LyrArc Article Gist
Daniel Yergin cites an estimate by IHS Cambridge Energy Associates which shows oil from shale and dense rock, which was about 1 million barrels a day in 2011, could reach 3 million barrels a day 2020. North Dakota where much of the production is taking place is now fourth in oil production in the U.S. after Texas, Alaska, and California, and is likely to move up to second place. U.S. imports of oil come primarily from Canada 25%, Mexico 11%, Venezuela 9%, and the Persian Gulf 16%. Canadian oil sands development has increased production and the completion of the Keystone pipeline will increase the share of oil imports from Canada. This is shifting the dynamic of oil away from the Persian Gulf, with the volatile politics in the region, and more towards North America.

LyrArc Article Gist
A study by the national Petroleum Council which continues to emphasizes the energy constraints as developing countries expand and conservation lags behind in the USA.

LyrArc Article Gist
Deepening frustration and economic diffficulties in Iran over sanctions. The Iranian currency, the rial, loses a third of its value.

LyrArc Article Gist
The U.S. responds to Iran's threat to close the Straits of Hormuz, a vital route for oil tankers.

LyrArc Article Gist
Under a new agreement reached between the new Iraqi government of prime minister Haider al-Abadi and the semi-autonomous region of Kurdistan, Kurdistan will export 250,000 barrels of oil a day in 2015, and the province of Kirkuk will export 300,000 barrels a day. Exports will be made under the Iraq national oil company, SOMO (State Organization for Marketing of Oil). Kurdistan will get 17% of Iraq's budget expenditure, Kurds will sit on the SOMO board, and Kurdish Peshmerga army will get direct monthly payments from Iraq's budget. Earlier in 2014 talks had broken down under the Maliki government- Kurdistan began exports using a pipeline to Turkey and the Iraqi government cut off budget payments to the Kurdistan Regional Government. Iraq's oil minister Abdul-Mehdi said in Vienna after an OPEC meeting in November that Iraq has set a production target of 3.8 million barrels a day for 2015. This is an increase of 500,000 barrels a day compared to production in Oct. 2014.

LyrArc Article Gist
Crude from Canada's Alberta oil sands brings about $65, a large discount from the $115 for Brent crude and the $97 price in the U.S. The increase in U.S. oil output is causing a surplus in the U.S., reducing demand for Canadian crude. The lack of enough pipelines to bring this crude to the U.S. also affects prices. The $50 discount to Brent crude affects Canada's oil revenues and economic growth. Canada's central bank cut the growth rate forecast for 2013 to 2% from 2.3%. This is also likely to weaken Canada's currency.

LyrArc Article Gist
The WSJ's Spencer Jakab points out the role of politics- with Saudi Arabia in a standoff with Iran and Russia in Middle Eastern conflicts- and Saudi policy of full output with no cuts unlikely to change, ensuring lower prices for 2016-2017.

LyrArc Article Gist
With domestic oil consumption growing at 10% a year, and the Arab Spring leading to increased subsidies and social spending, the Saudis are looking at nuclear power to generate some of the supply of electricity. Saudi Arabia expects to have no reserve margin of supplies by 2020 at current levels of domestic consumption. In 2011 the Saudi government setup the King Abdullah City for Atomic and Renewable Energy, or KA-CARE, for coming up with nuclear energy policies. KA-CARE has an agreement with French supplier AREVA.

LyrArc Article Gist
After a gap of $25 at times between Nymex and Brent crude prices in 2011 and 2012, the gap is now about $9 in Feb 2014. Analysts expect this gap to narrow further as U.S. bottlenecks ease and prices increase due to low inventories.

LyrArc Article Gist
As U.S. carmakers vehicle sales recover and the Japanese carmakers go through a slowdown as a result of disruptions from the earthquake, the U.S. and the Japanese carmakers find their situations reversed. Japanese carmakers are facing vehicle shortages in the U.S.. Detroit carmakers see the opportunity to make gains in market share during this period, till Toyota and Honda return to normal. Detroit carmakers have also been affected by the earthquake related supplier disruptions, but to a much smaller extent. Chrysler expects to produce 50,000 to 100,000 fewer vehicles as a result of disruptions, according to Marchionne. Chrysler, the weakest of the Detroit carmakers, has staged a recovery under Fiat's Marchionne. One hurdle was the high interest payments- $348 million in the first quarter of 2011- on the $7.5 billion borrowed from U.S. and Canadian governments. Chrysler increased revenue by 35% to $13.1 billion, with global sales of vehicles up 18% to 394,000, and profits of $116 million in the first quarter 2011. The market situation is still precarious for several reasons. Sales of pickup trucks and larger vehicles- which still constitute a major portion of vehicles sales of Detroit carmakers- are vulnerable to higher gas prices. The Japanese carmakers have large cash reserves for new investments, and will introduce new models as they recover from the earthquake. In the past Detroit carmakers used incentives to maintain sales, which diluted profits. Jeremy Anwyl, chief executive of Edmunds.com, says Detroit carmakers have an opportunity to get back to a situation where they can compete with foreign carmakers on a level playing field, with better market acceptance and higher prices. GM says it will increase prices by about $123 on average to cover higher materials costs. The risk will continue to be in the product mix of a higher proportion of pickup trucks and larger vehicles in a volatile oil price environment....

