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Well The NextThing You Know...

2008-05-06

Where the hell is Jed Clampett when you need him? I keep running into Milton Drysdale.

 If the powers that be were to pitch the premise of the Beverly Hillbillies to the network execs, you can bet your last stock option, that it wouldn't be based in  California.

I'm very much dismayed by the news today that oil hit a record 123 a barrel on predictions that it would soar to 200 a barrel, which analyst at  Goldman Sachs  want you to believe.

I've blogged it before and  I will blog it again.  The futures market is sending the price of oil sky high fraudulently when they know about a little hot spot called the Bakken Formation.

For those of you not up on your geography and thinking that  Bakken is some kind of sci-fi term for an oil mine on a Class M planet in another solar system, the good news is you're wrong.

The Bakken Formation was initially discovered in 1951 and covers land mass in North Dakota, Montana, and Saskatchewan. Because the technology didn't exist back then to drill into the shallow shale the Bakken Formation was technically classified as an oil reserve and completely underestimated until recently.

One of the latest reports to come out of the U.S. Geological Survey assessment, released April 10, showed a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil. In essence 3 to 4.3 BILLION barrels of available oil that will send the price of oil down to an estimated 16.00 a barrel, and relieve the US of relying of foreign oil. 

I'm going to make an assumption that most people that happen across this little missive, don't really understand what's going on and it is easier to blame the President for the cost of oil and a war - then lay the blame on Wall Street.

The people that trade on the futures market are well aware of what is going on in this country, and they are driving up the price of oil right now because the run is going to be over soon enough. A newer type of drilling technology,Horizontal, has to be utilized to gain better access to the oil.

Back in 1990 the drilling cost per foot was $88.16 as compared to $75.40 for wells not drilled horizontally. Now it's only a 17% increase, but the average cost of oil in 1990 was only  $10.00 a barrel it was estimated that the drilling cost would add 20-40 a barrel.  Since the cost of oil was so cheap, it didn't make sense to pursue the Bakken formation when the common thought was the untapped oil reserves in Alaska that would use conventional drilling.

Now we hold the ace up our sleeve, that potentially could make America energy independent, and loosen the death grip that Venezuela and Iran have on us, and manipulating the oil supply irrelevant.

The US imported about 14 million barrels of oil per day in 2007 , which means US consumers sent about $340 Billion Dollars over seas building palaces in Dubai and propping up unfriendly regimes around the World, if 200 billion barrels of oil at $90 a barrel are recovered in the high plains the added wealth to the US economy would be $18 Trillion Dollars which would go a long way in stabilizing the US trade deficit and could cut the cost of oil in half in the long run. (Source: Next Energy News)

 Now if you are smart and take anything from this, is that you still have time to make long term investments, there are plenty of companies that are heavily investing millions into this venture. I placed an order today to purchase stock in a company by their accounts anticipates drilling approximately 300 wells over the next four to five years. This program has the potential to add more than 20 thousand barrels of oil equivalent per day of net production by 2012. 

That estimate was based on the Bakken holding only 100 million barrels. North Dakota will probably build their own refinery, and pipelines will have to be added. This is a whole new ballgame, but what we don't need is the continuation of the Futures Market controlling the value of the market. Investing is about building a future, not instant gratification.

Do your homework, and maybe you can use that tax rebate to get you started. You know you were going to use it to buy oil or gas one way or another, may as well make some money back investing in the good ole US OF A

WHOOOHEEEE

Vittles for everyone !  

 

 

  

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Dom (2008-05-08)
Well oil's also high because developing countries like China and India are purchasing more than ever before and therefore the supply's stretched more. Of course there's no guarantee or regulation saying the oil has to come to the pump of the U.S consumer (correct me if I'm wrong, I know many things, but international oil futures markets, isn't one of them).

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