produces roughly 30% of the crude oil it uses domestically, which means we are importing roughly 14 million barrels per day.
It's easy to see how at the current prices of ~$130 per barrel this can add up very quickly.
Until some portion of demand is completely destroyed to balance out supply and demand, don't expect a relief in crude prices and don't expect this argument to go away.
Most experts believe that there are a minimum of 14 billion barrels of oil in ANWR alone, although some estimates are over 18 billion barrels.
I personally believe the actual number could even surpass the high end of the estimates because there have not been tests run recently to determine the size of the reserves.
With how quickly technology has advanced due to companies like Schlumberger Limited SLB with their 4-D Seismic Mapping technology and others, it is definitely important that we allow a service company to conduct tests so that we know exactly with what we are dealing.
Most experts also believe that offshore in the continental shelf and American deepwater that we could have as many as two times the reserves that are located in ANWR.
Using the low end of these estimates we could have 1,000 days of not having to import oil due to ANWR and 2,000 days worth of not having to import oil due to the continental shelf and our deepwater territories (This includes 6 million barrels per day of continuous domestic production that is already online).
Obviously, we couldn't produce this oil tomorrow at a rate of 14 million barrels a day, but if we don't start now, when will we start? Many politicians don't want to drill because, "It will take 10-20 years to begin pumping oil.
" By this logic, we will never drill because it will always be 10-20 years away.
If Clinton had not continued the ban on this drilling, we would already have this production online.
The 10-20 year argument is a lie according to Anadarko Petroleum APC CEO Jim Hackett who says we could be able to have this production online in 2-4 years, if there were no interference from the government or environmentalist groups.
The interference of politicians is not something new in the energy markets and even in a crisis, the politicians will not stop playing their games.
Don't believe for a second that once oil makes a short term pull back that the politicians will not take credit for the market forces that caused the pullback because there is no doubt that they will.
It will be much more humorous to see the look on their faces and hear their bumbling excuses when crude breaks $200 a barrel and gasoline is over $6.
00 a gallon.
As I have stated before, even without a direct short or middle term effect on prices, these issues are a matter of national security.
If we go to war in the future with a country who has control of the world's oil markets, they could effectively shut down the United States without firing one bullet or using one soldier.
Our Strategic Petroleum Reserve only has about ~700 million barrels, and including current online production, that would last us just 50 short days.
The government should have never stopped filling the SPR as it has placed our country at extra risk.
So who would benefit if this new legislation is passed? The first place to look would be the drilling companies, both shallow and deepwater.
Some of the intriguing shallow water names include Ensco International ESV, Atwood Oceanics Inc.
ATW, Rowan Companies Inc.
RDC, and W&T Offshore, Inc.
WTI.
These players could potentially have more upside than some of the deepwater players when it comes to the United States' oil supply as a large portion of it is located in the continental shelf.
Many of the deepwater names already have contracts locked up for long periods of time in other areas around the world.
They would still stand to benefit from an opening of the United States Continental Shelf as it would drive up spot market rates for drilling rigs around the world.
The more interesting names include Noble Corporation NE, Transocean, Inc.
RIG, and Diamond Offshore Drilling, Inc.
DO.
With a new glut of rigs, service companies could also benefit, namely some of the smaller players, as the new level of demand will cause new and smaller players to enter into the marketplace.
Another key point is that you shouldn't believe that this "energy run" is over just because crude oil has gone from ~$147 a barrel to ~$126 in recent days.
Don't believe that these small blips in American demand are long term if gasoline prices come back into the $3.
XX range.
We are so reliant on crude oil to run our economy that it is important not to underestimate the elasticity of demand in this case.
Those investors who are able to cut through the noise and analyze the facts will be rewarded with great returns in the long run.
Source...