LyrArc Article Gist
Efforts to increase investment in exploration for oil and natural gas by the Indian government include an increase in the state mandated price of natural gas to bring it closer to world prices.

LyrArc Article Gist
GM shares have fallen to $32 by April 2011, having dropped by 13.5%. Ford Motor shares have dropped by 9%. All automobile manufacturers have been affected by rising oil prices. And the government's plans to sell all of its GM shares this summer at a loss create additional uncertainty about the value of GM stock. A sense that the IPO roadshow for GM last summer may have oversold GM and created expectations that may not be fulfilled.

LyrArc Article Gist
Peter Schiff says home prices are still too high. They would have to decline another 20% just to fit the long term trend line indicated by the Case -Shiller index of an average 3.35% increase each year, based on long term historical data. He says economists underestimate how distorted the housing market has become, and how little it has normalized since 2008. This is based on average increase in home prices of 3.35% per year for the 100 years between 1900 and 2000, as determined by Yale economist Robert Shiller, which is just a bit above the average rate of inflation. Taking the January 1998 10 city index of 82.7 and following the 3.35% annual trend line, he says the index would be at 126.7 in October 2010. Case-Shiller showed that it was 159.0 for October 2010. Schiff uses this to show that the market needs to drop by 20.3% from the current level to get back to the trend line. He says that the home buyers tax credit, record low interest rates, and the increased presence of Fannie Mae and Freddie Mac and the Federal Housing administration have for now put a floor on housing prices. Conditions in the US housing market with high inventories, the high unemployment, savings depletion and debt, point to this overshooting by 5-10% on the downside. See Roubini, who points to housing losses in 2011....

LyrArc Article Gist
It makes for good political rhetoric, but in reality the flow of money goes both ways. A lot of investments are made by American companies overseas. This time the flow of oil money because of high oil prices, from the USA and Europe to the Middle East is being recycled back to the USA in the form of investments in the US through small equity stakes in companies and more so through purchases of capital equipment and services to build Saudi infrastructure projects. The $500 billion investment plan over several years in Saudi Arabia is to build everything from new cities, aluminium plants, electricity generation plants and chemicals and plastics plants. The fears and rhetoric are overblown, as the USA also invests overseas with holdings according to the Treasury department of $6 trillion of foreign stock and debt. The acceleration of foreign investment in the US is to be seen in the numbers, as the dollar gets weaker, and its more advantageous for Canadians and Euuropeans to invest here. Last year $414 billion of foreign investors money went into buying stakes in American companies and building factories and purchasing stock, according to Thomson Financial. Thats up 90% from 2006 and represented one fourth of all announced deals. This year in just 2 weeks foreign investors poured $22.6 billion in just the first 2 weeks of January, and that represents one half of all deals. Shows how quickly the picture is changing. One way of looking at it is that Americans buy a lot of foreign goods and the money Americans use to pay for a lot of imports is now being returned to the USA in the form of foreign investments. Note that foreign investment is desirable because it brings new ideas and technology and new management methods to the host country from other countries. These foreign investors in many cases are able to make these investments overseas because they are good at what they do, having them in the host country benefits the host country and shakes up competition in the particular industry in the host country that is receiving the investment. This is why economies once relatively unfavorable to foreign investors like Japan and S. Korea are now passionately seeking foreign investment to make their economies thrive through the exchange and inflow of new ideas and ways of doing things. The same can be and is true for the USA. The other aspect is that most of the investment is still from countries like Canada, Germany, Japan, S. Korea which are big free trade partners of the USA. Manufacturing investment is heavily skewed to European and Japanese companies. Foreign multinational investment (Sony, Toyota etc) grew to $43.3 billion in 2007 from $39.2 billion in 2006 according to OCO Monitor, and will accelerate significantly as companies like VW and other German companies find it cheaper to build in the USA and shift more manufacturing here. To get an idea why the rhetoric is overblown Canada spent the most in buying American companies, $65 billion in 2007, according to Thomson Financial. Russia spent $572 million and India $3.3 billion. How will this improve the chances of the USA making it out of this recession? Five million American work for foreign companies in the USA. Of these one third are manufacturing jobs. These jobs pay about 30% more than jobs in American owned companies. Figures from Treasury Department. There will be more of these jobs as companies like VW build plants here. Roubini Economics estimates that an infusion of about $300-400 billion is needed for the USA to overcome the effects of the current mortgage and credit crisis. $414 billion was invested in the USA by foreign investors according to Thomson Financial in 2007, going up from something like $200 billion in 2006. If this pace continues becasue of some of the same underlying reasons as the weaker dollar, stronger economies overseas, then $200 billion additional investments this year would add that much to a stimulus package of $150 billion by one estimate, to provide a boost of somewhere around $350 billion. In the range of the needed boost. Companies like IBM and GE which have significant investments in India and China and investments in software or infrastructure industries that are growing rapidly or Caterpillar with growth in construction overseas, may keep growing through this downturn. This recession may hit selectively and differently, not be a complete hit to the USA economy, and could prevent it from going beyond 2009 with recovery in 2010. ...