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  • Oil Prices

  • Oil Prices are Higher, But It Won't Be Much Help for Alternative Energy Normally, when gas and oil prices accelerate on both sides of the Atlantic, alternative energy sources come into focus and become a big part of that "energy independence" discussion.

    Well, not this time.

    During the run up to mid-$4 gas and $147 a barrel oil in 2008, many assumed these costs would continue to advance. That made alternative sources - especially renewables such as solar, wind, biofuels, and geothermal - more attractive to investors, politicians, and energy enthusiasts.

    Alternative sources are more expensive than conventional oil, gas, or coal. They are, however, more environmentally friendly. Paying those higher costs was regarded as a tradeoff for cleaner energy sources and a reduction in emissions.

    Today, that view has changed.

    U.S. Oil and Gas Squeezes Alternative Energy Prospects

    It's part of the reason why I've recently avoided alternative energy companies like First Solar (Nasdaq: FSLR), Canadian Solar (Nasdaq: CSIQ) or SunPower Corporation (Nasdaq: SPWR) in my Energy Advantage portfolio.

    The economic downturn has made reliance on more expensive energy sources a difficult proposition to accept. Renewables are hardly a convincing argument anymore, especially during a sluggish economic recovery.

    Yes, increasing oil and gas prices should reduce the spread between conventional and renewable, thereby providing stronger arguments for change. And proponents argue that alternatives provide an enhanced advantage given that they can also be domestically produced.

    Just don't bet on these arguments holding up this time. Here's why.

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  • Why a Strategic Petroleum Reserve Release Won't Help Oil Prices or President Obama With oil prices showing no signs of retreat during the final months of the U.S. presidential campaign, beltway insiders are turning to one misguided solution to combat rising oil prices.

    Releasing oil from the Strategic Petroleum Reserve (SPR).

    Trial balloons floated all over Washington during the past few days. The only reason politicians didn't move on this sooner (say a few months ago) was the price level.

    Until the last month or so, both oil and gasoline prices were heading in the other direction. Near-month futures contracts for West Texas Intermediate (WTI), the crude oil benchmark traded on the NYMEX, were below $78 a barrel in intraday trade toward the end of June, while the same futures for RBOB (the NYMEX traded gasoline contract) were at $2.55 a gallon.

    At the time, all the sage pundits predicted that oil would fall below $60 a barrel; some even suggested that prices could approach $40. On the gasoline side, these same wise guys were proclaiming we may see prices at the pump breach $3.

    Everything has changed quickly.

    Yesterday morning the markets opened with WTI 23% higher than late June and RBOB up by more than 20%. Oil stands at more than $96 a barrel in New York, while Brent has exceeded $116 a barrel in London. And retail gas prices are once again approaching $4 a gallon.

    Recently, I discussed why oil prices are moving up. But for some politicians, including the fellow running for reelection at 1600 Pennsylvania Avenue, those prices are becoming a job liability.

    So it's back to hitting the SPR.

    But there are four reasons why tapping the SPR won't make oil prices any cheaper in the end.

    Maybe you should let your Congressman know about them...

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  • Oil Prices Headed Higher after this Week's Boost Oil prices have steadily inched upward, buoyed by a surprising drop in U.S. crude inventories, stronger than anticipated retail sales, and the heightening tensions in Iran.

    Benchmark crude for September delivery rose $1.27 to finish at $95.60 per barrel in New York on Thursday. On the heels of the Commerce Department report Wednesday on retail sales, oil rose 90 cents, finishing at $94.33 a barrel, near three-month highs. Brent crude also rose, closing the day up 35 cents at $114.63.

    Oil prices slipped a little Friday, but remained above $95 a barrel in morning trading. They fell on news that the Obama administration may release oil reserves to slow the oil price climb. Oil is up 23% since late June.

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  • Don't Ignore This Shift in the Global Oil Market The prices for crude oil and major oil products (like gasoline, diesel, jet fuel, and heating oil) continue to advance. And some interesting changes on the supply side are emerging.

    You see, traditional raw material providers are moving to supply international markets with value-added processed products.

