|
Post by jeffolie on Dec 11, 2011 16:46:56 GMT -6
nat gas can substitute for coal by converting electrical generating plants, but currently exporting nat gas from America remains very limited resulting in a declining price expectation. Consolidation of a nat gas pipeline system recently may increase nat gas manufacturing use perhaps in the future if demand for manufacturing in America looks promising enought to justify the conversion. Europe hangs like an ugly threat to American manufacturing if Europe's demand for American manufactured products declines adding risk to the conversion investment decisions. nat gas unlike gasoline will face increased difficulty sluffying off its supply and high amount of storage into the international market. Without an outlet the excess over American demand creates an expectation of declining American prices. Imagine the decline if imports of liquidified nat gas had grown from the turned down creation of port facilities to import LNG. ======================== A SOBER LOOK AT U.S. NATURAL GAS 10 December 2011 By Walter Kurtz, SoberLook.com Looking back at a two year old post on natural gas called “Natural gas prices below zero?“, it feels as though we are back to the same price dynamics. Price for the “nearby” Henry Hub contract hit new lows today at $3.317/mmBtu. What is driving this price collapse? As before it is the usual suspects: limited storage, strong production (particularly in US shale), increasing reserves, and warm weather. Let’s take a quick look at the first three. 1. Storage: The chart below compares current storage usage versus the historical range based on where we in the seasonal cycle (inventory drops off in the winter and increases the rest of the year). Just as in 2010 and 2009 we are at the top of the range and may go even higher if the weather in the NE & Midwest stays warm. Source (EIA) 2. Production continues at rates significantly above historical levels. Source: EIA This growth is driven by a rapid increase in shale gas production. According to EIA, the US shale production increased 14-fold since 2000 and is now 22% of total US production. Source: EIA 3. And estimated reserves in the US continue to increase. Source: EIA It is almost as though the US is becoming the Saudi Arabia of natural gas but with limited export capabilities. No real support for natural gas prices is expected to come until 2013. According to a Goldman report this support will come from moderation in production growth and environmental restrictions that will force conversion from coal burning to natural gas. Goldman: 2013 shaping up as a transition year to a more balanced market We expect 2013 to be a transition year, with the market’s reliance on priceinduced responses (e.g. need for coal-to-gas substitution) diminishing as US shale gas production growth moderates, economic growth improves and looming increased environmental restrictions – notably, CSAPR Phase 2 and Maximum Achievable Control Technology (MACT) – further boost gas-fired generation at the expense of coal. On net, we expect less priceinduced coal-to-gas switching will be needed than in 2012, allowing prices to move higher, and are introducing a 2013 NYMEX natural gas price forecast of $4.25/mmBtu Until then if the weather stays warm, there is no telling how low natural prices could drop. pragcap.com/a-sober-look-at-u-s-natural-gas
|
|
|
Post by jeffolie on Jan 17, 2012 16:13:57 GMT -6
Natural gas [ prices] down in flames Natural-gas futures tumble nearly 7% Tuesday to their lowest level since 2002 as expectations of warmer weather lead to selling. Consumers who use the fuel for heat are big beneficiaries. (MarketWatch) — Natural gas futures plunged to their lowest in nearly a decade on Tuesday, pressured by forecasts of unseasonably warm winter weather in the U.S. Meanwhile, crude returned to $100 a barrel, prodded higher by bullish remarks by Saudi Arabia’s oil minister. Light sweet crude for February delivery+2.29% added $2.01, or 2%, to $100.71 a barrel on the New York Mercantile Exchange. That marked oil’s highest level since Wednesday. But natural gas contracts for February delivery /quotes/zigman/2199342 NG12G -6.67% were touching their lowest levels since March 2002, declining by 18 cents, or 6.8%, to close at $2.49 per million British thermal units. Natural gas has closed lower for seven out of eight sessions, and has declined 19% over the past six sessions. ... ....With storage tanks not hurting for lack of the fuel, bouts of cold weather will come but it will be insufficient to make a dent in supplies and send prices higher, he said. Chandra saw prices likely below $2 per million Btus by late February and early March. www.marketwatch.com/story/oil-rises-above-100-a-barrel-in-asian-trade-2012-01-17?dist=afterbell
|
|
|
Post by jeffolie on Jan 17, 2012 16:19:53 GMT -6
Power Plants Shifting From Coal to Gas Use has risen by 50 percent in last decade January 17, 2012 By KEVIN BEGOS Associated Press Writer , The Intelligencer / Wheeling News-Register PITTSBURGH - The huge smokestacks of electric power plants have long symbolized air pollution woes. But a shift is under way: More and more electric plants around the nation are being fueled by natural gas, which is far cleaner than coal, the traditional fuel. The most optimistic projections describe an abundant domestic energy source that will create enormous numbers of jobs and lead to cleaner skies. Nationwide, the electricity generated by gas-fired plants has risen by more than 50 percent over the last decade, while coal-fired generation has declined slightly. The gas plants generated about 600 billion kilowatt hours of electricity in 2000 and 981 billion hours in 2010, according to the U.S. Energy Information Agency. American Electric Power’s coal-fueled Kammer Plant is targeted for shutdown by the end of 2014 because of new U.S. Environmental Protection Agency rules. The company says it currently is not interested in converting the facility to burn natural gas. During the same period coal generation declined from 1,966 billion hours to 1,850 billion hours, while hydroelectric and nuclear generation stayed about the same. The figures include electricity use by consumers and industry. Nationwide, EIA said natural gas use for power generation rose 7 percent between 2009 and 2010. That's about 515 billion cubic feet. The biggest jumps were in the Southeast, with use rising 24 percent in North Carolina, 18 percent in Virginia and 15 percent in South Carolina. "Most of the people I know in the electric power industry are building natural gas" plants, said Jay Apt, a professor of technology at Carnegie Mellon University in Pittsburgh. That's because of low prices over the last few years and the relatively low cost of building such plants, compared with coal-fired or nuclear. But Apt cautions that the trend could stall because the basics of supply and demand mean that if too many plants embrace cheap gas, it won't stay cheap. "The surest route to $6 or $8 gas is for everybody to plan on $4 gas," Apt said, and if prices do rise, coal will again be the most cost-effective fuel. Natural gas is priced per million BTU. Some companies clearly believe the switch to natural gas plants makes long-term sense. Sunbury Generation LP in central Pennsylvania plans to close five of its six coal-fired generators and replace them with two natural gas-fired turbines by 2015. But some companies are deciding not to switch fuels. There has been talk locally that American Electric Power could retrofit its soon-to-be-closed Kammer power plant for natural gas use, or that FirstEnergy could restart its shuttered R.E. Burger Plant in Shadyside using natural gas. Representatives from both companies dismissed those claims, saying they have no plans at this time for those plants. The owners of the Homer City Generating Station in western Pennsylvania, the state's second-largest coal plant, plan to add $700 million in pollution control equipment to keep the 40-year-old plant running and in compliance with clean air laws. www.theintelligencer.net/page/content.detail/id/564519/Power-Plants-Shifting-From-Coal-to-Gas.html?nav=515
|
|
|
Post by jeffolie on Jan 17, 2012 16:23:19 GMT -6
Coal, nuke, solar now have signification issues compared to nat gas.
