Fossil Fuel Industry Is The Next Subprime Danger

(London Telegraph)

The cumulative blitz on energy exploration and production over the past six years has been $5.4 trillion, yet little has come of it.

The epicentre of irrational behaviour across global markets has moved to the fossil fuel complex of oil, gas and coal. This is where investors have been throwing the most good money after bad.

They are likely to be left holding a clutch of worthless projects as renewable technology sweeps in below radar, and the Washington-Beijing axis embraces a greener agenda.

Data from Bank of America show that oil and gas investment in the US has soared to $200bn a year. It has reached 20pc of total US private fixed investment, the same share as home building. This has never happened before in US history, even during the Second World War when oil production was a strategic imperative.

……. The cumulative blitz on exploration and production over the past six years has been $5.4 trillion, yet little has come of it. Output from conventional fields peaked in 2005. Not a single large project has come on stream at a break-even cost below $80 a barrel for almost three years.

……. A large chunk of US investment is going into shale gas ventures that are either underwater or barely breaking even, victims of their own success in creating a supply glut. One chief executive acidly told the TPH Global Shale conference that the only time his shale company ever had cash-flow above zero was the day he sold it – to a gullible foreigner.

Oil & Gas Investment Chart

The Oxford Institute for Energy Studies says the Eagle Ford Dry Gas field, the Marcellus WC T2 and “C” Counties, Powder River, Cotton Valley, among others, are all losing money at the current Henry Hub spot price of $4.50. “The benevolence of the US capital markets cannot last forever,” it said.

Read The Full Story —

SRSrocco’s Remarks:  As you can see from the chart above, private investment in U.S. oil and gas is at an all-time high at nearly 20% of the overall total.  Furthermore, as investment in oil and gas peaked higher (1920, 1945, 1982 & presently), investment in residential construction declined substantially.

There is a great deal of debate how things unfold from here on out.  Some believe “Renewables”such as wind and solar are going to save the day.  I disagree.  Renewables are not an alternative to the fossil fuel industry, rather they are “DERIVATIVES” of the fossil fuel industry.

Wind turbines or solar panels are not manufactured out of thin air… a great deal of oil, natural gas and coal are consumed in the process.

I will be also including data on the changing climate in the future.  We must remember, after the sun, the climate is the next largest source of energy (wind, rain, weather & etc) after the sun.

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6 Comments on "Fossil Fuel Industry Is The Next Subprime Danger"

  1. a ‘greener agenda’ is mis speak for ..changing more MONEY for existing products….that is a ‘greenback agenda’….imho

  2. DaleFromCalgary | July 12, 2014 at 7:43 pm | Reply

    A few comments from a private investor who has 25% of his assets in petroleum:

    Conventional oil still pays, albeit small wells. I have mineral rights that pay me royalties, preferred shares in junior petes that pay dividends, and limited-partnership units in groups of conventional wells where I get a share of the gross income. All this in Alberta.

    One natural gas investment I’m in was only getting $1 per gigajoule shipping gas as gas. Now they have electrical generators on the wellheads and sell the electricity locally for a netback of $7/gj.

    I don’t own any shale, heavy, or bitumen investments. Nobody I know who does has even got their initial investment back, much less any return on capital. However, I noticed that the drilling companies get paid, so I have some shares in them. My observation is that the only people who make a profit fracking or drilling horizontal are the machine operators.

  3. Steve,

    just read through BP latest est. on oil longevity…what a hoot.

    Before we look @ BP’s view for the next 10yrs, let’s look @ the last 9yrs…

    Brent crude saw a 300% increase in price ($38 to $109) from ’04 til ’13 produced a 5% increase in global production and despite the higher prices saw a 9% increase in demand (consumption). And available net exports (ANE) are flat to falling. Amazingly there is no discussion of ANE’s on which the price of all oil is established…like everything, oil is priced on the margin and in this case based on what can be exported after exporters have their fill…importers are paying a kings ransom and will continue to pay more and more because there isn’t enuf ANE.

    When the last 10yrs show that the price of something triples but net global supply barely changes while total demand continues rising faster than supply…ummm, and Capex spending for the largest oil producers (XO, BP, CVX, BG, COP, ENI, OXY, PBR, RDS, STO, TOT, XOM) collectively goes up 320% from $80 B to $262 B…that may indicate there is a problem.

    And no cheap energy, no “trend” growth, no way to service debt…I guess when you are this deep in a hole of lies, no reason to stop digging.

    • Chris,

      SPOT ON… no discussion on NET OIL EXPORTS whatsoever. I am indebted to Jeffrey Brown’s work on the LAND EXPORT MODEL. I will be publishing some of my own forecasts for the decline in NET OIL EXPORTS in upcoming Reports.

      We are most certainly out of CHEAP OIL… and the world can’t afford EXPENSIVE OIL. So, Peak oil is here. Just a matter of time.

      steve

      • PBS interviewed martensen they made him out to be this right-wing conservative doomer who thinks the worlds oil is about to run out.. Most people I know look at me the same way even though I explain to them the world has plenty of oil but the cheap stuff is almost gone.. They either don’t understand that concept or (this is good) they’ll get just get paid more to offset the higher energy and food cost lol

        • Adam,

          I actually believe the folks in the government and in the media understand the ramifications of PEAK OIL. However, no one makes any money on a DECLINING ENERGY BASE. The only way to keep BAU-Business As Usual going is to make sure the world believes INFINITE GROWTH FOREVER.

          Silly people…

          steve

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