Environmentalists always try to find ways to disrupt any energy production possible, it seems, using any means possible. This time they’re trying to disrupt shale oil production in NW Colorado over the possible death of a species: a plant called the DeBeque milkvetch.¹ Rather than throw their money (and time) into moving the species to another locale, they’ll waste their days picketing, lobbying and harassing to get their way. If your property has a very unique specie of animal or plantlife on it, it means you have a rare resource. If the demand by environmentalists is high for this species, why not sell it to them at a nice profit? Let them raise the money, buy what they want, and provide for it with their own money. I sure don’t want to spend my tax dollars supporting any particular species of animal or planet if others are willing to cough up their own cash to do so. I’m not anti-environment, I’m pro-property rights.

The Daily Advertiser regurgitates the same news in a very short article today.² Some interesting information from them was included though: Gasoline and diesel are just two components of crude oil and make up approximately 30 percent of a barrel of oil. Other percentages are as follows: jet fuel 4 percent, butane, propane, ethane 1.7 percent, heavy fuel oil 1.7 percent, other 7.6 percent for a total of 44 percent. The remainder, heavy tower bottoms 46 percent, is converted to lube oil, asphalt and petroleum coke. We always consider crude oil useful for cars and trucks, but we rarely think of the other uses that crude is better at providing for than anything else. Even though the other 70% may not occupy a huge portion of the market, many of these smaller markets are much more profitable for the retailers in this country. We can’t write off crude entirely until we’re aware of new ways to create those useful byproducts.

Garfield County, Colorado is worrying about another boom and bust cycle from the new shale oil drive.³ This county has experienced more booms and busts than almost any other U.S. microeconomy over the decades usually due to skyrocketing import crude prices versus US dollars. Here is where we see the Federal Reserve’s crime: creating new money, pushing prices higher due to a weak dollar, and thousands of residents trying to profit from the mess the Fed creates. What they forget is that OPEC can just as quickly lower prices to snuff out the profit opportunities that they believed existed. It is very important for the U.S. and state governments to reregulate energy production as much as possible, including refinery, to level the opportunities as the free market would provide.

Aurora Oil & Gas announced the retirement of one of their members on the Board of Directors.⁴ Aurora Oil & Gas primarily works in the crude and shale markets of Michigan and Indiana, markets that are rarely discussed by the media.

LovelandFYI tells Congress to go slow on shale oil production in Colorado.⁵ They’re concerned about the boom and bust spoken of earlier in this article. Yet we’re now seeing the renewed drive being backed not just by small time speculators but also by huge oil conglomerates: companies who can deal with the risk for the long term. One of the biggest problems with Colorado is not the risk of making a profit but instead the risk of dealing with local and state governments who always want a bigger piece of the pie when profits are found. When the population grows to try to grab a piece of the profit, the governments grow faster and take a bigger chunk out of the residents and businesses. If the governments would leave the industry alone, I doubt we’d see the usual booms and busts. And when they don’t leave them alone (they never do), we’ll have to watch very closely to see how much government cries for more tax dollars when the market collapses for them.

ITPBusiness asks “Is peak oil pure fiction?”⁶ I don’t believe in Peak Oil theory myself — the price of crude oil is not significantly higher once you take into account all the destruction of value the dollar has faced with the Federal Reserve’s mad inflationary policy of the past 2 decades. We’ll know when there is a peak oil problem when gasoline costs exceed 10% of our household income. Until then, I am still paying less than 3% of my gross income for driving, and driving occupies more than 8% of my workday. I’m happy to pay 3% for the 8% I get to bill, gas is still a profit for me. If you’re not billing for your drive time, you’re in the wrong business. People have been crying about peak oil for well over 130 years.⁷ Since 1874 there have been repeated and regular analysis that the oil in the world would be used up within 4 to 15 years. None have been true, and I been none will ever be true. Our knowledge of the true source of oil is still thin: the analysts don’t even know where it comes from or how it is made. If oil is as plentiful and recurring as dirt and water, we’ll never hear it from the mainstream media nor the pro-oil industry analysts.

The Star Telegram has a great article titled “Small Barnett Shale Producers Cash Out.”⁸ Nearly US$50 billion has traded hands in the region with bigger companies buying up the smaller speculators and excavators. For me this is a sign of big things to come — when the big guys come into a market, you’re sure to see new efficiencies and profits to be found (as long as the big guys don’t try to get grants and subsidies for their work). This is a huge market that has been relatively ignored — US$50 billion over 2 years isn’t small beans. Some of the winners in the transactions were even ex-athletes.⁹

One big concern for shale oil producers is the lack of a necessary resource used in the extraction of shale: water.¹⁰ The answer by most analysts seems to be that the oil producers should work with local and regional water suppliers to get the water they need. There’s the government again, one more piece of red tape in an industry long dead from all the other red tape that killed it off the first few times around. It wouldn’t be a surprise to me if the easy hand in the pie by those in power would be control over the water resources rather than a direct tax or regulation. When we see profits, we see politicians.

