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What We Read Today 14 March 2015

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Get ready for a much bigger oil shock (Stephen Sedgwick, CNBC)  The hottest trades right now are buying European sovereign debt with negative yields, riding NASDAQ rocketing to all-time highs and going long on oil.  That's right - betting on two raging bulls and also on the reversal of a growling bear.  According to data from ICE (Intercontinental Exchange), last week "hedge-betters and speculators were piling into the oil trade in levels not seen since the middle of last year" when the bets were on a raging oil bull with prices at $110 a barrel.  Of course, now they are under $50.  Does that make oil a fire sale bargain?  Watch two traders discuss this on the video.

There is more about oil in the discussion section below.

oil.bounce.back.video


Articles about events, conflicts and disease around the world

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The Oil Keeps on Coming (Walter Kurtz, The Daily Shot)  This is why the price of oil is not going up permanently any time soon.  It's probably going down, particularly if production continues to climb through year end.  See next article.

crude.oil.us.2015.mar.12


The U.S. Has Too Much Oil and Nowhere to Put It (Matthew Philips, Bloomberg Business)  Overflowing storage tanks could lead to another drop in prices.  Eight months ago everyone was remarking about how stored crude in Cushing Oklahoma had been drawn down to the lowest level in years.  The tanks were 75% empty.  Then the price of crude collapsed and companies started storing new production, waiting for better prices.  Now the U.S. is running out of storage capacity.  There is even a new type of storage being used - see next article.

crude.storage.us.2010.2015


Introducing Fracklog, the New-Fangled Oil Storage System: Energy (Dan Murtaugh and Lynn Doan, Bloomberg Business)  Wells drilled for fracking have a property that producers are now using:  Oil doesn't flow significantly in a drilled well until the fracking is actually done.  With prices down by 50% drillers are now sitting on some newly drilled wells waiting for prices to rebound.  This article says an estimated 3,000 new wells are in that waiting (or storage) mode and drillers interviewed indicate they inyend to increase the number throughout the year.  The current level of "fracklog" is estimated to be about 3 million barrels a day, and, of course that is rising.  Econintersect estimates that, if the price of crude stays low, by the end of the year the fracklog storage could add another 60 to 90 million barrels of oil in storage in addition to what is stored above ground.  There is also addition oil in storage in the U.S. in the government's Strategic Petroleum Reserve (SPR) - see next article.


SPR Quick Facts and FAQs (Energy.gov)

The Strategic Petroleum Reserve is a U.S. Government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts. The caverns have a capacity of 727 million barrels and store emergency supplies of crude oil owned by the U.S. Government.

The current storage is 696 million gallons, or almost 96% of capacity.  The average price of oil in the SPR is $29.70 so obviously most of the oil has been in there for decades.

The authorization (Energy Policy and Conservation Act passed in late 1975) for the SPR is for storage to be up to 1 billion barrels so presumably additional salt domes could be added to the preserve to increase capacity by another 273 million barrels.  Of course, Congress could pass new legislation to increase the authorized maximum.

However, boneheads in Washington (in the GAO - General Accounting Office) proposed last fall (as crude prices were plummeting) that the government should sell oil and reduce the size of the SPR because it's current size was greater than needed to protect against disruption of oil imports which have fallen with increased U.S. production.  See The Feds May Sell Oil From The Strategic Petroleum Reserve (Philip Mause, Seeking Alpha)


How Big Oil Is Profiting From the Slump (Javier Blas, Bloomberg Business)  Lower oil prices are contributing to profits for Europe's largest oil companies.  Both current profits and future gains are involved.  The deep pockets of huge corporations like BP Plc, Royal Dutch Shell Plc and Total SA enable then to buy and store oil on the dips to be sold later when prices have risen.  That is the future profit.  Currently these companoes are profiting from price volatility:

Although better known for their oil fields, refineries, and petrol stations, BP Plc, Royal Dutch Shell Plc and Total SA are also the world’s biggest oil traders, handling enough crude and refined products every day to meet the consumption of Japan, India, Germany, France, Italy, Spain and the Netherlands.

The trio’s sway in commodities trading, largely unknown outside the industry, is set to pay off in 2015 as the bear market allows traders to generate higher returns by storing cheap oil today to sell at higher prices later and using lower prices to make more bets with the same capital.


Global carbon emissions stall in 2014 (Pilita Clark, Financial Times)  Global emissions of climate-warming carbon dioxide did not rise last year for the first time in 40 years without the presence of an economic crisis.  The efforts to curtail CO2 emmissions may be having more effect than had been thought.  Or the general economic malaise, with Europe teetering on the edge of recession and China slowing down, may have been an important factor. At any rate, this is the first time in 40 years that carbon emissions have not risen without having a significant recession.

gdp.co2.1984.2014


Other Economics and Business Items of Note and Miscellanea

Why I may not send my kids to college (CNBC)

The Retirement Savings Gap Between Haves and Have-Nots Is Getting Bigger (Bloomberg Business)  Public policy action can "play a critical role" in fixing this.  See next article.

The Continuing Retirement Savings Crisis (National Institute on Retirement Security)

IEA sees renewed pressure on oil prices as glut worsens (Reuters)

The East India Company: The original corporate raiders (The Guardian)  For a century, the East India Company conquered, subjugated and plundered vast tracts of south Asia. The lessons of its brutal reign have never been more relevant.

If Hillary Clinton doesn't run, do Democrats have a Plan B? (+video) (Christian Science Monitor)

Iron Ore Price Plunge Puts Small Miners In Danger Zone (Reuters)  Chinese mines are among the losers.

Wall Street Firm Develops New High-Speed Algorithm Capable Of Performing Over 10,000 Ethical Violations Per Second (The Onion)  “With this new automated program, we’ll be able to systematically deceive investors, engage in conflicts of interest, and execute thousands of other blatantly unethical dealings in the time it takes to press a button.”

Pot Warns Congress About Kettle Being Black (Waterford Whispers News)  [T[he Pot depicted the kettle as a “threat to the entire kitchen”.



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