    Russia is the clearest example of this transformation in the oil-export balance, but it's hardly the only one. Saudi Arabia and Kuwait have also embarked on major refinery upgrades and expansions.

    The Russian experience is the most... Read More...
  • This Key Energy Metric Could Make You A Lot of Money Last week I discussed what EROEI is-and how to use it.

    This week I'd like to talk about how this key metric affects the balance of your energy investment portfolio.

    Now, this is certainly not the only element in determining preferable stock moves, but it's critical that you know the EROEI because it could make you a lot of money.

    Recognizing the real elements that determine the genuine cost of energy production, EROEI is becoming an important factor in estimating profit margins.

    And those margins certainly influence the performance of a stock as we've seen all across the energy value chain in recent months.

    EROEI refers to the amount of energy used to produce energy.

    If this ratio produces a figure of 1.0, EROEI is telling us that it takes one barrel of oil equivalent to produce one barrel as a result.

    Anything under 1.0 means that more energy is consumed in the production process than is gained as an end product.

    EROEI has the advantage of being a useful yardstick throughout the energy curve - from upstream production sites (wellheads, generating facilities) through midstream (gathering, transit, storage and initial processing) to downstream (refineries, terminals, wholesale and retail distribution, end use).

    Some applications of EROEI are already in wide usage, although we don't tend to think about them in these terms. Energy-efficiency ratings on appliances, heating and cooling systems, windows, or building supplies are an application at the end of the energy curve.

    But how can we use this to fine-tune an investment portfolio?

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  • What EROEI is – and How to Use It In Friday's Oil & Energy Investor, I began a discussion about the importance of a metric known as Energy Returned on Energy Invested (EROEI).

    As our research disclosed in the "Your Future: The Ultimate Pyramid Scheme" documentary, the factor is becoming a substantial element in the availability and cost of energy in general.

    But oil is the most critical energy source in this discussion.

    Our research has found that the situation will not be improving. We will be reaching a point when our need for exponential growth in energy, the environment, and the economy will become unsustainable. From there, we will experience a tipping point, and then a major collapse.

    This will require that each of us change the way we structure our investments, secure our assets, and provide for our families.

    However, in the interim, there will also be some amazing opportunities to make unparalleled profits in the energy sector.

    And, in all of this, EROEI will be figuring in important ways.
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  • The Trajectory is for Oil Prices to Rise Crude oil and gasoline futures contract prices moved down yesterday, as the market took a breather from an accelerated upturn.

    But the overall medium-term trajectory for oil prices no longer appears to be in doubt.

    As I have indicated on several occasions recently, the downward movement in May and June was an overreaction to softness in the sector, with the ultimate slide over twice as large as any objective reading of the fundamentals would justify.

    We are now witnessing a return to a "normal" oil market. That doesn't mean a lack of volatility or a narrow range of trading.

    This normal is hardly boring.

    These Three Factors Determine Oil Prices

    What it does mean is that oil prices will be determined by three factors:

    1. Supply and demand;
    2. The spread between benchmark crude grades; and
    3. Geopolitical tensions and events. Here, we are considering matters we've discussed here a number of times.
    Now we will continue to see, on occasion, external factors weighing in, such as the concerns about the European debt crisis that pushed the markets lower yesterday.

    That results in something I have discussed previously - a sort of "cart leading the horse."

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  • Will Oil Prices be the Next Manipulation Scandal? Now that the Libor manipulation scandal has been revealed, it looks like oil prices could be the focus of the next search for misreporting.

    According to the International Organization of Securities Commissions (IOSCO), the current system of oil price reporting is "susceptible to manipulation or distortion."

    Comparisons to Libor manipulation have been made because oil prices, such as Brent, serve as a benchmark for trillions of dollars of securities and contracts.

    There is the potential for market participants to manipulate oil price assessments published by price-reporting agencies (PRA) through the submission of false information and selective reporting of deals.

    Traders at various banks voluntarily report the prices they pay for oil contracts to Platts and other PRAs. Platts, which provides the most influential assessment, uses a number of trades to decide what the benchmark price, quoted to the outside world, should be.

    That is where the trouble begins.