Late Addition:
It seems like I missed the news that a bunch of ethanol producers are heading for an IPO.¹¹ Three of the largest ethanol producers are expected to have an IPO this year, with some as early as July. Projections are showing a possible doubling in IPO investments. I’m not a huge fan of ethanol based on the corn subsidies and regulations, but any step in a more local energy production is likely a positive one. Ethanol is made by distilling corn. For those who don’t know, distillation is illegal in the U.S.: you need a license by the Federal government to distill alcohol. Preferential treatment, anyone?

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With a 3-day weekend ahead, it seems that the news media has taken off a day early. Today’s wire feeds are about 50% slower than yesterday in content, with a lot of reprinting of the same articles.

The U.S. Senate Committee on Energy and Natural Resources is ready to dig their fingers into a new pie next week as they hold a hearing to look into various oil shale development proposals. This hearing will be held on-site in the Western Slope regions of Colorado and Utah. “I don’t see that oil shale today is a panacea to the energy crisis we have in America,” says Sen. Ken Salazar (D-Colo) who will be joining Committee Chair Pete Domenici, R-N.M., and Orrin Hatch, R-Utah in Grand Junction, Colorado. ¹ “We have more recoverable oil in Wyoming, Utah and Colorado than there is in the Middle East, and this field hearing will help us learn how to tap into this resource as quickly and responsibly as possible,” says Dave Tabet, energy and minerals program manager for the Utah Geological Survey. ²

Patent No. 7,048,051 covers an invention by Ronald E. McQueen of Park City that is titled “Recovery of products from oil shale” has been assigned to Gen Syn Fuels of Kalispell, Mont. Already the preferential treatment and monopolization starts. ³

Internationally, Janek Parkman, CEO of Viru Chemical Group, says that “several new shale oil factories are likely to appear in Estonia in the next decade.” The Estonias oil industry is finding very high demands for liquid fuel to power the growing industrial expansion. They also currently import Natural Gas from Russia, but oil production creates Natural Gas as a byproduct, which could be used to partially meet the demand for the gas. ⁴ The Caspian pipeline between Azerbaijan and Turkey transported its first cargo of oil worth US$4 billion. This 1,768km pipeline will pump about 300,000 barrels of oil this year, and is expected to grow to 1 million barrels daily. BP has a 30.1% stake in the project, which had started construction 10 years ago. 5

OpEd writer Raymond J. Learsy says that “Oil is Not Scarce — The Oil Industry Continues to Play Us For Fools.” He says that “most people have been bamboozled by the oil industry led by its flacks, by compliant analysts, by peak oil spinmeisters, a snoozing press, and the heavy artillery brought to bear by the Organization of Petroleum Exporting Countries.” I tend to agree with him as I don’t believe in Peak Oil, but I also don’t believe that we’re seeing an oil price crisis. Considering the high costs of the Federal Reserve’s madness in inflating the money supply non-stop, oil is not significantly more expensive versus my income compared to 10 years ago. While I miss the days of paying US$1.50 per gallon at the pump, I was also earning half my income at that point. Learsey also covers many available sources of petroleum that are currently not tapped to peak efficiency. ⁶

Natural Gas Intelligence is reporting that ” Energy Lenders Like U.S. Market Best.” Dan Condley, managing director in Banc of America Securities’ natural resources group, says that in the next few weeks Banc of America will announce another $400 million raised for a private energy firm. ⁷

Next week, the Organization of Petroleum Exporting Countries (OPEC) will be meeting in Venezuela in what should be a test of President Hugo Chavez’ ability to influence the policy of the oil cartel. Chavez is pro-nationalization of Venezuela’s resources, which can bring with in great inefficiencies and unprofitability from a market sector that was one of Venezuela’s greatest export profit bases. Venezuela’s reserves are pegged at about 80 billion barrels of oil, but the country believes it has 235 billion barrels. If this can be proven, it would put Venezuela ahead of the current world leader in reserves, Saudi Arabia. ⁸

The results of the Federal Trade Commission’s investigation into possible “price gouging” post-Katrina are in, they’re saying that there was no evidence of price gouging during the natural disaster. The FTC performed examinations on 30 refiners, 23 wholesalers and 24 single-location fuel retailers and released their 222-page report this week that found “no instances of illegal market manipulation.” Sen. Barbara Boxer (D-Calif) said in a statement that this is “business as usual from the FTC.” ⁹

Crude oil prices on the NYMEX fell ahead of the 3 day weeked. The NYMEX closes early and Friday and will be closed on Monday in observance of Memorial Day. Natural Gas prices were steady on the same market exchange. ¹⁰ AAA expects prices to remain high even with the dip, citing a forecasted aggressive hurricane season ahead along with a Federal Energy Information Administration report that forecasts high gas prices. ¹¹

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