Peak Fossil Energy

I was tempted by greed, and I succumbed. Last week, I bought the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), at $19.75 a share.   The Temptation I made the trade as a simple speculation.  I watch oil because the oil price is one of the key drivers of investor interest in alternative energy, although oil is only a true competitor for biofuel companies, not producers of wind turbines (at least until there are a significant number of plug-in electric vehicles.) With crude trading below $40/barrel, oil producers are cutting back on new drilling.  This is...

Charles Morand The relationship - or lack thereof - between oil prices and the performance of alt energy stocks has been a long-time interest of mine. I discussed it last in late March when I looked at correlations between the daily returns of alt energy and fossil energy ETFs. At the time, I found that only a weak relationship existed between the two and that if someone wanted to make a thematic investment play on Peak Oil, alt energy ETFs were not an ideal way to do so.  Seeing as the popular press and countless "experts"...

Garvin Jabusch A train, loaded with coal, crashed into the back of a passenger train in Czechloslovakia in 1868. Securities of fossil fuels firms, as an economic sector, may soon be on the decline. Predictions as to when oil, gas and coal will become a smaller part of the investment society makes into its total energy mix in favor of renewables (such as solar, wind and ocean energies) vary, ranging from 2060 on the long side (this prediction from oil industry powerhouse Shell) to 2030 or even...

Jim Hansen That is the question many buyers of shale gas assets should have been asking themselves over the last few months. This week’s news that shale gas high roller Range Resource was selling its Barnett shale properties reinforced our view that there is major trouble brewing in the shale gas business. Upstreamonline reported that “…Range Resources Corporation said it will sell almost all of its Barnett shale properties to a private company for $900 million…” Then of course there is the number one shale gas play cheerleader of them all, Chesapeake Energy. Just last week they...

Green Energy Investing For Experts, Part V Tom Konrad, CFA A global climate deal in Copenhagen would have been bad for coal miners, and coal companies have been rallying as the economy recovers, but it may not be clear skies for the black rock. In the battle to reduce greenhouse gas emissions, coal is enemy number one.  The global disarray in Copenhagen can only be good for coal mining companies, and they duly rallied when the climate talks ended with little to show for it.  Yet carbon emissions are not the only black mark on the coal...

Tom Konrad CFA Dr. Arthur Berman, of Labyrinth Consulting Services has taken a hard look at actual production data from  Barnett Shale in 2007.  What he found should worry anyone expecting this abundant, relatively clean, domestic energy resource to be cheap.  It should especially worry investors in shale gas companies, such as CHK, DVN, and XTO. In a panel entitled "Natural Gas Game Changers?" at the 2009 International Peak Oil Conference, Dr. Breman presented some results from his research into the actual production from the nearly 2000 horizontal gas wells drilled in the Barnett Shale in 2007.  The Oil...

Bill Paul Will shares of the oil companies that are major players in Canada’s tar sands region rise or fall? Logically, shares should rise in the wake of the deepwater drilling moratorium ordered by President Obama following the BP (BP) oil spill, as Wall Street begins to reflect on the fact that Alberta’s tar sands region is the second biggest crude-oil deposit in the world. Even before the spill, a report from IHS CERA had concluded that Canadian tar sands would be the single biggest source of US crude imports in 2010. Just as logically, however, shares should...

A couple of interesting items in the news yesterday on topics dear to alt energy investors' hearts. Firstly, a new report (PDF document) by CIBC World Markets arguing that globalization could be reversed by high oil prices. The folks at CIBC WM contend that growing shipping costs driven by higher prices for transportation fuels could erase the Asian labor cost advantage, driving a renaissance in North America's manufacturing sector. What's the main culprit? Peak Oil, albeit not called directly Peak Oil. I watched an interview with Jeff Rubin, CIBC WM's Chief Economist, on Bloomberg's In Focus yesterday, and...

By Christopher Mims According to some of the most complete calculations available, when we use natural gas to generate electricity in an average power plant, it results in 40 percent less warming than if we generate the same electricity with coal. If we fully utilized the natural gas-fired power plants that already exist in this country, we could significantly reduce the amount of coal we’re burning practically overnight. What’s more, primarily because of access to new natural gas reserves, proved reserves of natural gas recently shot up to 284 trillion cubic feet – more than we’ve...

shale gas Eamon Keane shale gas shale gas Shale gas is back in the news recently after Obama hearted the shale gale in his energy speech ("Recent innovations have given us the opportunity to tap large reserves, perhaps a century's worth of reserves...in the shale under our feet,"), and Daniel Yergin (full disclosure: he wrote The Prize) has a lengthy piece in the WSJ along with an interview in which he says a bunch of stuff. It turns out that the US and...

...and Why Not Invest in Oil Companies? Tom Konrad CFA The purpose of this series on peak oil investments has been to highlight companies outside the oil sector that are likely to benefit from increasing oil prices.  This article explains why we should expect oil prices to rise. What is Peak Oil? There are many definitions for peak oil.  In its most basic form, Peak Oil is the moment of highest production.  World oil supplies are finite, and so we cannot continue to produce oil in increasing quantities forever.  It's a mathematical certainty that at...

by Tom Konrad, Ph.D.   A couple years ago, I began to see reports that coal supplies might not last the 200+ years we've all been lead to believe, so I wrote an article about what you could do to prepare your portfolio for Peak Coal. Now two years have passed, and Peak Coal is undeniably 2 years closer.  (Did you ever wonder why people who have been saying that we have 200 years of coal for 20 years aren't now talking about 180 years of coal?)  But more than being 2 years closer, the evidence continues to mount.  Caltech...

Tom Konrad CFA The last ten years have brought a structural change to the world oil market, with changes in demand increasingly playing a role in maintaining the supply/demand balance.  These changes will come at an increasingly onerous cost to our economy unless we take steps to make our demand for oil more flexible. We're not running out of oil.  There's still plenty of oil still in the ground.  Oil which was previously too expensive to exploit becomes economic with a rising oil price.  To the uncritical observer, it might seem as if there is nothing to...

Green Energy Investing For Experts, Part III Tom Konrad, CFA Controversy continues to grow about the economic viability of shale gas.  Investors who doubt the companies' claims should consider buying puts. The Case for Gas From the perspective of a green energy investor, natural gas is the most benign fossil fuel.  Natural gas emits less carbon than other fossil fuels (slightly more than half as much as coal, when used for electricity generation.)  Natural gas turbines also can quickly compensate for fluctuating supply and demand from other sources of electricity.  This quick response makes them a natural complement...

Charles Morand Last week, I conducted an analysis showing the lack of evidence supporting claims that oil and alt energy returns are strongly correlated (claims that sometimes come from outfits as reputable as Bank of America Merrill Lynch).     I don't want to belabor this topic but I thought I would post the results of another, similar analysis I conducted following comments I received on how to improve the first one. In a nutshell, the comments suggested I do the following: 1) Look at daily correlations or even smaller periods, as "common knowledge" market...