Consumer Energy Report is now Energy Trends Insider -- Read More »

Posts tagged “investing”

By Robert Rapier on Jan 15, 2008 with no responses

Oil Stocks for 2008

CNN is recommending oil stocks for 2008: Oil stocks: Best picks for 2008 They cover the integrated oil companies, the independents, the refiners, natural gas, and oil services. Here is what they said about the majors: Experts generally expect nearly all oil stock sectors to do well in 2008 – although not as well as in 2007. If you think the price of crude is going to go down, investors like Mark Gilman, an oil and gas analyst with the Benchmark Company, say go with the big boys. With their diversification, high dividends and low stock prices compared to revenue, big oil companies that produce, refine and market oil and natural gas like Exxon Mobil (XOM, Fortune 500), BP (BP),… Continue»

By Robert Rapier on Jan 3, 2008 with no responses

The Bet

Background In December of 2006, there was a lively discussion at The Oil Drum about what would happen with oil prices in 2007. Although almost everyone felt that oil prices would rise, some argued that oil prices would rise to $100 by the end of 2007. A major reason for this belief was that Saudi Arabian oil production was declining at the time – and many felt like this meant that oil production in Saudi Arabia had peaked. While I felt that IF Saudi production continued to decline, we would certainly see oil prices go to $100, I didn’t think it likely that they were experiencing involuntary decline. Therefore, I offered to bet $1,000 that we would not see oil… Continue»

By Robert Rapier on Dec 10, 2007 with no responses

Pacific Ethanol Woes Continue

I have been a critic of Pacific Ethanol’s (PEIX) business model for a long time. I criticized it a year and a half ago in an article I wrote for Financial Sense, arguing that it would be very difficult for them to compete with Midwestern ethanol producers. Add in the excess ethanol capacity spawned by government subsidies, which in turn drove corn prices up and crushed ethanol margins, and I couldn’t see how Pacific Ethanol would consistently make money. Today, they announced they were halting construction of their newest ethanol plant: Pacific Ethanol Halts Plant Construction NEW YORK (Associated Press) – Pacific Ethanol Inc. said Monday it has halted construction of an ethanol plant near Calipatria, Calif., because of weakened… Continue»

By Robert Rapier on Nov 30, 2007 with no responses

Beginning of the Correction?

It’s no big secret that I think oil prices ran ahead of themselves in the past couple of months. I don’t think they should have cracked $90 this year (and despite mass amnesia by analysts, as of August 99% were in that camp as well). But today, WTI traded into the $80′s for the first time in over a month. Of course prices may reverse before the close today (especially since it sounds like the Fed may cut interest rates again), or they may reverse next week. But I have a feeling that this is the beginning of the correction I have been expecting (and mentioned in this week’s TWIP). It’s not that I don’t think oil is inherently worth… Continue»

By Robert Rapier on Nov 12, 2007 with no responses

Prepare for Volatility

I saw a comment from someone yesterday that if this week’s inventory report shows a sharp drop in crude inventories, oil will probably spike up above $100. I do think that because of the storms in the North Sea and the flooding in Mexico we will see a decent inventory draw this week. But I don’t think the price will spike to $100 on the news, because this week is complicated by a number of factors. The first is that the inventory report will be delayed by a day this week, due to the government holiday on Monday. The second is that the front-month WTI contract expires the day after the inventory report is released. There are a lot of… Continue»

By Robert Rapier on Nov 10, 2007 with no responses

Pacific Ethanol Continues Slide

In June 2006, I warned about Pacific Ethanol (PEIX) in response to a story suggesting that the company presented a great investment opportunity: Ethanol Investing: Counterpoint Some excerpts of what I wrote: I will make the case that many claims regarding ethanol are overblown, and some are simply fiction. I will also take a look at Pacific Ethanol to show why I think the underlying fundamentals make it a very risky investment. Local grain supplies, preferably within 50 miles of the plant, are important for keeping costs down. It will probably be cheaper for a producer to produce ethanol in the Corn Belt, and then ship the ethanol to California than it would be to ship the corn there and… Continue»

By Robert Rapier on Oct 30, 2007 with no responses

Goldman Says `Take Profits’

A few months ago, an analyst at a brokerage firm wrote to me and said that they had actually used some of my essays as the basis of advising their clients. That was flattering, but it also made me feel somewhat uneasy. I don’t mind telling you what I think is going to happen, but I don’t want to be responsible for anyone losing money if I am wrong. Anyway, that particular brokerage had used some of my essays to steer their clients away from ethanol stocks, and those stocks are in fact down significantly since then. So, that worked out well. The analysts probably got paid a nice bonus and the clients were happy. I couldn’t help but notice… Continue»

By Robert Rapier on Oct 29, 2007 with no responses

The Positive and Negative of High Oil Prices

Probably the most devastating personal impact if oil goes over $100 is that there won’t be a beer fund for people who stop by and see me in Aberdeen. Therefore, if you come see me you will have to pick up the tab. But a MarketWatch story today highlighted that energy stocks were tracking oil prices, which is why I am hedged against rising oil prices: Energy stocks rise along with oil prices NEW YORK (MarketWatch) — Energy stocks moved up Monday along with the overall market after oil futures broke through $93 a barrel for the first time on jitters over a production cut in Mexico on bad weather. Oil futures rose $1 to $92.86 after breaking through $93… Continue»

By Robert Rapier on with no responses

Shakeout Predicted

I have never heard of James Mound, but I think he is correct in his assessment below. As I have mentioned, I absolutely would not buy oil at these prices. It may still go to $100 in the short term, and clearly that sentiment is helping drive the market, but the fundamentals have not changed so dramatically in the past 3 months to warrant this kind of run-up: James Mound’s Weekend Commodities Review Energies Strong selling ensued on Monday as a follow through to a bearish Friday close. The market suckered in a lot of shorts, me included, and then rocketed back to fresh highs amid growing geopolitical concerns. While the concept of peak oil (the end of the growth… Continue»

By Robert Rapier on Oct 28, 2007 with no responses

$90 Oil: How We Got Here

David Ivanovich at The Houston Chronicle always does a nice job of covering the energy markets. His latest article gives a comprehensive overview of the events of the past few years that put us on the cusp of $100 oil (I actually dreamed last night that we hit $100 this week, which means I am thinking too much about it): Factors converged to send oil prices gushing On the catalyst that kicked off the price rise in 2004: WASHINGTON — China’s electricity grid was near the breaking point in the spring of 2004. Facing repeated blackouts, Chinese exporters, clustered in the southern province of Guangdong, fired up their own diesel-powered generators. China’s petroleum demand rocketed up 15 percent that year… Continue»