Mailbag Items
Premium
Natural Gas Q&A: Lies, Damn Lies, and Statistics
[Editor's Note: If you're already subscribed to the Oil & Energy Investor then you've already profited from Dr. Kent Moors' expertise. If not then take a moment to sign up for the free newsletter by clicking here. Here's a small sample of what it has to offer.]
It has been a while since I responded to your many emails.
So, as we await the latest developments in the European debt mess, today seems like a good time to answer a few. This time around, I am addressing some of your questions and comments that deal with natural gas.
By the way, my staff and I read all of the input and feedback you send our way, and we're very grateful for it. Please email me at customerservice@oilandenergyinvestor.com. (I can't offer any personalized investment advice, but I can address your questions and comments in future broadcasts.)
Let's get started…
Q: I've just read recently several articles stating that the EIA has revised downward its estimate of our natural gas shale reserve potential by deciding to accept, unconditionally, the most recent U.S. Geological Survey stating that the Marcellus, Eagle Ford, Barnett, and other shale formations hold only 20% of the heretofore accepted reserves. This is an 80% reduction! This changes everything if true.
That's the question – is this bogus, or is there factual evidence to conclusively support this new estimate? ~ Howard B.
A: Howard, this reminds me of a famous statement from the 19th-century British Prime Minister Benjamin Disraeli (though the comment is also variously ascribed to Mark Twain, Alfred Marshall, and many others): "There are three ways to hoodwink the masses – lies, damn lies, and statistics."
The Energy Information Administration (EIA) – a unit of the U.S. Department of Energy – continues to wrestle with the distinction between reserves and extractable reserves.
The first is the volume of gas indicated by field tests and analysis. The second is gas available for extraction at current methods. I would also stipulate as "extractable" reserves only the volume that market conditions allow.
When you equate the two, we are still in the same ballpark.
Current estimates put no more than 20% of known reserves as "extractable." As technologies improve, that figure could improve, too.
For now, the EIA estimate falls in line with most others.
So to answer your question, nothing much has changed here, aside from some government bureaucrats wanting their figures to be more accurate.
Q: Kent, your work appears to be expanding into areas of advisement that could affect the future profitability and wellbeing of nations and their business relationships with existing partners. A delicate balancing act if there ever was one! If such arrangements are not handled carefully, could sanctions and/or military skirmishes be the outcome? Are we facing the possibilities of "gas wars"? ~ Fred P.
It's Not Just Congress – the System Has Failed
Sandra Bloom is in a frustrating position, and she feels stuck.
She put faith in people to do some work for her – and they've failed.
Not only did they fail to fulfill promises, they've created a bigger mess than the one they were supposed to fix.
Like many Americans, Bloom hoped the U.S. Congress would improve the country's struggling economy this year. Instead, she watched elected leaders squabble and finger-point while the U.S. credit rating was downgraded and federal debt climbed past $14 trillion.
"I am so angry at Congress for the way it is not doing its job," Bloom wrote in an e-mail to Money Morning. "There is no longer any attempt to do what is best for the country, no attempt to compromise."
Bloom shared her thoughts on what's wrong with Congress in response to a dismal CBS News/New York Times poll in early August that revealed 82% of Americans disapprove of the way Congress is doing its job – the highest disapproval rating since polling began in 1977.
This was on the heels of a USA Today/Gallup Poll in Julythat showed just 7% of Americans believed their representatives in Washington were negotiating in good faith when it came to the debt-ceiling debate.
We asked you, our readers, just what's wrong with Congress – and the overwhelming majority emphatically agreed: Elected representatives are only out for their own interests, not those of the people.
"All they have been doing is playing chicken to see who blinks first, and the American public is the loser," said Bloom. "They would rather one side's ideas be defeated than accomplish any meaningful legislation."
That could mean it's time for a change.
Why Shah Gilani's Plan to Fix the U.S. Housing Market is a Winner
[Editor's Note: Why keep your thoughts to yourself? We don't! If you want to share a comment or idea or ask one of our financial experts a question, send it over to mailbag@moneymappress.com. (**)]
Money Morning Contributing Editor Shah Gilani told us last week that if something isn't done now to fix the U.S. housing market it'll "drag the rest of the economy down into a hellish bottom that will take years, if not decades, to crawl out of."
"The housing market is our single-most important generator of gross domestic product (GDP) and, ultimately, national wealth," said Gilani. "And we can almost immediately execute a simple plan to fix mortgage financing and stabilize U.S. housing prices."
Gilani outlined steps the U.S. government needs to take to resuscitate the U.S. housing market, including unwinding Fannie Mae (OTC: FNMA) and Freddie Mac, making bailed-out banks contribute to a private national pool of mortgage capital, and creating a new ratings agency to assess the creditworthiness of mortgage pools – with a tax on the pools' interest.
He also called for more up-front money from borrowers, and for a tax-incentive program to stimulate buyer demand and stabilize the housing market.
Money Morning's Shah Gilani Responds to Reader Comments on His Housing Plan
Dear Money Morning readers:
To every one of you (and there were more than just a few!) who took the time to comment on my housing-fix plan, thank you. I read every single comment, twice.