Price, pollution, jobs issues now have gotten the attention of big consumers of energy that now favor nat gas. Nat gas also has peaking generation potential meaning that electrical generating stations can turn on the gas during the day and shut it off at night much easier than a coal fired boiler.
|
|
|
Post by jeffolie on Jan 23, 2012 12:24:53 GMT -6
US domestically drilled, produced and used nat gas supply exceeds demand ... higher cost supply now will not sell and some high cost supply that now becomes overhead resistence to price increases if demand increase enough in the future to justify selling it profitably ========================= Faced with decade-low natural gas prices that have made some drilling operations unprofitable, Chesapeake Energy (CHK) says it will drastically cut drilling and production of the fuel in the U.S.Chesapeake, the nation's second largest natural gas producer, said Monday that it plans to cut production 8%. That means the company would produce the same or slightly less natural gas in 2012 than it did in 2011. Chesapeake produces about 9% of the nation's natural gas. That's a change from the dramatic increase in domestic output in recent years. Chesapeake and other drillers have learned to tap enormous reserves of natural gas trapped in shale formations using a controversial drilling method known as hydraulic fracturing, combined with horizontal drilling. The drillers force millions of gallons of water and sand, laced with chemicals, into compact rock to create cracks that serve as escape routes for the gas. Extreme weather for two winters and two summers kept natural gas prices high by boosting demand for home heating and power generation. But this season's mild winter, especially in the Northeast and Upper Midwest, has crimped demand and led to a glut. Natural gas futures slipped to $2.32 per 1,000 cubic feet last week, lowest since 2002, before rising slightly to $2.34 Friday. Prices have fallen 23% since the beginning of the year. Storage levels are 21% higher than their 5-year average for this time of year, according to the Energy Information Administration. The drop in price has meant lower revenue and profit for drillers. Analysts surveyed by FactSet estimate that Chesapeake's earnings fell to $2.81 per share in 2011, excluding special items, from $2.95 per share in 2010. They say at today's prices only the least expensive, most productive natural gas wells remain profitable for drillers. In electronic trading Monday, natural gas prices were up 3.9% to $2.434 per 1,000 cubic feet, getting a boost from the Chesapeake announcement. Drillers had already begun to shift activity regions that produce oil and other liquid hydrocarbons. Strong global demand has kept oil prices high and made these drilling operations extraordinarily profitable. Chesapeake said it would cut its current activity in so-called dry-gas regions by half, to 24 rigs, by the second quarter. That's 67% fewer than an average of 75 rigs the company had in use last year. Chesapeake increased natural gas production 13.5% from 2010 to 2011. It now plans to cut spending on natural gas regions to $1 billion in 2012, from $3.1 billion in 2011. The plan calls for a cut of 500 million cubic feet of gas per day, about 8% of its current production, in two drilling regions in Texas, Arkansas and Louisiana. The move is designed to reduce the glut of natural gas in the country, and therefore increase prices. But analysts caution that drillers historically have reneged on plans to cut output in times of low prices, bowing to pressure from investors to increase production. Also, even as drillers avoid dry-gas regions, they are aggressively increasing drilling in regions rich in oil and other liquids. Those regions also produce large amounts of natural gas, which will help keep total natural gas production high and will likely keep prices relatively low. Chesapeake and others are also working to stimulate demand for the fuel, advocating its use as a transportation fuel or exporting it. International natural gas prices are high because they are linked to the price of oil. www.usatoday.com/money/industries/energy/story/2012-01-23/chesapeake-energy-natural-gas-drilling/52753478/1?loc=interstitialskip
|
|
|
Post by jeffolie on Mar 17, 2012 19:00:01 GMT -6
now at $2.02 down from $3.32 at the beginning of this thread .... almost a 40% price collapse in less than 4 months============================== Natural gas: U.S. energy market’s best bargain? Natural gas is cheap at decade lows, but hasn’t quite bottomed SAN FRANCISCO (MarketWatch) — For those who follow the natural-gas markets, it was no shock to see the commodity fall to its lowest level in a decade, but prices may finally be nearing a bottom as production levels continue to slow. “Gas is more than a bargain. It is not sustainable at this price,” said James Williams, an energy economist at WTRG Economics. “The question isn’t whether prices will rise, but when.” NGJ12 2.33, +0.05, +2.02% April natural gas prices Natural gas for April delivery +2.02% settled at $2.27 per million British thermal units on March 12. That was the lowest settlement level for a front-month contract since February 2002, according to data from FactSet Research. On Thursday, it closed at $2.28 on the New York Mercantile Exchange. That’s a more than 80% drop from the high above $15 seen in 2005, and year-to-date, futures prices have fallen more than 20%. “Realistically, it will be difficult for prices to sustain current levels for an extended period due to the fact that current spot prices are approaching cash costs for marginal production,” said Dan Gundersen, vice president of energy finance for Sandstorm Metals & Energy STTYF +2.14% . And “a reduction in natural gas supply investment is evidenced by a steep decline in the natural gas rig count over the past 4-5 months,” he said. The number of rigs drilling for gas in the U.S. has dropped to 670 as of the week ended March 9, according to data from Baker Hughes Inc. BHI +2.86% — that’s down 21 rigs from a week earlier and down 212 rigs from a year ago. Rigs drilling for oil, meanwhile, have jumped by 469 to 1,296 from a year ago. Click to Play Natural-gas-powered pickups comingU.S. auto makers are introducing pickup trucks powered by natural gas as they look to catch the growing wave of interest in the fuel as an alternative to gasoline. Jeff Bennett has details from Detroit. The 670 rig count for natural gas is the lowest since 2009, according to Ryan Issakainen, senior vice president and exchange-traded fund strategist for First Trust Advisors L.P., while the 1,296 count for oil rigs is the highest level on record. “Oil and gas producers have clearly shifted production to oil versus natural gas,” he said. At the same time, announcements of production cuts from drillers have continued to pour in. Encana Corp. ECA +0.05% said in February that it would lower its 2012 capital investment plan by 37% from 2011 levels to $2.9 billion to “minimize” investment in dry natural gas. Other companies such ... have also announced cutbacks this year in natural-gas output. Read more on the output cuts. “As producer hedges wind down, and as this current low price environment continues to impact the business decisions of natural-gas production companies, increasing natural-gas prices is inevitable,” said Gundersen. Factors that weigh Still, that potential turnaround in prices may take its time. After all, the ultralow prices for natural gas didn’t come overnight. “The writing has been on the wall for a long time,” said Kim Pacanovsky, managing director of oil and gas at boutique investment bank MLV & Co. “High inventories at the start of winter, followed by the warmest winter in a decade were a recipe for disastrous prices.” ‘High inventories at the start of winter, followed by the warmest winter in a decade were a recipe for disastrous prices.’ Kim Pacanovsky, MLV & Co. Exacerbating the natural-gas price decline were a relatively weak economy and “dramatic production gains” over the past few years due to technological improvements, which allowed natural-gas production from shale and “other low porosity formations,” said WTRG’s Williams, noting that by 2011, onshore natural-gas production in the lower 48 states reached 60.2 billion cubic feet per day, up from 41.9 billion in 2006. more at : www.marketwatch.com/story/natura ... 2012-03-16
