I’ve decided to stop posting to the Energy Investment Strategies web site and to take the site down eventually.  There are two reasons.   One is that I need to concentrate my efforts on fighting my cancer.  The other is that I think to a large extent my original aims for this site have been accomplished.  The site was started to educate investors about “peak oil”, its implications for potential future energy shortages, related increases in the importance and value of energy-related equities, and ways investors can best participate .  …

Jim Jubak just published a very useful survey course on Rare Earth Element investment opportunities.   The good news is that he nails the facts.   The bad news is that if he’s writing about REE’s, then the knowledge of this unusual  investment niche is no longer very rare.  Jubak’s sense is that the stocks have become pricey. He’d like to buy Lynas (LYSCF) if the Chinese fund it but get less than control shares. (Who wouldn’t?)  That surely must be what the Australian government wants too.  With the new interest …

On July 26th I wrote a piece about oil and energy which also focused on the speculative battery technology company EEstor and it’s minority owner Zenn Motor Company (ZNNMF).  Since then I’ve given more thought and some added research to the matter.  On July 29th, I posted a correction to my original pieces as follows:   re: the Zenn investment, it seems the information in my piece was incorrect. According to a 7/2/09 press release you can find athttp://www.emediaworld.com/press_release/release_detail.php?id=623265the Zenn investment was $5M [not $700,00]. The …

Game Changing Battery Technology: Is It Here Now? Nearly every oil observer - Simmons, Maxwell, Jeff Rubin, many others, and least of all myself - see oil prices rising in 2 - 5 years, probably to new heights, if the global economy continues to recover.   That’s based on pretty accurate visibility of new oil supply over the next 5 - 7 years, fairly certain rates of decline in old fields, plus assumptions of demand growth rates for OECD, developing, and oil exporting economies.   I provided my own version of this …

This has nothing to with energy but I was amazed to read a recent WSJ report stating that “Executives and other highly compensated employees now [2007] receive more than one-third of all pay in the U.S.”  And that doesn’t even include equity-based compensation like stock options which is often a huge percentage of total executive compensation!   The complete WSJ piece is reproduced below.  It seems to me that American society is being increasingly polarized both politically and financially, and that the two are related.  Not that the rich are …

The stock market and the oil market both seem to engender feelings much like summer vacation time when I was a kid.  Kinda boring, not much happening, a time to wander around, allow your attention dwell on whatever news of the day happens to come along and rest your mind before getting back to the “real world” some time around Labor Day.   So we can be distracted by Gov. Sanford’s bazaar behavior, the political drama of health care reform, Berlesconi and his babes, or Wimbledon - all of which are …

As numerous observers have said of late, the causes of oil’s substantial climb from about $40 to $70 were primarily the weakening dollar and purchases by investors and speculators (if there is a difference) to hedge their inflation fears.  I’ve noted these causes ever since oil broke $50. More recently I offered the view that some fundamental supply and demand pressures may be building on U.S. oil inventory levels due to the combined difficulties of four of America’s five largest suppliers, Mexico, Venezuela, Nigeria, and Canada, to …

Venezuela has provided about 11% of U.S. oil imports, roughly 1.2 mb/d.   Two trends are putting that supply at risk.  The first is Venezuela’s increased commitment to sell its oil to Cuba, to China, and to other non-Japanese Asian countries.  This commitment may be partially one of political comradeship, but it also is based on Venezuelan debt to certain Asian countries. The second is the decline in Venezuelan production that has come from the increasing financial chaos and expropriation activities caused by its virtual dictator, Huge Chavez.  I think …

Ever since oil lifted over $50 I’ve been saying that speculation is the cause.   Actually, the lower dollar (caused by speculation) is a good part of the cause and inflation speculation is the rest.   What is not driving oil up, it seems, is actual supply and demand.  That’s the assumption in the market, anyway, and it’s probably correct. But there are some fundamentals influencing oil to the upside that are worth noting.   One is Nigeria and the other is Venezuela.   Both have collapsing governments and economies that have been well …

In response to my recent post suggesting that the forces of deflation are fighting those of inflation  (mostly weak housing, growing unemployment, and compulsory reductions in state and local budgets vs. the easy Fed and large federal deficit spending), one reader chastised me for even considering the possibility of deflation.  He and many other commentators say “it can’t happen”. They assume we must be entering a period of inflation because that’s the only way the gigantic projected federal deficits that will create mountains of federal debt - both in …

Another episode in the drama of EEstor - the privately owned potential game changing technology developer that has yet to produce a prototype for public inspection - is the public endorsement or EEstor’s recent milestone announcement by Zenn and Zenn’s decision to increase its investment in EEstor.   Zenn (ZNNMF) is the only way for the public to participate in EEstor.   Here and here are my recent reports on the Zenn/EEstor back-story.