Money Morning readers have always impressed me with their insights and activism. That's why I write for Money Morning, I get to have a "conversation" with you, which motivates me, enlightens me and always keeps me looking at every side of all the issues I write about.
Here are some of my thoughts on your comments:
First of all, it's not possible for any comprehensive address of a problem as deep and wide as what our housing market is facing to be perfect. There is no such thing as a simple solution to such a complex set of attendant issues. And, no matter how exhaustively researched and designed a packaged solution is constructed, there will always be unintended consequences and naysayers who would rather complain about the status quo than change it.
A Greek Default is Bad – But a Greek Bailout Much Worse
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
Many investors continue to favor a Greek bailout to prevent the Eurozone's first sovereign default – but they are rooting for the wrong solution.
Greece has requested another loan from its European neighbors to cover next year's $43 billion (30 billion euros) shortfall as yields on 10-year Greek bonds have climbed over 16%.
The second Greek bailout would come about a year after the European Union (EU) and International Monetary Fund (IMF) loaned the struggling country $158 billion (110 billion euros) to meet soaring financial obligations. Greece took the money on the terms that it would implement austerity measures and cut its massive budget deficit, but the country failed to meet the agreed-upon targets.
EU and IMF officials have been reviewing Greece's cost-cutting actions to determine if the country – now with about $430 billion (299 billion euros) in debt – deserves another huge loan. EU leaders have also considered asking investors to reinvest in new Greek debt when existing bonds mature, buying time to stabilize Greece's sinking economy.
Extreme Weather Conditions to Threaten U.S. Agriculture for Next Decade
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
U.S. agriculture is likely to face harsh weather for the next decade, threatening food production and the livelihood of the nation's farmers.
Extreme weather conditions have slammed the United States this spring. Tornadoes and flooding in many U.S. states have killed hundreds and ripped through millions of acres of farmland. Residents of Joplin, MO continued to sift through rubble this week after being hit Sunday by the nation's deadliest tornado since 1953.
Many U.S. towns now have to rebuild from devastating losses, and many farmers are left with a questionable future for their land.
This prompted a reader to ask the Money Morning Mailbag how U.S. agriculture and food prices have been affected by the nation's drastic weather conditions.
What does all the recent weather catastrophes in the United States mean for crops and farmland? Will this add to food prices that are already too high for our own good?
– Rob S.
Restrained Worldwide Population Growth is a Long-Term Benefit
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
Money Morning Contributing Editor Martin Hutchinson detailed earlier this week how worldwide population growth will affect global commodity prices, prompting many readers to express praise for his well-supported analysis.
Hutchinson cited the United Nations report "2010 Revision of World Population Prospects" published May 3, where the UN estimated that the global population would reach 9.3 billion in 2050. This means prices for oil, metals, and food are also likely to climb much higher by 2050.
"The total impact of the UN's spiraling population projections will be seen over the long haul," said Hutchinson. "And that means that — even when interest rates are back to normal levels — global commodity prices will not return to levels we would consider ‘normal.' Oil prices will never see $20 a barrel again; their bottom is probably somewhere in the range of $60 a barrel to $80 a barrel — after which they march higher."
Increasing U.S. Oil Production Won't Stop Rising Gasoline Prices
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
This year's surge in oil prices and resulting high gasoline prices have many calling for more U.S. oil production as a solution.
Rising oil prices have pushed the U.S. average price per gallon of gasoline to $3.98. Oil prices, despite a recent slip, are up about 11% this year. West Texas Intermediate crude oil hovered around $99 a barrel yesterday (Thursday), and many experts expect it to hit $150 a barrel this year.
Many consumers want an increase in U.S. oil production to lower oil and gasoline prices, as well as reduce U.S. dependence on foreign oil for a national security benefit. Domestic activity has slowed since BP PLC's (NYSE ADR: BP) Gulf oil spill last April. Critics claim that U.S. President Barack Obama hasn't done enough to support a U.S. oil industry that provides needed jobs and revenue and could help keep oil costs from rising much higher.
Copper Price Forecast: Why the Red Metal is on a Long-Term Bull Run
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
With metals and commodities on a long-term bull-market run, investors have recently turned their attention to copper.
The red metal's price recently has fallen due to mixed economic data. Copper's use as an industrial metal – it's widely used in buildings, electronics, appliances and automobiles – makes it sensitive to economic growth prospects.
But despite the recent dip, many analysts and industry experts have a bullish copper price forecast.
U.S. Consumers Stumble Over Bernanke's "Transitory Inflation" Claim
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
In the first-ever press conference by the U.S. Federal Reserve, Fed Chairman Ben Bernanke tackled a handful of eager reporter questions about why he continues to think rising inflation does not warrant a change in interest rates.
The Fed announced Wednesday after a two-day meeting of the Federal Open Market Committee (FOMC) that it would keep its record-low interest rates between 0.00% and 0.25% "for an extended period."
Bernanke stressed to reporters that "longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued," and Fed policies would keep "transitory inflation" under control.
RSS