How To Position For The Next Oil Shock
Friday, May 27, 2011
Executive Summary
- Saudi Arabia’s reserve capacity is a myth
- World oil demand is increasingly overwhelming supply
- Why exports matter more than total world production
- What the next oil shock will do to stock, bonds, commodities, precious metals, and real estate
- What you should do to prepare
Part I: Past Peak Oil – Why Time Is Now Short
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: How To Position For The Next Oil Shock
Putting It All Together
Let’s review the situation in the KSA:
- Despite assurances of 12.5 mbd of total capacity, the KSA has not yet produced more than 9 mbd on a sustained basis in 2011.
- The IEA is begging the KSA to pump more.
- The KSA has turned to outside companies to help it begin to unlock heavy oil reserves that will take a lot of time, energy, and money to prosecute.
- The KSA has a vastly expanded rig count as they expand drilling operations to produce more oil (odd behavior for a nation with an alleged 3.5 mbd of spare capacity?).
The simplest and therefore most likely explanation for all of this is that the KSA does not actually have 12.5 mbd of total capacity, it is already at peak, and it’s now struggling to maintain even 9 mbd of total output on a limited basis.
Of course, there are other possibilities, but since those will not shake the world to its bones if they happen to be true, the safe course of action here is to go with the ‘KSA is at peak’ story. Sooner or later it will be true, so there’s not a lot of harm in being early to it, while being late could be costly.
Now let’s move onto the last part of this puzzle: demand.
How To Position For The Next Oil Shock
PREVIEW by Chris MartensonHow To Position For The Next Oil Shock
Friday, May 27, 2011
Executive Summary
- Saudi Arabia’s reserve capacity is a myth
- World oil demand is increasingly overwhelming supply
- Why exports matter more than total world production
- What the next oil shock will do to stock, bonds, commodities, precious metals, and real estate
- What you should do to prepare
Part I: Past Peak Oil – Why Time Is Now Short
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: How To Position For The Next Oil Shock
Putting It All Together
Let’s review the situation in the KSA:
- Despite assurances of 12.5 mbd of total capacity, the KSA has not yet produced more than 9 mbd on a sustained basis in 2011.
- The IEA is begging the KSA to pump more.
- The KSA has turned to outside companies to help it begin to unlock heavy oil reserves that will take a lot of time, energy, and money to prosecute.
- The KSA has a vastly expanded rig count as they expand drilling operations to produce more oil (odd behavior for a nation with an alleged 3.5 mbd of spare capacity?).
The simplest and therefore most likely explanation for all of this is that the KSA does not actually have 12.5 mbd of total capacity, it is already at peak, and it’s now struggling to maintain even 9 mbd of total output on a limited basis.
Of course, there are other possibilities, but since those will not shake the world to its bones if they happen to be true, the safe course of action here is to go with the ‘KSA is at peak’ story. Sooner or later it will be true, so there’s not a lot of harm in being early to it, while being late could be costly.
Now let’s move onto the last part of this puzzle: demand.
Have we forgotten where our food comes from? The importance of a whole foods diet has become more and more vital to our overall health and well-being, because, well, we’ve strayed so far from food. Farmers’ markets bring honest food to us. However, I certainly get lost and frustrated while shopping for food at a grocery store because a) there are too many products on the shelves and b) the multitude of choices requires label-ready due-diligence.
You might say that I am a bit of an unconventional thinker. I generally take a different approach to things than what most people do, given the same stimulus. I believe I am in good company in that regard here at ChrisMartenson.com. I clearly understand the controversy over employing biofuels as one method to prepare for the coming storm. Let me say right up front that I do not believe biofuels will allow our existing civilization to sustain its current high net energy lifestyle by substituting biofuels for oil. My argument for the application of biofuels is at a much more personal/community level. I have been asked repeatedly about what and why I am doing this, so I am posting this as a service to the ChrisMartenson.com members who have questions that may not have been answered yet.