The current development has Zenn “independently verifying” EEstor’s recent announcement of significant permittivity (energy storage capacity) by its …

In the conclusions to my latest newsletter I noted that, “Nearly every analyst is saying the market has come too far too fast and needs a pullback.  Great, let’s have one.”  Today I want to consider the pullback scenario further.  While it’s true that when “nearly every analyst” says something that thing is probably wrong, still  I think it might be reasonable for investors to take steps to protect the portfolio gains of the past couple of months in preparation for a potentially serious pullback.   Let’s hope that it …

There is reportedly $4 trillion parked in U.S money market funds and other cash equivalents getting a return of approximately zero.   That’s a large cash allocation.  Breaking even seemed great a few months ago when most investors were being crushed by falling equity prices.  But now pessimism is waning and the last couple of months’ returns have been record-setting.  So cash is now starting to feel under-appreciated, pun intended.  One principle of investing always holds true:  funds must land somewhere.   So cash funds will either be re-invested where they …

Lynas hosted a conference call recently that can be accessed by clicking on: Investor Call - 5 May 2009 The company line was that the new Chinese investors want to fund the company’s existing business plan and management without any changes.   They understand the strategic value of REEs and wish to maximize the company’s value just as any investor would.  Two good features of the deal are, first, that the new funds are believed to be sufficient to get the company past its Phase 2 goal of producing 20.5K …

Oil prices are ascending in concert with a rising stock market and an expanding sense of non-pessimism about the global economy, yet the supply of cheap oil remains far greater than demand.   Huge amounts of $5 cost oil is being moth-balled by OPEC and there is no shortage of oil inventory above ground, much of it floating at sea.   So the fundamentals of near term oil supply and demand imply lower prices but they are being overpowered by speculators who want to own oil as an investment category.  There …

Here is very good news:  The U.S. Department of Energy will stop researching hydrogen fuel cells for cars.  Hydrogen fuel cells might be feasible if there were gigantic supplies of cheap wind and solar power available to make hydrogen.  It was never a near term concept.   In fact, when George Bush proposed a “moon shot” in transportation technology based on hydrogen, my take at the time was that it was being trotted out because of the desire of both Bush and some Detroit executives to defer the inevitable transition to …

An analysis by an experienced but controversial analyst, Jack LIfton, was recently published at Seeking Alpha and is reproduced below.  It focuses on the use of neodymium, a rare earth element, in windmills, noting China’s plans to vastly expand its use of wind power.  The use of REEs in windmills and the expansion of wind generated power is one more bullish trend supporting the idea that the prices of REEs may have a great deal of upside potential.  Lifton thinks that is the case although he raises the …

Shown below is part of the Great Western Minerals Group web site that compares the market value per tonne of their Hoidas Lake deposit of rare earth elements with other deposits as of February, 2008.      If we assume that REE prices will rise somewhat as the recession ends, it is not unlikely that the Lynas Mt. Weld deposit would be worth $17,500 per tonne.  The company plans to reach 20,100 tpa by phase 2 with half that achieved in phase 1.  Therefore, gross revenues …

A report in The Australian newspaper (affiliated with The Wall Street Journal) provides an insight that is worth considering.  It suggests a some key ideas that could be important in evaluating the investment prostpects of both Lynas (LYSCF) and Arafura (ARAFF):   1. China’s exports of Rare Earth Elements (REE’s) is slipping significantly.   2. China may be seeking to both monopolize the REE market and to diminish its reliance on its own domestic supply of REEs for use in its own production of end products.   In …

Lynas Corp (LYSCF), the Australian rare earth element mining company, announced it will accept an offer from China Non-Ferrous Metal Mining Co to provide A$252 million of equity capital in exchange for a 51.6% equity position in Lynas.  As part of the deal, China Nonferrous will provide guarantees to help Lynas secure financing from Chinese banks for two loans worth $104 million and $80 million. Lynas said the second loan is not needed immediately but is to be made available at the request of its board. According to this …

Stocks continue to recover from their panic bottoms of last November, many of them having doubled or more from then (case in point: General Electric).   All this seems very healthy to me given the lack of real world data indicating any sort of resumption in economic growth.  We get only data indicating a slowing in the rate of decline.  On top of that, we know there are more shocks to come:  huge default rates in loans on commercial real estate which lags the economy, the likely bankruptcy of both Chrysler …

