(Erik has had some technical problems getting onto the site / see: thread
And he has asked me to post the following message and responses here):
Please forgive my apparent silence on this thread. I am having severe technical problems posting on this site, which I’ve so far been unable to resolve....If anyone has any suggestions, I’m all ears. I can’t post to this thread until I find a solution, and the videos will be put on the FinancialSense homepage this weekend, so I’m expecting a bunch of new traffic here. Any help much appreciated!
Now to the questions posed recently:
For those heavy to gold exposure, would it make sense to transition to oil and gas exposure? In your scenario, I don't see gold necessarily following the oil price up.
I think that all depends on whether you intend active or passive management. If I had to choose something to buy and hold for 3 years, it would go gold. Hands down, no question about it. I actually think there's far more profit opportunity in oil, but you need to follow the markets and trade it actively. As described in the videos, I don't expect a one-way market. There will be some big ups and downs, and the most profitable traders will be those who can hedge their bets and anticipate a lot of volatility.
Steve Crower recently had a good podcast with steve 2 beers where he pushed the idea of this 'plateau' peak oil, through technological advances and Bakken etc. I post the link, in case you or anyone hasn't heard it. The comments to the show see James H. Kunstler throw in a comment and also a reply from Crower beside a few others.
I guess I am interested in how long this 'plateau' could be extended because, as you say, timing is everything, the all important factor for getting this right. Bugger that it is so difficult! For example I have thoughts that the 'ACH' window, if we dont have another deep shock, could be already at an end and we are actually in, or entering right now, the 'crisis' window with the volatility showing through from 2008.
James Puplava's recent interview with Robert Hirsch about his new book and where we are right now was quite a wake up call (at least to me) and Robert's careful consideration and strength of feeling conveyed in his language was measured and yet full of portent and urgency. It says a lot to me that you give weight to this very book towards the end of your video presentation-more so that even Twilight in the Desert.
Anyway here's the link to Steve Crower's podcast on 2 beers with steve. Thanks again for your valued input.http://twobeerswiths...crower/comments
Steve Crower is a really good guy. I’ve e-mailed him links to the videos, and hopefully he’ll feel inclined to join us in this discussion.
The plateau can be extended for as long as new non-conventional production can be brought online to make up for conventional decline. In theory this could be indefinite if enough non-conventional supply could be found to compensate for the inevitable decline of conventional supply.
As Milton Friedman once said, the solution to high prices is high prices! In other words, the higher the price of oil, the greater the incentive (and the more available the capital) to develop new non-conventional resources. In a bizarre way, the geopolitical crisis ( Egypt , Libya , Bahrain , etc.) that is now developing will help extend the plateau. If some of the middle-eastern conventional projects are taken offline (for example if Qadaffi’s henchmen follow through on his threat to blow up the oilfield resources in Libya), crude prices will skyrocket and that will fund more aggressive development of the Bakken, Athabasca tar sands, etc. etc. Then eventually the trouble in Libya will abate, those resources will be brought back online, and there will be more supply. If all goes well, that is (big bet).
On the other hand, a big price shock in coming weeks might be just what it takes to crash the global economy, and a repeat of 2008 would mean crude prices falling to the point that no capital would be available for any kind of non-conventional project development. That would shorten the plateau.
The point is, you really can’t say for certain. A lot is in flux right now, and how it turns out will depend on both the geopolitical and economic landscapes.
A major question I still consider to be only vaguely answered is what the real story is on producing shale oil using hydro-fracking (only) and no heating. I know people who are producing oil in the Bakken shale for ~$23/bbl, something that should be impossible if you read what the PO camp (including Bob Hirsch) has written on oil shale. Some of my sources are telling me “But that’s an anomaly – only a small (<10%) part of the Bakken can be produced that way”, but my contacts in the Bakken (who are drilling real holes and selling real oil for real money) say otherwise. I’m still working on getting to the bottom of this question.
The really big development since the video was recorded is everything going on in Egypt/Libya/Bahrain/etc. My video talks about a crisis window. What wasn’t said explicitly is that the “crisis” in question is a geological/economic crisis – the crisis of peak oil and peak cheap oil. Now we have another crisis being superimposed on top of my timeline, and it’s a geopolitical crisis. This is not a case of my “crisis window” arriving earlier than expected. Rather, it is a matter of another crisis window (the geopolitical one) starting now, in addition to the factors in my timeline. I guess I was more prescient than I thought by choosing “Anything could happen” as the name I gave to the time between now and the beginning of the geological crisis window.
This gets very interesting because the two crises have opposing effects on the term structure of the crude oil market. The geological (peak oil) crisis will be all about oil costing more in the future than it does in the near term, because of the geological phenomenon of conventional production decline. The geopolitical crisis, on the other hand, tends to force much higher near-term prices because of anticipated continued political unrest threatening near-term production, but would normally tend to anticipate declining longer-term prices as the present tension eventually abates.
These opposing forces may create some really extraordinary opportunities for spread traders. I expect the long-term backwardation to deepen as a result of the geopolitical tension coupled with an under-appreciation of peak oil. That will create a huge speculative opportunity, but picking the bottom (in terms of the calendar spread differential) will be challenging to say the very least!
All the best,