|
|
|
Post by jeffolie on Apr 11, 2012 13:11:54 GMT -6
Bloomberg News Natural Gas Drops Below $2, Lowest Since '02 April 11, 2012 Natural gas futures in New York dropped below $2 per million British thermal units for the first time in a decade on a growing supply glut caused by mild weather and record production. Gas is down 33 percent this year, making it the worst performer on the Standard & Poor’s GSCI (SPGSCI) commodity index. U.S. stockpiles last month were at an all-time high for the season after the lower 48 states experienced the warmest March on record. Production has climbed, driven by gains at shale formations from Texas to Pennsylvania. “The bulls continue to make a stand at every support level but there’s no fundamental reason to be long right now,” said Phil Flynn, senior market analyst at PFGBest Research in Chicago. Natural gas for May delivery declined 3 cents, or 1.5 percent, to $2.001 per million British thermal units at 1:35 p.m. on the New York Mercantile Exchange after sliding to $1.999, the lowest intraday price since Jan. 29, 2002. More than 15,000 temperature records were broken in the continental U.S. last month, according to the National Oceanic and Atmospheric Administration. Temperatures averaged 51.1 degrees Fahrenheit (10.6 Celsius), 8.6 degrees above the 20th century average, the warmest March in data going back to 1895. Temperatures during the heating season from October through March were 3.8 degrees above average, making it the second- warmest for the period on record after 1999-2000, government agency said. Heating Demand U.S. heating demand this winter was 18 percent below normal through April 7, according to Weather Derivatives in Belton, Missouri. About 51 percent of U.S. households use gas for heating. Fuel consumption typically slumps after the winter heating season ends and before hot weather drives demand from power plants to run air conditioners. U.S. stockpiles totaled 2.479 trillion cubic feet in the week ended March 30, a high for that time of the year, according to the Energy Department. A surplus of the fuel to the five-year average widened to 61 percent, the most in six years, from 59 percent the previous week. Supplies may reach a record 3.851 trillion cubic feet by the end of October, the department said yesterday in its monthly Short-Term Energy Outlook. U.S. gas output increased by 0.8 percent in January to 83.17 billion cubic feet a day from the previous month, led by gains in the Marcellus shale in Pennsylvania and Ohio, the Energy Department’s Energy Information Administration said in its monthly EIA-914 report on March 29. Production in 2011 was a record 28.6 trillion cubic feet. Gas Output Production in the lower 48 states rose every month but one from July through January as drillers shifted operations to more profitable liquid-rich shale deposits. Gas output in the region increased 0.5 percent in January to 72.85 billion cubic feet, department data show. The number of rigs drilling for gas fell 11 to 647 last week, the lowest level since May 2002, according to Baker Hughes Inc. The oil-rig count gained 11 to 1,329, representing 67 percent of the total, according to the Houston-based oil- services company. The Energy Department cut its 2012 forecast for spot gas prices at the Henry Hub in Erath, Louisiana, by 66 cents, or 21 percent, to an average of $2.51 per million Btu from last month’s estimate. The spot price at the hub, the delivery point for Nymex futures, averaged $4 last year www.businessweek.com/news/2012-04-11/natural-gas-drops-below-2-lowest-since-02
|
|
|
Post by jeffolie on Apr 20, 2012 14:54:08 GMT -6
Big players moved into the domestic nat gas arena. Consolidation and mergers now created a different set of players. "... you're going to see consolidation in the industry. So companies that borrowed and used leverage funds, to do all this drilling activity, are going to be under increasing pressure. And you're going to see bigger players step in and buy small companies - we've already seen that..." Just this week the 1st exporting facility in a long time got approval ... it takes time to build The exporting of petroleum will be joined with the exporting of nat gas from LA. The botton half of the Canada to LA pipeline now will feature land rights for a nat gas pipeline. Record exports of petroleum, gasoline and in the future nat gas will shift America's balance of payments picture IF REPUBLICANS SWEEP as I predict in th 2012 elections. ====================================== Natural Gas Glut Leads To Lower Prices Morning Edition [4 min 28 sec] April 11, 2012 The U.S. is facing a growing surplus in natural gas. Renee Montagne talks to Amy Myers Jaffe, of the Energy Forum at the Baker Institute at Rice University, about the glut. She expects some consolidation in the industry. Copyright © 2012 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required. RENEE MONTAGNE, HOST: As oil prices range around $100 a barrel, another energy source is dropping in price and gaining market share. The U.S. is facing a growing surplus in natural gas. Amy Myers Jaffe is the director of the Baker Institute Energy Forum at Rice University, and she joined us from Houston to talk about that surplus and what it means for the U.S. Good morning. AMY MYERS JAFFE: Good morning. MONTAGNE: What does it mean that we've got this huge glut of natural gas? JAFFE: Well, I suppose if you're a natural gas selling company it's not great news, but for the rest of us it's excellent news. It's meaning that consumers, while they're being hit at the retail gasoline pump with high prices, they are having low prices inside their homes. It means that certain states that are not used to being energy producing states have the benefit of severance tax and other kind of economic activities. And it's meaning some good things, geopolitically. It means that we are not buying natural gas from the Middle East. We're not buying that gas from Africa and Russia. So, all good from the point of view of domestic economy, and from household consumers, and from the point of view of U.S. foreign policy. MONTAGNE: Then the downside is actually for the natural gas producers, themselves, who, might it be said, they're victims of their drilling successes. JAFFE: So one of the things I think we're going to see over time, as the price of natural gas, I think, probably is going to stay low, you're going to see consolidation in the industry. So companies that borrowed and used leverage funds, to do all this drilling activity, are going to be under increasing pressure. And you're going to see bigger players step in and buy small companies - we've already seen that.[/color]
The other downside is that we have a lot of states that are not used to having oil and gas development in their state - its noise pollution and industrial trucks moving in and out of communities.