In early February I wrote about the upside potential for Iraqi oil production.  Below is the opposite case as put forward recently by an EIS reader, Nawar Alsaadi, who has first hand insights on the issue.  I think he makes a compelling series of arguments, all of which tend to the conclusion that Iraq is unlikely to provide the world with much more than it’s current 2.2 mb/d of oil, certainly over the next few years and perhaps longer term. Future Iraqi oil production is very important to projecting …

I’m scratching my head over $50 oil in the face of unprecedented levels of inventory both on land and at sea and with ample spare capacity of “underground inventory.”   Talk about speculative influence - speculation seems to be the only explanation for why oil is not, say, $35.  Speculators in oil futures are betting on an economic bottom begetting a recovery begetting greater oil demand.  Along with limited expansion capacity due to reduced investments in oil production and high rates of decline for older wells. Of course all that …

I’ve owned Petrobank (PBEGF), a TSE oil junior, at $50, sold it as the market tanked, and over the past few months I’ve been buying it again in greater quantity in the teens.  It’s now just over $20.  I’ve been impressed with management’s apparent ability to successfully execute a standard “exploration and production” strategy as exemplified by its Bakken and it’s Columbian programs.  Beyond that, I’m fascinated with the huge speculative upside potential of the technologies it has developed for harvesting heavy oil more economically and environmentally.  

The stock may not …

In February Merrill Lynch analysts issued a report saying that non-OPEC oil production may have already peaked. “In summary, assuming the ongoing recession does not turn into a multi-year event where global oil demand is pushed down structurally for the next five years, the steep decline rates in OPEC and non-OPEC countries alike could put upward pressure again on oil prices as soon as 2010 or 2011.”  Here are two press reports:  Thomson Financial News STOCKS NEWS US-Merrill: Non-OPEC oil production may have peaked02.03.09, 02:25 PM EST …

The first press report of a Chevy Volt test drive,  has been published here.  The Volt is America’s first plug-in hybrid electric vehicle.  What stood out in my mind was the very positive performance review in terms of power, acceleration, and the low center of gravity.  As I recently wrote, the surprising virtue of the new PHEV’s will be great performance.  The other advantage of the PHEV, as this report mentions, is that some drivers may not need to buy any gasoline.  That could save $1,000 a …

Oil and Stocks Advance Further   Oil and stocks seem to have bottomed as I suggested last month.  Since that March 16th post, stocks are up another 8%, a scorchingly hot run on an annualized basis.  Since March 6th the S&P is up over 21%.   Meanwhile the price of oil has risen almost 35% since February 18th, not quite two months ago. More Gains to Come I continue to expect further gains for both stocks and oil - and eventually for natural gas - but each is a different …

Platt’s reported a 12% y/y decline in Mexican oil exports in February.  “In February 2009, Mexico exported 1.257 million b/d of crude, down from 1.366 million b/d in the previous month and 1.429 million b/d in February 2008.”

Here’s a summary published at SeekingAlpha.  Note the P/E seems to be off.  I make it about 14. http://seekingalpha.com/article/127329-sqm-reports-revenue-growth-for-eighth-consecutive-year#comment-436464

Are stocks and oil bottoming?

Was last Tuesday’s 350-point rally the beginning of the end of the bear market or just a false “bear trap?”  And a related question: “Did oil bottom at $33 and will it get re-tested?”  Let’s see what we know.

Some things we know

Sometimes the objective observable facts can yield fairly clear conclusions.  Usually that’s not the case.  Usually you can use the available facts to make a decent argument in either direction.  But sometimes the facts seem fairly clear.

For example, there should have been clarity about being …

I’m very enthusiastic about the potential for Plug-in Hybrid Electric Vehicles (PHEV’s) to provide a big piece of the ultimate solution to America’s “oil addiction” problem.  The PHEV will have an extended-range all-electric capability and a small gasoline engine that will re-charge the battery when it begins to run low, thus providing ample total range on a tank of gas.  

A PHEV with a 20 mile electric-only range will allow many drivers do all their normal daily chores while using only minimal gasoline, if any - thus getting virtually …

Six month ago - when the world economy looked significantly rosier - I posted an analysis of projected supply and demand for oil going forward to 2015.  The analysis was based on the assumption of continued demand growth, continuing decline of old oil fields and expected new production from announced oil megaprojects.  I adjusted the magaprojects estimates for delays and  I concluded that: “if these estimates are at all closely correlated with reality we should expect oil markets to be tighter than at present through 2012 …