In Energy

Some weeks, I work rather hard to try and find the three most important stories in energy for this blog.   Sometimes it takes some fairly deep digging and some …..uh…..stretching to find something that at least seems significant –

Not this week.

DEJA VU ALL OVER AGAIN –   Perhaps it is deja vu for Jonathan Chanis over at the Fuse, who now posits that the oil bust has constrained E+P spending – therefore limiting the portfolio of recoverable assets available in 2019, 2020 and beyond.  He now believes that – wonder of wonders! – that limitation in light of continuing demand acceleration might just lead to an oil supply shortfall.

This is precisely what I said in my book –  Shale Boom, Shale Bust – more than three years ago.

Chanis goes further and comments that the current overwhelming supply coming from US shale oil resources is giving the market a false sense of security, and ultimately even a very small shortfall from production projections of US resources could result in a very violent increase in oil prices.

YEP, that’s also in the book – and I don’t make it past the introduction to make that point.

But read Chanis – he uses bigger words than I do.

PARIBAS IS GETTING ALL CRUNCHY ON US –   In a statement this week, the French bank said it will no longer finance any shale or tar sands oil projects, citing their commitment to the Paris Climate Accords.  President Trump announced US withdrawal from those accords on August 4th.

HUH –  Now, I’m not a fan of US withdrawal from the agreement, but c’mon Paribas – it couldn’t be that capitalization in shale and oil sands in the last three years has been a particularly horrible return investment that’s getting you guys all tree-huggy, could it?   My guess is that as oil prices recover and $60 breakevens from the Athabasca or DJ basin look like solid cash positive investments, the French giant might suddenly get less environmentally conscious.

Let’s see.

DRAIN THE SWAMP? – The Department of Energy floated “resiliency” subsidies, designed to cover costs for electricity sources that are “fuel-secure”.  The simple translation is that Rick Perry is writing rules to help put a finger on the scales in favor of coal and nuclear generation.  Part of the Trump energy agenda has certainly centered on coal, and I’ve noted in previous blogs and columns how impossible (and silly) it is to try and turn back the clock on the natural progression of energy development.  This latest foray, however, seems far more targeted than just a sweeping ‘help-out’  for coal and nuclear.  After a closer look,  the measure will have its greater impact in the PJM Interconnect, where three coal producers – Murray Energy, Alliance Resource Partners and Peabody Corp. – deliver nearly half of the coal supply.

Charles Murray has been an outspoken personal friend and supporter of President Trump during the campaign, as has ARLP.  Perry’s proposals – which likely will take at least a year to get approved and won’t move the needle significantly on the US grid anyway – look like little more than a post-election payoff.

Energy markets continue to gain steam – but it’s a minefield out there.  Not just any energy investment is going to work for you – which is why I started the ENERGY WORD interactive webinar.  You get all of my insight, plus a personalized analysis of the stocks in your portfolio, or others that you are considering adding to it.  It’s the kind of support you need to make the right decisions in these moments of opportunity.

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