MONTAGNE: Give us an example where they've suddenly had this boom in natural gas production.
JAFFE: North Dakota is a great example. But I think you're going to see it in western Pennsylvania and in Ohio. You have rural places that are not used to having large-scale industrial development. It takes a lot of equipment, you're having to come in with trucks. These are all new phenomenons and there is going to be, I think, a big adjustment period.
You can hear from my accent I did not grow up in Texas. And one of the interesting perspectives I have, is looking back on '70s. We had this whole the Northeast was energy poor and Texas and Louisiana was energy rich. And when we have oil supply crises, it tends to very much hurt the economy and the U.S. East Coast. And it helps the economy in Texas and Louisiana.
And that's really going to change, I think, the way people think about energy in this country, because it's not going to be all the environmental pressure is in Texas and Louisiana, and we're supplying energy for the rest of the country. Many, many states are going to have the opportunity to produce energy.
MONTAGNE: What about exporting the natural gas itself? Is there enough of it, potentially, to become an export product? And is there the capacity to do that?
JAFFE: Well, to export the natural gas, you need to liquefy it and then put it on a tanker. Say they make that investment, you're talking about over a billion dollar investment, to have an export facility. Then the next question is, is there an enough supply? And, I think, probably, the answer to that question is yes. But will that market stay high over the time it will take you to build the facilities to export?[/color]
And there's a lot of competition in the natural gas markets. Can United States gas compete, economically, with Australian gas? Or with gas from a place like Qatar where the cost are very low to produce it? And when we have done our computer simulations of, you know, the world five years from now or the world 10 years from now, it really doesn't look like a smart decision.
MONTAGNE: Amy Myers Jaffe is the director of the Baker Institute Energy Forum at Rice University, speaking to us from Houston, Texas. Thanks for joining us. www.npr.org/2012/04/11/150406676/natural-gas-glut-leads-to-lower-prices
|
|
|
Post by jeffolie on Apr 20, 2012 16:36:54 GMT -6
The organization used to craft policies, regulations, rules on the State level most often corrupted by gas & oil special interest is the well known ALEC. ALEC Urges President and Federal Government to Consult with States on Energy Resources and Public Lands FOR IMMEDIATE RELEASE Contact: Kaitlyn Buss Phone: 202-742-8526 Email: kbuss@alec.org ALEC Urges President and Federal Government to Consult with States on Energy Resources and Public Lands Washington, DC—(February 1, 2012): The American Legislative Exchange Council (ALEC) is sending a strong message to the federal government in regards to management of lands and energy resources within state borders. In his State of the Union address, President Obama said, “Over the last three years we’ve opened millions of new acres for oil and gas exploration…” Unfortunately, compared to 10 years ago, oil and natural gas production on federal lands is down by more than 40 percent. Also, over the past few years, the U.S. Environmental Protection Agency has developed and finalized numerous overreaching and inefficient air and water rules that will dramatically increase energy costs, negatively impact jobs and the economy, irreparably damage the competitiveness of U.S. businesses and trample on state sovereignty in the process. “Every year the federal government further erodes state sovereignty by handing down decisions on the use of energy on public lands,” said Wyoming State Sen. Bebout, a member of ALEC’s International and Federal Relations Task Force. “It’s time to restore the states’ co-equal status with the federal government as written in the Constitution.” The lack of cooperation and the recent onslaught of EPA regulations violating states’ rights is in direct opposition to a recently passed ALEC resolution requesting that the federal government “confer and consult” with states on public lands and energy resources. This resolution, reflecting the sentiment of ALEC’s more than 2000 state legislative members from across the country, was approved earlier this month by the ALEC Legislative Board of Directors. ALEC’s resolution titled Resolution Requesting that the Federal Government Confer and Consult with the States on Management of Public Lands and Energy Resources, recognizes that state governments have an inherent interest in how the federal government manages public land and energy resources. Therefore, state governments should be included in the formation and execution of any significant policy impacting these resources. “The stakes are high and states like Texas who depend on public trust lands demand a seat at the table when decisions are made,” said Texas State Rep. Tom Craddick, ALEC’s former national chairman. Recently, 33 current and former governors and lieutenant governors, 27 groups of state and local officials, 13 state legislative bodies, and ten state agencies across the country have opposed the escalating EPA expansion into states. The groups of state and local officials comprise of thousands of state legislators, utility commissioners, agricultural department officials, foresters, drinking water administrators, fish and wildlife agencies, solid waste management officials, state wetland managers, mayors, counties, and cities. States that have already actively voiced opposition to federal government overreach include Alabama, Alaska, Arizona, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah, Virginia, West Virginia, and Wyoming. ALEC further calls on Congress and the Administration to “commit to greater consultation with the states and to recognize cost-benefit and job-impact analyses must be addressed in order to understand how federal regulations impact states and their respective citizens.” ALEC policies, resolutions and model bills are approved by our legislative members and are the result of nonpartisan research and analysis. For more information on ALEC’s work on the impact and significance of federal regulations on the states, refer to ALEC’s publication EPA’s Regulatory Trainwreck: Strategies for State Legislators available at: www.regulatorytrainwreck.com. For more information about ALEC’s work on state sovereignty visit: www.alec.org/initiatives/restore-the-balance ### The American Legislative Exchange Council (ALEC) is the nation’s largest nonpartisan individual membership association of state legislators, with more than 2,000 state legislators across the nation and 100 alumni members in Congress. ALEC’s mission is to promote free markets, individual liberty, and federalism. www.alec.org/2012/02/alec-urges-president-and-federal-government-to-consult-with-states-on-energy-resources-and-public-lands/====================================== For example in banking: BoA's selective interpretation of the gain from a loss compares to dealing with the mentally ill who selectively remember events through thier pyschotic visions while ignoring the events through the perspectives of observers to these events without psycotic visions. The both see what they want and interpret the events in ways normal people find crazy.http://unlawflcombatnt.proboards.com/index.cgi?action=display&board=financial&thread=10600&page=1 Crazy accounting was labelled 'financial accounting' when I was taught Intermediate Accounting at the University of California at Los Angeles in 1973. One set of books with a meaning for the financial analysts purposely was made; while, a separate set of books