By: Bill Loveless, Special for USA TODAY
For Jack Gerard, the outlook for U.S. energy security has never been brighter, with domestic supplies of oil and natural gas increasing, dependence on foreign supplies declining and a new Republican president and Congress keen on promoting fossil fuels. Read the full story
By: Mick Cunningham, OilPrice.com
OPEC is closing in on a deal to cut production, which will surely cause oil prices to rise. Oil is already almost back to $50 per barrel, so cuts of nearly 1 million barrels per day could boost prices well into the mid-$50s, even up towards $60 per barrel. That will provide a windfall to oil producers around the world and the sacrifice for OPEC members will be more than paid for by higher revenues. Read the whole story.
There has been some discussion emanating from government securities agencies, at least in my home state of Colorado, regarding the reconsideration of oil and gas general partnerships and joint ventures as subject to securities regulations. Principle among the arguments is what is known in legal parlance as the Williamson Presumption or Williamson Test (Williamson v. Tucker). The Williamson Test is composed of three elements or tests which state that a general partnership or Joint Venture interest can be considered a security if:
- an agreement among the parties leaves so little power in the hands of the partner or venturer that the arrangement in fact distributes power as would a limited partnership; or
- the partner or venturer is so inexperienced and lacking in knowledge of business affairs and industry that he is incapable of intelligently exercising his partnership or venture powers; or
- the partner or venturer is so dependent on some unique entrepreneurial or managerial ability of the promoter or manager that he cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers.
E&P companies, Issuers, and/or their Broker/Dealers raising money for drilling programs through private placements who wish to avoid the cross-hairs of government securities may want to make sure that their investors have some general knowledge about the oil and gas asset class as a defense against parts two and three of the Williamson Test. Investor educational products such as the ones we offer on http://www.learnaboutoilandgas.com/ and license to E&P companies, Issuers, and/or their Broker/Dealers through http://buyoilvideos.com/ may go a long way towards ensuring that their Private Placements do not get classified as securities.
Andrew Critchlow, Commodities Editor for “The Telegraph”, wrote a wonderful article entitled “Sun sets on Opec dominance in new era of lower oil prices“. This article really frames the events going on with OPEC, the price of oil, and what this all means for the global oil industry. OPEC nations need higher oil prices to fund their domestic agendas. Furthermore, with many OPEC nations at political odds with each other, and their relationships further complicated as they each try to gain national market share in a climate with a decreasing demand for oil, cooperation should prove interesting for the Gulf States. Moreover, according to Critchlow, lifting the ban on US crude oil exports is becoming more likely as Washington considers applying more pressure on Russia. Since Russia’s GDP is taking a hit with lower oil prices, removing the ban on US oil exports may act as a one-two punch to Vladimir Putin at a time when Russia is threatening its non-NATO border nations, like the Ukraine and now Finland.
In recent days, OPEC has been in turmoil due to lower crude prices. Saudi Arabia, OPEC’s most influential cartel player, has changed its focus. Instead of trying to control supply in an effort to maintain a price window of about $100 per barrel, their new strategy is to grow market share at the expense of other OPEC members. US imports from OPEC countries have been cut in half since the beginning of the recession, replaced mostly by increased domestic production. With the loss of revenue from the US market and the decline in demand from the EU, some OPEC countries, like Libya and Saudi Arabia, have increased production as a way to maintain or grow GDP. These few break-out OPEC members have not only increased production, thereby lowering Brent oil prices, but are directly competing with one another for the emerging Asian market. This move has the added effect of attempting to slow both US oil production and future domestic oil and gas investment based on lower oil prices.
Before you attempt to digest what this means to domestic oil investments, you should understand that not everyone in OPEC agrees with this strategy. This move to increase production, lower prices, and aggressively court specific markets stands to reduce revenues as well as market share for other OPEC members. According to Wikipedia, some OPEC countries derive most of their GDP revenue from petroleum exports (UAE 53%, Angola 97%, etc.) Saudi Arabia is the primary actor in this increased production strategy. This move could ultimately backfire on Saudi Arabia, the de facto leader of OPEC, from other OPEC members who desperately need the higher price for crude oil to fuel their economies. Some OPEC members are requesting a special OPEC meeting to deal with the drop in crude prices, while some countries like Iran are specifically calling for cuts to OPEC production. It should be noted that Saudi Arabia tried to reduce production this summer but was unable to gain consensus from the other OPEC members, so it reversed course. Perhaps Saudi Arabia’s recent strategy will make OPEC members originally hesitant to reduce production this summer reconsider their reluctance, and support cuts in production to return prices to about $100 per barrel.