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  • You Don't Want to Miss This Opportunity I recently spoke at FreedomFest in Vegas along with the world's best and brightest minds, such as Steve Forbes, Senator Rand Paul, and Whole Foods CEO John Mackey.

    I discussed the growing global demand for resources and gold to a crowd of 2,000.

    Half of the group was attending for the first time, which demonstrates to me a growing curiosity to learn about macro trends shaping the world and affecting our investments.

    Among investors these days, coming across a fellow commodity bull is about as rare as finding a positive story in the media, especially when you look at the results of metals and natural resources during the first half of 2012.

    Only four commodities on our periodic table pulled off a positive return.

    Wheat grew the most, rising 13 percent, followed by single-digit rises from corn, gold and copper. On the negative side, coal lost more than 19 percent, followed by crude oil (-14.1 percent), nickel (-13.6 percent) and lead (-12.3 percent).

    A Clear Tipping Point for Resources

    Fears of slowing global growth and how it will affect commodities have caused many investors to dig their heels in the ground and resist owning natural resources. Perpetuating this negative investor sentiment is the constant 24/7 news cycle punctuated with pessimism.

    During a natural resources conference, Jeremy Grantham of GMO pounded the table for an investment in resources, but you wouldn't know it by reading the headline of the CNN piece that covered the topic.

    In its article called, "Our planet will truly be toast," CNN discussed Grantham's comments on a global commodities shortage, saying he was "bearish on human resources...but bullish on natural resources investments."

    His argument focused on the swelling population in China, and the fact that the world had experienced a "great paradigm shift" around 2000, when commodity prices, which were negative for decades, "abruptly reversed course." He told the crowd, "in the long run, you can't afford to miss this opportunity." We agree.

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  • Why Gas Prices are Heading Higher With "Big Ben" testifying over the next two days on Capitol Hill, the indices will be bouncing around.

    I always find it curious that the same Street urchins who criticize government for interfering in the "free market" are nonetheless the same ones pouting in the corner when the Fed doesn't propose a new bailout to improve their portfolio values.

    When my children would pull a stunt like that, they would be sent to bed early... not given a seven-figure salary and benefits.

    In any case, that's not the only pouting going on...

    A few weeks ago, pundits were claiming U.S. gas prices could be moving down to as low as $3 a gallon nationwide.

    Well, these same guys have been quiet lately.

    That's because the price has been moving, all right, but in the opposite direction.

    The RBOB near-month futures price was up again yesterday (Monday) at market's open. This is the contract traded on the NYMEX for blended gasoline. The price has increased 5.6% in the past week and 11.6% for the month. As of Monday's open, the price had recovered 13% from the recent low, just three weeks ago.

    Gasoline is now tracking ahead of the rise in crude oil futures prices.

    The reasons are rather straightforward.

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  • Four Things Suppressing Crude Oil Prices Today The collapse of talks between Iran and the "Big 6" (the five permanent members of the UN Security Council plus Germany) should have accelerated international crude oil prices.

    And yes, they are higher.

    But the real spike hasn't hit. Not yet.

    The rising crisis atmosphere in the region and the genuine possibility that a fourth round of talks between the two sides will not even take place should have renewed the upward movement.

    That hasn't taken place yet, either.

    Oil prices are caught between the normal dynamics of geopolitical concerns - which push prices north - and continuing concerns over a global economic slowdown - which results in lowering expectations.

    Now, this limbo is a delicate balance; it could change in a matter of hours.

    We are likely to see a short-term rise Monday evening if the Norwegian oil and gas sector strike is not averted. Labor negotiations between Norway's oil workers and employers over pay and pensions failed - yet again - yesterday. The country is now just hours away from the first complete shutdown of its oil industry in decades. (Already, the strike has cut oil output by 13%, according to Reuters.)

    Then there are the figures coming out from the Energy Information Administration (EIA) on Wednesday, which will almost certainly show a drawdown on U.S. inventories. Normally, that would also push up prices.

    However, absent an Iranian move against the Strait of Hormuz or a major refinery accident somewhere in the world, the rise will be less than usual.