with an IRS meaning for the tax preparations purposes was made. 2 sets of different accounting ledgers/books was considered normal and standard operating accounting under the "Generally Accepted Accounting Procedures" used by the US government and by the FASB "Financial Accounting Standards Board". Today's FASB rules and today's IRS rules now have twisted and manipulated psychoticly. For example, banks were allowed to declare as earned income money that was never received from certain types of mortgages. Derivatives tax treatments substantially differed from financial treatments, etc. All these ethically wrong approachs mean nothing wrong to ethically deficient government and accountants. Those with the gold write the rules...the banks and corporations employ ALEC alecexposed.org/wiki/What_is_ALEC%3F to write laws, regulations, policies for mentally, ethically perverted governments at all levels including Cities, Counties, States, Federal plus regulatory entities at all levels. American Legislative Exchange Council (ALEC) 1129 20th Street NW - Suite 500 Washington, DC 20036 Website: www.alec.org/The American Legislative Exchange Council works to advance the fundamental principles of free-market enterprise, limited government, and federalism at the state level through a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public. www.alec.org/about-alec/Q: What is ALEC Model Legislation? A: ALEC model bills serve as public policy resources. Many organizations that focus on state-level issues also offer model state legislation or codes. These organizations include the American Bar Association, National Conference of Commissioners on Uniform State Laws, and advocacy organizations, such as the National Consumer Law Center. Model bills are ideas that can be taken, modified or rejected, depending on the needs of a particular legislation. State legislators often find model bills valuable for learning from each others’ experiences and expertise, while tailoring the bills they introduce to meet the interests of their own state’s constituents. Any model bill, regardless of where it is from, rises or falls in a state based on whether it provides the solutions that makes sense in that particular state. Unlike in many private sector groups that offer model legislation, elected state legislators fully control ALEC’s model legislation process. Ideas for model legislation are presented in a task force, which any member can join. The task forces often have vigorous discussions on whether to adopt a model bill, as well as the language for that model bill. When a task force believes a model bill is ready, ALEC’s Board of State Legislators must review and approve the bill for it to be posted for other ALEC members. Each state legislator and their constituents then decide which solutions are best for them and their states. As ALEC Treasurer Rep. Linda Upmeyer (IA) has said, model bills are like “a file cabinet. If something can help my constituents, I can take what I need; and if it doesn’t help, I leave it alone.” www.alec.org/about-alec/frequently-asked-questions/
|
|
|
Post by jeffolie on Apr 27, 2012 11:51:10 GMT -6
Nat gas' low prices hurt coal, help electric expenses to decline, avoid new nuke power ... little else Nat gas gluts will continue at least for 2 years inside the US because little get exported and little new demand Nat gas as a govt CPI component ... lower inflation rate reported by lying govt. Nat gas does not immediately relieve the oil prices ======================================= Why Lower Natural Gas Prices Help the U.S. Only a Little April 26, 2012 There’s a rule of thumb that says a $10 rise in the price of a barrel of oil reduces gross domestic product growth by anywhere from 0.2 to 0.5 percentage points. Applied over the past six months, when crude prices rose by about $30 from early October to the end of March, that means dearer oil might’ve chewed as much as 1.5 percent out of GDP growth during the last two quarters. Not a trivial amount considering GDP increased 3 percent in the fourth quarter of 2011. Economists surveyed by Bloomberg tend to think the economy grew just 2.2 percent in the first three months of 2012, when the price of gas really took off. Oil is our economy’s most important raw material. The price of it (and therefore, gasoline) impacts the price of just about everything we buy, from groceries to clothes to appliances. The more expensive oil is, the more expensive a whole lot of other stuff becomes. But what about that other gas, the kind that we’re practically swimming in these days? Natural gas is now 80 percent cheaper than it was four years ago. How much has that price decline counteracted our recent pain at the pump? Unfortunately, not much. On the consumer side, at best you’ve seen a small reduction in your electricity bill. Natural gas has certainly played a part in slowing the pace of rising residential electricity prices, from an average annual increase of 5 percent between 2003 and 2008, to 0.8 percent from 2009 through 2013. Rates are actually forecast to fall 1.4 percent next year. According to the consumer price index, the cost of utility gas service for heating declined 9.1 percent over the past year. But that’s a relatively tiny portion of what we spend our money on—less than 1 percent. Motor fuels, on the other hand, carry a relative importance of 5.8 percent and have increased 9 percent in price over the past 12 months. So whatever you might’ve saved on your electric or home heating bill, you probably plowed right back into your gas tank. Cities with public buses that run on compressed or liquefied natural gas have benefited from lower fuel costs. And if you happen to be one of the handful of people in the U.S. who drive a natural gas car, you’re probably coming out ahead on your fuel bill every month—especially in California, which has the bulk of the country’s 400 public natural gas fueling stations, and where regular gasoline prices are among the highest. Manufacturers have certainly benefited from lower natural gas prices. The fuel is a particularly critical input for the petrochemical and refining industry, giving U.S. firms a big cost advantage over international competitors—as much as 70 percent over manufacturers in South Korea and Europe. Whether cheap natural gas is propelling any of the strong job growth in the manufacturing sector over the past couple years is debatable. It’s certainly making a lot of manufacturers more profitable. On the flip side, it’s been bad for producers. As prices have plummeted it’s become uneconomical to keep drilling for gas. There’s a good chance that if you were working on a natural gas drill rig a year ago, you’re not anymore. Big picture as of today, cheap natural gas hasn’t done much to counteract the run-up in oil prices. “So far it’s been a pretty small positive,” says Mark Zandi, chief economist at Moody’s. That doesn’t mean that in the future it won’t pay big dividends for the U.S.—particularly, as Zandi points out, if we’re able to get more natural gas into our transportation network. T. Boone Pickens wants to retrofit our long-haul trucking fleet to run off natural gas. There’s evidence that’s starting to happen. If done on a large enough scale, that could take a big bite out of the impact high oil prices play in driving up the costs of goods. We’re also severely limited in our capacity to export natural gas right now. The U.S. has just one export facility, in Alaska. A recently approved LNG export terminal in Louisiana will bring that to a grand total of two once completed in 2015. Regulators aren’t likely to approve any more LNG export projects in the coming year, though they probably will in the future. Depending on domestic demand, abundant natural gas could significantly reduce the U.S. trade deficit and perhaps turn us into a net exporter. Although we have massive amounts of natural gas—an estimated 2,214 trillion cubic feet, enough to last 100 years by some measures—we still don’t use that much of it. Case in point: We’re drilling so much and using so little, it’s conceivable that we’ll max out our 4.3 trillion cubic feet of storage capacity at some point this year. Americans burn about 22 trillion cubic feet of natural gas every year, enough to fill up about 595,000 Empire State Buildings. But we could use a whole lot more, and certainly will soon. Until we do, the U.S. economy won’t see that big of an upside from cheap prices. www.businessweek.com/articles/2012-04-26/why-lower-natural-gas-prices-help-the-u-dot-s-dot-only-a-little