When you couple this recent move by Saudi Arabia with the rise in Sunni and Shiite tensions, as well as the ascension of rebel groups such as ISIS and other Islamic militant groups in oil producing nations, we could soon see terrorist activity with the goal of reducing and/or destabilizing the flow of Middle Eastern and West African oil to world markets. Any disruption in the flow of oil will put further pressure on the US to end its ban on exporting its superior light sweet crude oil. In the end, the recent drop in crude oil prices may actually turn out to be the nudge necessary to set into motion actions that will ultimately elevate the prominence of United States oil industry.
Research performed by Thomas J. Stanley in his book “The Millionaire Next Door” found that about 70% of all millionaires are in business for themselves. Research performed by Sally Shaywitz of the Yale Center for Dyslexia & Creativity indicates that dyslexia is a key attribute of successful entrepreneurs. Richard Branson, William Hewlett, Henry Ford, Ted Turner, and Charles Schwab are all flaming dyslexics, just to mention a few. In fact, in addition to entrepreneurs, some of the most successful and wealthy inventors, politicians, artists and athletes are also dyslexic. The point is that while dyslexia occurs in about 10% to 15% of the general population, the most financially successful segments of our population have a MUCH higher occurrence of dyslexia.
Why are entrepreneurism and dyslexia important with respect to oil and gas investments? Because dyslexics do not read text very well, nor are they very good at auditory processing. They require a more multimodal approach when it comes to understanding new information. Yet most oil and gas companies looking for new investors continue to use primarily text-based fact sheets on their web pages to educate new investors about the advantages of oil and gas, or use voice-only phone calls to get their investment message across. This technique would miss 10% to 15% of the general population, but according to a study performed by Julie Logan, a professor of entrepreneurship at the Cass Business School, it misses 35% of the most fertile portion of the investor population: entrepreneurs. Why then do oil and gas companies and/or their broker dealer organizations looking to raise capital from accredited investors continue to use techniques that fail to meet the needs of about 1 in 3 accredited investors? Companies willing to make minor changes to their sales approach to include video, graphics, and animation to educate dyslexic millionaires about the advantages of oil and gas investing will have little competition for these investors’ dollars.
A study by the U.S. Geological Survey (USGS) has concluded that induced earthquakes, which are triggered by drill operations pumping fluids underground, are creating quakes 16 times weaker then naturally occurring quakes. Man-made earthquakes have been a used by anti-fracking groups to make a case against domestic drilling programs. The truth, as revealed in the report, is that the induced quakes have much less energy and therefore do less damage than natural earthquakes. This is because the fracking fluids act as a lubricant, making for a smoother slip, as opposed to the more herky-jerky release of energy of a normal quake.
Dent Research provides demand demographics on a wealth of products. This video explains why they believe the Arab-Israel conflict and the domestic rise in light sweet crude production will put pressure on our government to make the US an oil exporter again. Such an act would create a power-shift in favor of the US and increase demand for domestically produced oil, raising the price paid for a barrel of our oil.
An recent article published in the Nature International Weekly Journal of Science says that the recent droughts and our increased reliance on irrigation are removing subsurface mass, causing more earthquakes. Fracking, which pumps water underground vs. removing it from the ground, has long been blamed for creating more earthquakes. Now Nature.com is saying that removing water is causing the overlying strata to exert less pressure on faults, causing an increase in earthquakes. It sounds like we should embrace fracking as a nation, if for no other purpose than to replace what irrigation is removing from the freshwater aquifers.
Many economists expect the trade deficit will continue to narrow as exports, helped by the U.S. energy production boom, are growing faster then imports. Our domestic energy boom has boosted exports while reducing America’s dependence on foreign oil. U.S. petroleum exports rose to an all time high of $137b, up 11% from 2012. Energy imports fell 10.9% to $369b replaced by domestic sources. For the first quarter of 2014 petroleum exports are up 7% while imports are down 3.4%