Tuesday, November 19, 2013

The Bakken and The Gold Rush

ZH had a post basically about how the Bakken is going to be a flash in the pan. A correspondent writes,

"J.M. Studebaker began making his fortune, 500 ounces of gold, by selling wheelbarrows to California gold rush miners, starting in 1853, a year after total yearly production of gold began to fall. Of course, he sold wheelbarrows to miners who later went home bankrupt after they made bad decisions to continue investing in gold mining, based on bad information.

It will often be possible to make money by shorting miners and going long on those who make the miners' tools. It will be that way in the Bakken and in the extraction of every depleting resource."
See also this post from Peak Oil Barrel. Especially this chart in the comments, and related commentary,
"Historic production of crude oil and lease condensate in the U.S. is resolved into several Hubbert curves. The tallest one is the original Hubbert curve published in 1956. The smaller curves starting from 1960 were generated by producing shallow, deep and ultra-deep Gulf of Mexico, Alaska (mostly Prudhoe Bay), and then everything else that was not in the original curve: large waterflood projects, thermal and carbon dioxide enhanced oil recovery (EOR) projects, horizontal wells, hydrofractured wells, etc. The broad curve peaking in 2002 was introduced in late 2002, and the model represented fairly well the U.S. crude oil production until 2010. The last small green curve on the right was introduced last month to describe the Bakken and Eagle Ford shales, as well as the increased production of crude oil from the Permian Basin near Midland, TX. The right-most black curve depicts a hypothetical production of 7 billion barrels of oil from the Arctic Natural Wildlife Refuge (ANWR) in Alaska."

1 comment:

Luke The Debtor said...

I found the last paragraph of the Zerohedge article interesting:

"Once the Bakken and Ealge Ford oil fields peak and decline, the United States has no other “ENERGY RABBIT” in its hat. This is precisely why investors need to understand energy and why its important to own physical assets such as gold and silver."

I think there is plenty of energy resources in the US for future development -- or rabbits.

Major oil companies are increasing their spending in deep-water Gulf of Mexico. A single well in the deep-water slope can produce 10,000-20,000 barrels per day.

Freeport is still drilling a 30,000ft natural gas well in the GO -- known as Davy Jones. So who knows what that may spawn if successful.

There are methane hydrate resources in the GOM, as well.

Maybe it is because I am all bent out of shape, but I cannot help but believe Zerohedge is clearly pandering to a certain target audience -- held up in Idaho with their guns -- who claim we all need to own physical assets, such as gold and silver.