|
|
|
Post by jeffolie on May 7, 2012 10:52:38 GMT -6
Record Gas Use by U.S. Utilities Fails to Drive Up Price: Energy May 7, 2012 U.S. utilities led by Southern Co. (SO) are burning a record amount of natural gas for generating electricity without triggering a forecasted boost to the fuel’s price from near 10-year lows. The power companies used 34 percent more gas in February than a year earlier, Energy Department data show. Even Atlanta- based Southern, historically one of the largest U.S. coal-plant operators, is on pace to consume more of the cleaner-burning fuel than coal in 2012 for the first time in its 100-year history. Utilities are the nation’s biggest gas consumers. Marketed gas production reached a record 66.22 billion cubic feet a day in 2011. The historic switch to gas is set to peak this year without fulfilling industry predictions that it would eat up inventory and drive up gas prices. That’s because unparalleled output from new shale fields is oversupplying the $95 billion U.S. gas market, postponing relief for hundreds of producers. Record gas use “may not be the panacea that people think” it will be, Jason Schenker, president of Prestige Economics LLC, based in Austin, Texas, said in a telephone interview. Schenker was the fourth-best predictor of gas prices in the first quarter, according to data compiled by Bloomberg. The difficulty of forecasting fuel prices led managers of two energy funds to close in the last four weeks, including John Arnold’s Centaurus Energy Master Fund. While benchmark U.S. gas prices have gained 42 cents, as of 10:53 a.m. in New York, from an intraday low of $1.902 per million British thermal units on April 19, most analysts are not calling the bottom of the price cycle for a fuel that traded above $13 in 2008. No Bottom Yet “I’m not expecting a lot of upside through summer” for gas prices, Tim Evans, energy analyst with Citi Futures Perspective, said in a phone interview. “We’re still sitting on a massive inventory of storage.” Bulging gas stocks are also being sustained by a combination of unusual weather that’s depressing electricity sales, as well as decisions by power company executives to avoid becoming over-reliant on the historically volatile fuel. Marketed gas production reached a record 66.22 billion cubic feet a day in 2011 and may rise another 4.5 percent this year, according to Energy Department estimates. Inventories rose to 2.576 trillion cubic feet the week ended April 27, 50 percent above the five-year average for the week, the agency reported May 3. Cheap gas, rather than helping power producers like Southern and Exelon Corp. (EXC), undercuts their revenue because it drives down wholesale electricity prices, squeezing margins for plants that run on nuclear, renewable and coal power. The utilities, for many reasons, are close to their limit of shifting the mix toward gas. Elasticity Limits “You have stretched the rubber band in terms of coal-to- gas switching as much as you can,” Arun Jayaram, an analyst with Credit Suisse in New York, said in an interview. Meteorologists say the fourth-warmest winter on record that just ended will be followed by a cooler summer for much of the U.S. compared with a year ago. If weather remains mild, total power consumption will be 1.8 percent lower from July through September from a year earlier, the Energy Department said. Gas consumption averaged 5 billion cubic feet higher at power plants this year through April 10 compared to year-ago levels, Credit Suisse’s Jayaram said. He predicts increases will ultimately slow to an average of 3 billion cubic feet a day this year as generators manage abundant inventories of both coal and natural gas. Unprecedented Burn To make a dent in gas inventories, the power industry will need to burn at least 4.5 billion cubic feet more per day on average for the year above 2011 levels, according to data compiled by Bloomberg New Energy Finance. That is “absolutely unprecedented, but not out of the question,” Charles Blanchard, fossil fuels analyst for Bloomberg’s New Energy Finance unit, said in an e-mail. Such consumption would shatter the all-time monthly gas generation record of 121 terawatt-hours, set in August 2010. Blanchard thinks the sector could reach around 130 terawatt- hours during the summer months, but cautioned recent forecasts of cooler, El Nino-influenced weather “would be terrible for gas.” The power sector is predicted to account for 35 percent of total U.S. gas demand this year, up from 31 percent last year, Energy Department data show. The trend has accelerated as gas prices fell in much of the country below coal, traditionally the second-cheapest source of power behind nuclear energy. Coal’s Declining Role Gas at the Henry Hub in Louisiana, the delivery point for New York futures, averaged $2.60 per million British thermal units in February, while Central Appalachian coal averaged $3.06 per million Btu, Energy Department data show. Coal remains the leading source of power in the U.S., but has fallen to 37 percent of U.S. electricity generated during January and February, combined, from 46 percent a year ago, Energy Department show. “For the first time since the 1970s, we’ve seen coal’s share of energy production fall below 40 percent,” David Herr, leader of Duff & Phelps (DUF)’ energy and mining practice, said during a March 28 webcast. In 2010, “coal was sitting at 50 percent, where it had been for the last decade.” Companies such as Duke (DUK), Dominion and Southern already had been increasing their reliance on natural gas in anticipation of tougher federal pollution standards and as gas prices began falling from a three-year peak on July 2, 2008 of $13.69 per million British thermal units. Using Spare Capacity Falling wholesale electricity prices also spurred the switch by making it uneconomical for power producers to retrofit older, smaller coal-fired plants to comply with tougher federal emissions standards, Herr said. As gas became the preferred fuel source, Southern and other power producers fired up generation capacity built after the last gas-price plunge a decade ago. Southern ran its combined-cycle gas turbine fleet at a near-record 70 percent of capacity during the first quarter, doubling the plants typical use, Thomas Fanning, Southern’s chairman and chief executive officer, said in an April 25 phone interview. Southern, whose energy production is nearly as great as the country of Australia, expects to derive 47 percent of its power from gas this year and 35 percent from coal. Five years ago, the company produced 70 percent of its power from coal and 16 percent from natural gas, Fanning said. Balancing The Mix Southern has tried to balance its power-plant fleet with a mix of nuclear energy, coal, gas and plants that can run on either fuel “so we can respond to the changing fuel market,” Fanning said. “That’s exactly what we’re doing.” Gas output in the lower 48 states has grown greatly because of hydraulic fracturing, or