Posted on 10/14/2014 6:04:38 AM PDT by ckilmer
NEW YORK (Real Money) -- Blame it on the Permian. That's where the oil is flooding into the markets right now. Sure, it is absolutely true that the Bakken and the Eagle Ford shales are responsible for the lion's share of new oil being produced in this country. Sure, the Bakken in North Dakota is amazing with its 1.1 million barrels a day, double what it was when I went there a couple of years ago, and the Eagle Ford is sensational with 1.5 million barrels a day now. But the Permian is 1.7 million barrels and it is conceivable that it could DOUBLE over the next two years. That's right, double.
Last night, I asked the CEO of Magellan Midstream Partners (MMP) , Mike Mears, and he didn't rule it out. Why would Mears know? Because he runs the biggest pipelines out of the Permian. He told me the numbers jump every single day and the more pipe that gets laid, the more we are going to pump. I got the sense that the gating factor is all about exporting, because Magellan is also one of the largest storage companies. He says that while there's storage that could handle most of what's coming out of the Permian right now, if it goes to the levels I am talking about we will have no place to put it and not enough refining capacity to refine it.
Yes, there's that much more coming on line.
I think this decline in oil price is a very real issue for this economy. The boom can be self-fulfilling at this pace. All talk about being continentally sufficient by 2020 is now off the table. I get the sense we could be there within three years at this blistering pace. But without the storage, we will have to cut back on the drilling. And if prices go lower, then the budgets will have to be cut back, too.
In other words, the boom is sowing the seeds of its own demise, being pushed along by the OPEC countries that don't want us to be self-sufficient.
If you take away this boom, you take away the biggest growth opportunities for good jobs. There is so much at risk right now with this price of oil that the selloff can make sense.
Think about it. We have no energy policy. We don't have a fossil-fuel-friendly president who sees what is about to happen: overproduction with no place to put the oil. We can't build the storage capacity, pipelines and refineries to use all the oil we have.
So, what started out as some huge windfall of oil and natural gas is now turning into something that could go very awry with just a few more dollars down for West Texas. We will be knocking the price down ourselves with no outlet for oil. And we will be bringing back unemployment in states that have been the backbone of our recovery.
It is a nightmarish scenario that had been part of a dream come true and it's just a few dollars down from happening, with no government in sight to prevent it.
Sure, it's a worst case scenario. But what exactly in heaven's name do you think the stocks are pricing in?
totally agree.
cheaper energy prices are pure oxygen for the economy. and set the stage for higher demand later.
We’ll have to agree to disagree.
I expect you’re right but the bright vista of energy independence in three years has me hoping that oil prices will not go below 80@ barrel in the next three years.
But the USA must become energy independent through the use of our own proven resources, not through expensive, unreliable, and unproven “alternatives”.
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That’s all about electricity. That’s not oil.
totally agree.
lower oil costs are a big deal for everyone.
Clarify?
Natural gas and coal produce electricity.
And there are expensive “alternatives” being explored to replace diesel,
so it’s more of a general approach to ENERGY, not particularly motor vehicle propulsion or electricity production,
that must be first established through the use of proven and affordable resources,
then we can dabble on the edges with the cute little “alternatives”.
it can still come.
An ISIS army moving toward Riyadh and the Saudi Royal family threatened is very believable and could cause dramatic changes in a heartbeat.
Cramer’s analysis as usual is wrong and is as usual sensationalized to get a mention in the news media.
Oil and its infrastructure still have a long ways to go before anything like Cramer’s doomsday scenario is even on the radar. Domestically the new supplies are not yet near 50%.
When the oversupply becomes a concern, some of the oil will be permitted to be exported but it won’t actually get that far. It won’t get exported because the rest of the world will drop their crude prices. The Middle East will decline in its importance. The net result is collapsing prices, a weakened Islam and lower costs for everyone.
Don’t forget we’re talking about the stock market. It has a devilishly independent “mind” of its own. The drop in oil prices is cited everywhere as a cause, but you have to go outside the US media to find out about the black-market oil.
there may be improvements to the tiny electric vehicles, maybe even by 2020. but their inefficiency and limited range will prevent their widespread public use, and so far has limited industrial use to only those who get government subsidy. I will believe it when I see it.
The simple fact of the matter is, coal-generated electricity used to charge inefficient batteries in order to run vehicles is not even a more environmentally sound approach to transportation — it’s a “feel-good” lib pipe-dream.
On the other hand, we could see large trucks switch to natural gas. if some company started producing nat-gas cars, they could become popular quickly, given the downward pressure on prices lately.
Ferengi Rules of Acquisition:
34 War is good for business.
35 Peace is good for business.
I agree, The problem is that US made items cost much more. People on tight budgets will naturally buy the lower priced goods. In some ways the cheap chinese products have allowed us to maintain our standard of living. My approach is to buy as much as I can used. The new stuff, I try to buy American. My Ford Focus is an example. Made in The USA and it’s a really good car.
What!
Stop importing mostly crap?
Foolish.
You seem to have a cart-and-horse situation here,
These things even themselves out in an unfettered market.
As those resources came online, the Saudis opened the taps and crashed the price of oil to the $ 10 a bbl. level.
American oil producers list their shirts so badly it took 3 years sky rocket oil prices to convince them start drilling again.
Of course the Saudis are responding to competitive pressure.
History shows they respond ruthlessly and effectively
Yep.
What you said.
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