Natural Gas Liquids are Following Natural Gas Off a Fracking Cliff

Tom Konrad CFA The unprecedented boom in natural gas supplies over the last few years as been one of the few tail-winds for the US economy over the last few years, as plummeting natural gas prices have lowered costs for both industry and consumers.  Few outside the natural gas industry even understood the shear scale of the shale gas resource, although industry insiders did. The Shale Gas Glut In 2008, I recall a natural gas executive complaining about how he could not get policymakers to understand the sheer scale of the shale gas resource.   To be honest, I...

What the L.A. Methane Leak Tells Us About Investing

by Garvin Jabusch Sempra Energy’s leaking gas field in Porter Ranch, CA, near Los Angeles, has been making national headlines recently, as it now enters its third month of being the largest methane leak in U.S. history. How big is that? The LA Times says that, “by early January, state air quality regulators estimate, the leak had released more than 77 million kilograms of methane, the environmental equivalent of putting 1.9 million metric tons of carbon dioxide in the air.” 1.9 million metric tons of carbon dioxide and counting. In addition, methane isn’t only a powerful greenhouse gas, it can...

So Much for Peak Demand – try 134mb/d by 2030

No peak demand Eamon Keane "So much for peak demand - try 134mb/d by 2030."  That was the startling conclusion dispatched from the ivory tower recently by Joyce Dargay, a British transport econometrics professor, and Dermot Gately, an American economics professor. I'll present their conclusions and then discuss the implications. Their report is available here (pdf). The main conclusion is that the low hanging oil fruit has already been picked after the 1970's oil shocks. From 1978-85 OECD fuel oil consumption dropped by 7mb/d and then from 2003-2008 by another 2mb/d. The...

Shale Gas: If this is such a good deal why are you selling it...

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...

The Best Peak Oil Investments, Part VII: Peak Substitutes?

Tom Konrad CFA There are two types of solutions to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies.  The most obvious is to find a substitute to replace oil.  Supply constraints limit the full replacement of oil by most potential substitutes.  Understanding those constraints leads us to the investment opportunities that arise from these substitutes.  Increasing demand and constrained supply of oil is fueling the search for oil substitutes to use in its place.  Unfortunately, almost all of these potential substitutes also have limited...

EIA Annual Energy Outlook 2010: Peak what?

Peak What? Eamon Keane The Energy Information Administration (EIA) released its Annual Energy Outlook 2010 (AEO 2010) last week, with projections out to 2035. It makes for interesting reading. Most notable was its take on peak oil, natural gas vehicles and on converting natural gas to liquids (GTL). An otherwise reasonable report was marred by the presumption of oil plenty. Figure 1 shows a graph presented (.pdf) by Glen Sweetnam, director of the EIA's International, Economic and Greenhouse Gas division, in April 2009. Although it mentions the source as being the...

Do You Need To Invest In Oil To Benefit From Expensive Oil?

Two months ago, Tom told us how he'd dipped a toe into the black stuff (i.e. bought the OIL etf) on grounds that current supply destruction related to the depressed price of crude oil would eventually lead to the same kind of supply-demand crunch that led oil to spike during the 2004 to mid-2008 period. If you need evidence that the current price of crude is wreaking havoc in the world of oil & gas exploration, look no further than Alberta and its oil sands. The oil sands contain the second largest oil reserves in the world after...

Betting Against Shale Natural Gas Plays

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...

The Peak Coal Portfolio

Last week, we alerted you to a report from Germany's Energy Watch Group called “Coal: Resources and Future Production,��? which predicts peak coal by 2025.  Readers of AltEnergyStocks are doubtless familiar with peak oil, the inevitable fact that as we consume a finite resource (oil reserves) at some point the rate of that consumption must peak, and taper off.  Serious arguments about peak oil center around "when" oil production (and consumption) will peak, not "if."   The same it true for other finite natural resources, such as natural gas, uranium, and even coal.  The difference with coal is the received...

Should Coal Company Investors Breathe Easy After Copenhagen?

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...

The End of Elastic Oil

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...

Some Realism on Shale Gas

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...

Oil’s Sesquicentennial; the Dream Becomes Nightmare

John Petersen On August 27th, we'll celebrate the 150th anniversary of Colonel Edwin Drake's completion of the world's first successful oil well near Titusville, Pennsylvania. That discovery and the many that followed planted the seeds of an industrial, economic and cultural revolution that transformed America from an agrarian backwater into a global superpower. For the next 114 years, oil was cheap, plentiful and the solid bedrock of the American Dream. Since the early '70s, however, the dream has gradually become a nightmare as domestic and global oil production began an irreversible decline. My first graph comes...

Divesting: Last One Out Loses

Tom Konrad CFA Anew report written by Nathaniel Bullard at Bloomberg New Energy Finance highlights the difficulties large institutional investors would have divesting from fossil fuels. What it does not specifically discuss is that these difficulties could lead to large financial losses for investors who see the difficulty of divesting as a reason to delay. Just as we can't easily fill up our cars with solar power instead of gasoline, the report points out that there is no asset class that can directly substitute for oil and gas in large institutional portfolios. A person...

Dipping a Toe in the Black Stuff

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...

The Four Best Peak Oil Investments

Tom Konrad CFA The best four stocks I've found in my six month quest to find the best peak oil investments. I apologize for being a tease.  Since March, I've been writing this series I've called "The Best Peak Oil Investments," but in many cases what I've actually done is to warn readers to stay away from particular sectors.  This bait-and-switch was compounded for my syndicated readers at Seeking Alpha when their editors decided to re-title the early articles in this series "Peak Oil Investments I'm Putting My Money On."  If you've stuck...