fracking, and other improved drilling techniques that make it economic to extract fossil fuels from shale rock like the Marcellus in the U.S. Northeast. Drilling in oil-rich reserves, such as in North Dakota and Texas, often also yield gas. Some of the factors affecting prices, excluding swelling supplies, are difficult to gauge. Blanchard said examples include the lingering effects of record winter warmth and the maximum use utilities will be able to derive from combined-cycle gas plants that infrequently ran at greater than 40 percent capacity. If weather patterns return to the norm this fall, PPL Corp. (PPL) expects to run its coal-fired plants longer than during the first quarter, when its gas units ran at up to 92 percent of capacity, William Spence, CEO of the Allentown, Pennsylvania- based utility owner, told analysts during a May 4 conference call. Embracing Instability? Public Service Enterprise Group Inc. (PEG), New Jersey’s largest utility owner, ran its New Jersey and Connecticut coal-fired plants at just two percent of capacity during the first quarter as nuclear plants and a combined-cycle gas fleet handled the weather-diminished power load. Executives worry their industry’s headlong embrace of a notoriously unstable commodity could contribute to a price spike later in the decade when the U.S. begins exporting liquefied natural gas, William Levis, president and chief operating officer of PSEG Power LLC, the Newark, New Jersey-based company’s merchant power unit, said in a phone interview. “We like to keep as many options available for us as we can,” said Levis, “It wasn’t that long ago that the price of gas was high.” www.bloomberg.com/news/2012-05-06/record-gas-use-by-u-s-utilities-fails-to-drive-up-price-energy.html
|
|
|
Post by jeffolie on May 8, 2012 14:01:50 GMT -6
Obama channelled Newt... drill, baby, drill3,675 new natural gas wells = 4,302 short-term jobs & 875 long-term jobs The current over supply will add to lower prices for electricity. " ... natural gas production grew by more than 7% in 2011, the nation’s largest volume increase in a year. Domestic oil production reached its highest level in eight years ... " =========================== Obama administration approves 3,675 new natural gas wells in Utah May 8, 2012 The Obama administration has approved a new natural gas drilling project in Utah that is designed to support more than 4,000 jobs and boost the production of energy -- while protecting the environment. All are political issues in the current presidential election year. U.S. Interior Secretary Ken Salazar announced the approval on Tuesday during an appearance outside Salt Lake City. Texas-based Anadarko Petroleum Corp. will be allowed to develop up to 3,675 natural gas wells in the next decade in Uintah County, about 170 miles southeast of Salt Lake City near the Colorado border. The announcement comes as Republicans have pressed the Obama administration on energy policy and on job-creation efforts at a time when the national unemployment numbers are at 8.1%. As part of its attack on how the Democrats are dealing with the economy, the GOP has called for more production and more drilling. In announcing the agreement, the Obama administration stressed energy production and job creation. According to the Interior Department, natural gas production grew by more than 7% in 2011, the nation’s largest volume increase in a year. Domestic oil production reached its highest level in eight years. “The president is focused on expanding safe and responsible production of natural gas as part of an all-of-the-above energy strategy that’s cleaner, cheaper and full of new jobs,” Salazar said. “This agreement is a great example of how collaboration can allow us to uphold America’s conservation values while bringing growth to Utah’s economy and further reducing our dependence on foreign oil by developing our resources here at home.” The proposed gas wells, to be located in an area with thousands of other wells, would support an annual average of 1,709 jobs directly and 1,212 jobs indirectly, the government said. At peak development, the project would support 4,302 short-term jobs; it would support an average of 875 long-term jobs over the production life of the project. The agreement also offered something to environmental groups, including the Southern Utah Wilderness Alliance, which repeated its April praise. As part of the agreement, Anadarko promised not to drill along the high cliffs of the White River on the Colorado Plateau. The company also agreed to buy 640 acres of private land along the river for conservation, the group said. “We appreciate Anadarko’s willingness to meet with us, listen to our concerns, and adjust its project to eliminate and mitigate impacts,” said Stephen Bloch, energy program director for the Southern Utah Wilderness Alliance. “These kinds of compromise agreements confirm that Utah can have a robust energy sector while at the same time protect its wildest public lands.” The agreement drew a mixed response from Utah’s Sen. Orrin Hatch, a Republican. Hatch faces a June primary for the nomination to seek a seventh term in the Senate. “This expected announcement is a step in the right direction, but we’ve still got a long way to go,” Hatch said in a prepared statement. “The fact is that much more has to be done to open up more of our state’s land to development.” The economy remains the most important election issue, according to almost every poll, but at least some energy issues, such as high gasoline prices, are also factors. A Gallup poll in March found that Americans were almost evenly split 47% to 44% when asked whether energy production or the environment should have a higher priority, a narrower division than a year ago when energy led 50% to 41% www.latimes.com/news/nation/nationnow/la-na-nn-utah-natural-gas-20120508,0,450789.story
|
|
|
Post by jeffolie on May 8, 2012 16:59:19 GMT -6
I enjoy a good outing of a hype as well as any skeptical person ... my significant problem with the below piece is that nat gas inventory has almost completely filled the nat gas storage in America which indicates to me that the hype claim below is not true at this time ... perhaps down the road the hype will prove to be bad stuff that policy decisions should have not relied upon. Eurozone crisis The below piece assumes a continued demand for nat gas which may decline because American manufacturing sells a significant, albeit low (I some have written 20% of exports, some 2%of total manufacturing), small portion to Eurozone buyers which clearly now has entered recession with the possibility rising of a collapse to 50% this year in my opinion plus higher as time extends to the end of 2013. So, if US demand declines then nat gas prices will not reverse anytime soon... the hype seems true, likely to continue to me for the short term======================================== Monday, May 7, 2012 Shale Gas Hype: Subprime 2.0? If my RSS reader is any guide, most of the press about shale gas has focused on two issues. First, shale gas is in considerable supply, cheap to produce, and burns far cleaner than other fossil fuels. Second, shale gas does not look so hot environmentally, all in. Fracking can pollute ground water (and potable water is our most scarce resource) and releases enough methane to make shale gas as detrimental as coal. Still, it has been treated as the Great Hope for America’s energy woes, a way to turn the US into an exporter, and maybe it will cure cancer too. Obama touted 100 years of shale gas reserves, and manufacturers envision an American revival based on cheap fuel. The problem is that the good part of this story is largely wrong. Shale gas supplies are overestimated, and it is not as cheap as it has been