Here’s the problem we have with the whole Greek bailout thing.
To put it simply, three groups benefited from the Greek spending: bankers, politicians and the Greek population.
Yet as we see it, there’s only one loser from the bailout. Guess who?
It’s not the bankers… it’s not the politicians… that’s right, it’s the Greeks.
As we wrote yesterday, the Greeks should pay the price for years of living above their means. But the bankers and politicians should also pay the price for financing it.
Seems fair, right?
Anyway, forget the Euro-chumps. Take a look at this from the Financial Times:
“Oil prices rallied more than $3 a barrel on Wednesday, recovering all the losses triggered by last week’s decision by rich consuming nations to release strategic oil stocks.”
Got that, “recovering all the losses…”
45 days of supply
The West Texas Intermediate crude oil price fell to USD$90 last week. Today it’s back at USD$95… and no doubt before long it’ll be above USD$100 again.
In his latest issue of Australian Wealth Gameplan, Dan Denning wrote:
“The Age of Cheap Oil is over and Australia’s Golden Age of Gas has begun.”
Last week we pointed out the silliness of the “rich consuming nations” releasing oil from their stockpiles. If they thought it would have a long-term positive impact on the oil price, they were kidding themselves.
And then today, as the FT also reported:
“Crude oil inventories in the US, the world’s largest oil consumer, fell 4.4m barrels last week, according to the US Department of Energy. Gasoline stocks were also drawn down by 1.4m barrels.”
In percentage terms, it’s a decline of 1.2% on the previous week:
Source: Energy Information Administration
What does this tell you?
Simply this: crude oil has found a support level around the USD$90-95 level.
Remember North American oil demand is around 23.7 million barrels per day – almost a third of the total worldwide oil demand.
Or to put it another way, the commercial and strategic oil reserves of the U.S. is the equivalent of 45 days of North American demand.
We don’t know what you think, but to us it doesn’t seem like a big buffer. Especially when the U.S. plans on drawing down 30 million barrels from the strategic petroleum reserve over the next month.
Now, don’t get us wrong. One day, the oil price will sink… but not until a viable alternative is accepted. Notice we say “accepted” and not “found”.
That’s because the only viable alternative has been around for years. Yet because it’s a fossil fuel, the gutless politicians won’t accept it as an alternative fuel. We’re referring to natural gas.
Peak gas is still a long way off
Forget wind, solar and wave power. And forget nuclear too. We’re not saying nuclear power doesn’t have a future, but compared to natural gas it’s a second-class power source.
Natural gas on the other hand, can almost be used as a straight replacement for oil. But unlike oil, we’re in no danger of reaching “peak gas” anytime soon. In fact, new gas reserves are discovered all the time.
That’s part of the reason the natural gas price has stayed so low.
But as we approach breaking point in the oil market, the high oil price makes gas even more attractive as an energy source.
And where a low oil price would be bad news for oil production, because of the high production costs, a low natural gas price hasn’t curbed production. Because there’s so much of it still untapped. And because new extraction methods are making inaccessible gas, accessible – that’s the case with shale gas and coal seam gas.
It’s shale gas that Dan Denning has his eye on in the latest issue of Australian Wealth Gameplan. And it’s the backbone to a special report and presentation he’s been working on for the past three months.
As he noted in an update last weekend:
“Next week, I’ll tell you exactly what I think it means for Australia. You may not agree with me. And you may not like what it means if I’m right. But either way, it could be the biggest energy story to hit Australia in 50 years. You don’t want to miss it.”
Cheers.
Kris Sayce
Money Morning Australia
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Exactly nic…..but hey, lets blame the Greek people. Its more convenient that way – then we dont have to see that the system is broken.
And while we are at it – lets blame the 3rd world for their crappy existence.
Corrupt western planted governments and corporate interests have nothing to do with their lot….its all the PEOPLE’s fault, isnt it?
pie in the sky. you aussies and your optimism…
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