    That's because right now, four things are tempering the oil price rise:

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  • Oil Prices Look For Steady Rebound Why have oil prices been down lately even with the Iran oil embargo in place, and when will oil prices pick back up?

    Dr. Kent Moors, Global Energy Strategist for Money Morning, tackled those questions today (Friday) on Fox Business and gave his latest prediction on the future for oil prices.

    Despite the high level of worldwide supply for oil, Moors expects oil to rise from the amount of global demand. He noted that the effects of the embargo have been overshadowed by Europe's debt crisis and once those sanctions are felt oil will start to rise.

    You can see all of Moors' analysis on oil prices in the accompanying video.

    Read More...
  • Three Reasons Oil Prices are Gushing Oil prices have taken a backseat lately to the turmoil in Europe and Obamacare. But investors and consumers are starting to take notice again.

    For the first time in three weeks, oil staged a noticeable rally. Brent crude oil topped $100 a barrel on Tuesday and crude for August delivery jumped $3.80 to $87.57 a barrel.

    Tuesday's rise in oil came off Monday's 1.4% decline and follows a selloff that has pushed oil down some 22% from its 2012 peak of $128.40 on March 1. In the second quarter, oil prices experienced their biggest quarterly drop since the financial crisis of 2008.

    Moving oil prices higher on Tuesday was a trio of factors: Iran tensions, dwindling inventories, and a wager that further policy action to shore up global growth is on the horizon.

    Oil Prices and Iran Tensions

    Concerns about Iran had calmed over the past month along with the sagging worldwide oil prices, but those worries were stoked Tuesday by an army general in Iran.

    The general reportedly said that the country wouldn't "sit idly by" as the U.S. and Europe built a missile-defense shield program that could target Iran.

    Late Monday, Iranian authorities staged missile drills to test weapons reportedly capable of hitting targets as far away as Israel. Iran officials also announced possible legislation targeted at closing the Strait of Hormuz, one of the world's most important choke points. Approximately 20% of the world's oil, nearly 17 million barrels a day, passes through the narrow strait.

    Iran's move came on the heels of the European Union's full embargo on Iranian oil that went into effect Sunday. The EU embargo halts the vast majority of imports into Europe, ending exemptions for contracts signed before 2012, and barring insurance for Iranian oil shipments.

    "Iran is always a factor and it has the potential to have a dramatic impact on oil prices," Ben Le Brun, a markets analyst at OptionsXpress in Sydney, told Reuters.

    While Iran was the biggest catalyst behind oil's ascent Tuesday, it wasn't the only factor moving oil upwards.

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  • Shale Oil Stocks are Poised to Earn Investors Big Profits With oil production soaring in the United States, shale oil stocks will be pumping out profits for years to come.

    It's all thanks to huge deposits of shale oil.

    At least four new major shale oil plays including the Bakken in Montana and North Dakota, the Eagle Ford in Texas, and the Marcellus in Pennsylvania and New York, may have more than 20 billion barrels each of recoverable oil.

    Each of these new shale oil plays has the potential to double the total reserves we have today.

    In fact, the "shale oil revolution" will soon make the United States the world's leading producer of crude oil, a report from Goldman Sachs Group Inc. (NYSE: GS) recently predicted.

    The United States will produce more than 10.7 million barrels of oil per day by 2017, the report said. That's more than any other country, including Saudi Arabia.

    And even though oil prices are in a short-term swoon, the glut of shale oil is about to make savvy investors a huge fortune.

    That's why you need to take a hard look at a particular group of shale oil stocks that stand to benefit most from this boom.

    But first, you need to know how this came about.

    To continue reading, please click here...

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  • How a Crude Oil Prices Slump Could Bury these Countries As crude oil prices fall far below $100 a barrel, the trend is affecting the most oil-dependent economies in the world.

    You see, whether we're talking about a country or a company, having a "competitive advantage" is one of the most important principles involved in succeeding in business.

    Just like a company, a country does not want its competitive advantage to diminish as it protects its financial viability and economic future.

    But this is exactly what's happening with Saudi Arabia and other Middle Eastern oil exporting nations. Read More...