touted to be. The big reason is that shale gas wells, unlike oil wells, peter out really quickly. The result is that the viability of shale gas as a solution to America’s high energy consumption level is only on an interim basis. Shale gas is more likely to be a stopgap, a 25 year solution rather than a 100 one. As with the housing bubble, analysts and journalists who understand the economics are giving clear warnings, but they don’t seem to be getting much of an audience. For instance, Jeff Goodell in Rolling Stone wrote in March: At the same time, scientists began to conclude that America’s reserves of natural gas have been overhyped. In January, the Energy Department cut its estimate of the amount of gas available in the Marcellus Shale by nearly 70 percent, and a group affiliated with the Colorado School of Mines warns that there may be only 23 years’ worth of economically recoverable gas left nationwide. Even worse, new studies suggest that because of fugitive emissions of methane from wellheads and pipelines, natural gas may actually be no better than coal when it comes to global warming. In February, no doubt annoyed by Obama’s State of the Union claim of 100 years of shale gas, aeberman of The Oil Drum wrote a detailed post explaining in some detail what the supply side looks like. One key fact: the US is already at the point where it is drilling less productive wells: In 2001, the U.S. natural gas decline rate was about 23% and the annual replacement requirement was 12 Bcf/d when total consumption was 54 Bcf/d. Today, the decline rate is estimated to be 32% and increased consumption of gas means that approximately 22 Bcf/d must be replaced each year. And the broader implications: The shale revolution did not begin because producing oil and gas from shale was a good idea but because more attractive opportunities were largely exhausted. Initial production rates from shale are high but expensive drilling and completion costs make economics challenging… Shale plays have produced a land grab business model in which hundreds of thousands of acres are acquired by each company. Unprecedented lease costs have become the norm often based on limited information and science. Operators have indulged in over-drilling these plays for many reasons but adding reserves, holding leases and company growth are among the main factors particularly with the low cost of capital. The inevitable result has been the collapse of prices as supply exceeded demand. Most analysts forecast that the future will be much like the present, and that natural gas will be abundant and cheap for decades to come. There are, however, strong and consistent indicators that natural gas supply may be less certain than most observers believe and require a higher price to be developed economically. Natural gas demand is growing as fuel switching for electric power generation continues, and will be increased by environmental regulation in the coming years. The U.S. will shift more of its future energy needs to natural gas in many sectors of the economy. The best justification, in fact, for the land grab and over-drilling spree is expectation of higher prices. Those companies that grabbed the land and held it by production will profit greatly once the true supply and cost of shale gas is recognized. In March, Wolf Richter also explained why the super low shale gas prices ($2.28/MMBtu) were not a sign of a great new energy source, but lack of producer discipline: Natural gas is dirt cheap, hovering at a 10-year low. In the US, that is. In other parts of the world, natural gas is four, five times more expensive—a rare discrepancy in a globalized economy… But there is a problem: price. Natural gas is too cheap…drilling activity is collapsing. In 2008, the peak of the drilling bubble, there were at one point over 1,600 rigs drilling for natural gas in the US. During the financial crisis, the rig count fell off a cliff, then recovered a bit, but now is in free fall again. Last year at this time, there were 882 rigs drilling for gas. Two weeks ago, the count was down to 691. Last week it was down to 670 rigs (Baker Hughes). Fracking has turned into a massacre for producers…at current prices, drilling activity will continue to shrink while production at wells drilled over the last two years is plunging. At some point, the massive amount of gas in storage will be drawn down below a normal level. But production can’t be cranked up from one week to the next. Perceived or real shortages will drive up the price, but not to an equilibrium where producers barely break even and consumers enjoy low-cost energy. It will be a spike. We’ve been through this before. But why the comparison to subprime? The biggest producers are more land/lease speculators than energy companies, in terms of how they seek to make money. And they’ve been speculating in a highly leveraged manner. Per John Dizard of the Financial Times: Even before the most recent gas price crash, the shale gas producers were spending two, three, four, and even five times their operating cash flow to fund their land, drilling, and completion programmes. The widely accepted claims of huge volumes of cheaply produced energy did not square with this deficit financing… Too much money was borrowed, on complex and demanding terms. Wall Street should have provided reality checks to the shale gas people; instead, they just provided cashier’s cheques with lots of zeroes at the end….Prices will have to adjust upwards, a lot, to cover not only past debts but realistic costs of production. There is an echo of the late residential real estate financing bubble in the shale gas story. Consider the parallels. Institutional investors sought to capture excess return while “hedging away”, or simply avoiding, classic sectoral risks (whole loan default risk, dry hole and gas price risk). The ultimate effect is their assumption of larger, less initially visible, and less manageable risks (securitisations backed by unenforceable foreclosures, very large, quickly-depleting, high cost shale operations). The same institutional investors could not find enough “investment grade” risk to fill those baskets in their portfolios (triple A or double A operating company bond issuers, investment grade energy company equity). In the case of the energy industry, the rise of national oil companies reduced the opportunities for integrated majors or even conventional-prospect-oriented smaller public companies. US national policy tilted the capital markets’ risk/reward calculation to a favoured set of investments (subprime/ “non-traditional” mortgages, gas substitution for coal, or gas-fired backup for renewables). The promoters had a “story” for institutions (home mortgages have a low historic default rate/ shale gas fields have little, if any, dry hole risk, and are a way to ‘manufacture’ gas). The lead companies in the industry devised complex structured products, often priced by OTC derivatives (tranched home equity asset-backed securities, impenetrable joint venture agreements and scantily disclosed hydrocarbon hedges). The issuers’ apparent risk mitigation was validated by expert opinion (rating agencies/ sellside geology consultants). The sad bit isn’t just that we seem to be playing the same tired scripts over and over, but that finance now seems to be based on deeply flawed incentives and risk sharing that encourage the manufacture of bad loans. I focused on current readings to contrast them with the hype, but consider: Dizard (not an energy expert, he’s only as good as his sources) was issuing warnings in 2010. As he points out, journalists, again in a parallel to the housing bubble, have been as remiss as the promoters. www.nakedcapitalism.com/2012/05/shale-gas-hype-subprime-2-0.html
|
|