Glenn Olnick Logo Banner
Home | Glenn's Website Suggestions | Glenn's Book Recommendations
     
 

Glenn Olnick Update



Over history wars have been fought over oil. Today, and for the foreseeable future, the world runs on oil. For the most part all the cheap oil and gas has been found.  We are now looking for hard-to-reach and very expensive oil and gas.

In my opinion there is a large disconnect in the price of oil between WTI and Brent.  I believe that Brent represents the true price. WTI should for the most part be ignored as I believe that WTI is priced where it is because of a lack of refinery capacity, and the lack of additional pipe line infrastructure.

In the US we have a very interesting situation with natural gas.  It appears that the US has an abundance of natural gas.  Instead of building an infrastructure to use this resource for transportation (cars and trucks), it appears the US would rather import expensive oil from countries that may not be there friends, and simultaneously export cheap natural gas in the form of LNG. It is my view that the US should build the infrastructure to use natural gas for transportation.  This would create thousands of high paying skilled jobs, whilst taxing the natural gas producers.

I cannot predict oil and gas prices in the short term, but I am very comfortable with my belief that prices for oil and gas will rise in the long term. My personal investment strategy is always to look at the long term trends leaving the short term trading to others.

17.02.2012 | Author: Glenn Olnick

 

Glenn Olnick Linkedin
  Glenn Olnick Welcome Image

Welcome to Oil and Gas Bug by Glenn Olnick

Welcome to my website on all matters oil and gas.  I have created this site in response to the many requests I get for good books and websites that I refer to in relation to oil and gas and other commodities. My own interest stems from a lifetime spent investing in oil and gas companies across the globe.  The complex nature of world economies in relation to oil and gas has fascinated me for many years.  With this in mind, I hope you find the following recommendations for books and websites useful in your own quest to further understand the relationship between politics, consumer demand and the supply of oil and gas across the globe. 

19.03.2012: Glenn Olnick's Thought for the Day
Can the world exist on $140 barrel oil when the world is in recession? Obama continues to ignore natural gas; a home-grown fuel and possibly the key to paying down US debt.  (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

21.03.2012 Glenn Olnick's Thought for the Day
The discrepancy between WT and Brent continues to exist – the cost of finding new oil as fracking and horizontal drilling continue to increase.  Can the world continue as it is? (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

26.03.2012 Glenn Olnick's Thought for the Day
With a number of global new off-shore discoveries in the past weeks, it's worth bearing in mind that any new off-shore discovery will be more costly due to the ecological and environmental considerations.  $50 oil is unlikely, so costs can only expect to escalate.  Worth a thought. (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

21.04.2012 Glenn Olnick's Thought for the Day
The US has licensed the construction of the Sabine Pass LNG terminal, and construction is expected sometime this year.  This baffles me.  The US is running a huge deficit of and is verging on bankruptcy.  However, they continue to import oil from 'unfriendly' companies when they even turned down the Keystone pipeline from Canada!  Now they are going to export natural gas - this just doesn't make sense in my mind.  (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

18.05.2012 Glenn Olnick's Thought for the Day
Everyone expected demand for oil to fall in March and April.  In actual fact it has risen.  Oil prices should remain high right through the summer.  We are experiencing a similar divergence between the price of oil and oil producers.  The oil producing stocks are now becoming attractive.  (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

4 June 2012: Glenn Olnick's Thought for the Day
Fears of worldwide recession forcing oil down both Brent and WTI.  Weakness in the market is translating in the share prices of oil and gas companies.  Oil could go lower.  We have not seen the bottom.  (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

14.06.2012 Glenn Olnick's Thought for the Day
Oil and gas prices continue to show weakness as the world flirts with a whirl wind recession. It looks like oil may continue to weaken. This is not the time to be brave and be a buyer, be patient as I believe oil and gas will continue to weaken. (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

11.07.2012 Glenn Olnick's Thought for the Day
Investors are eagerly awaiting the contents of the minutes of the last Federal Open Market Committee (FOMC) meeting to see if there are hints about further QE.  If so, then we could see oil price further affected.    And if QE3 isn’t imminent, then we may need to prepare for a further fall in prices.  This provides the US with a much needed stimulus as it will possibly lead to more disposable income available to the US economy and therefore better economic forecast figures.  We will wait and see. (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

25:07:2012 Glenn Olnick's Thought for the Day
When it comes to oil and gas, we are entering a new world order with the US now entering the energy game in a way that it has never done before.  Daniel Yergin’s book The Quest: Energy, Security, and the Remaking of the Modern World” is a balanced view on the emergence of America’s own oil and gas industry in line with the demand for more renewable sources.  This new reality, according to Yergin, “ requires a new way of thinking and talking about America’s improving energy position...”  Until the US government does this in a balanced and realistic way, costly and political dependency on imports will continue. (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation) 

4 September 2012
Whatever the commodity, China is the dominant factor when it comes to the market.  However getting a clear picture on what China’s growth prospects look like, and the ultimate knock-on effect to commodity suppliers globally is difficult.  I recently read an interesting article featured in The Energy Report by Keith Fitz-Gerald from Money Morning.   He answers some of those questions and clichés that constantly circle about China.  Read on for an interesting view point, or click through to the website at http://www.theenergyreport.com/pub/na/14261?utm_source=delivra&utm_medium=email&utm_campaign=streetwise-reports%2009/04/2012%2015:17:30


Q - The Chinese copy everything. Companies can't make money there, especially lately. A - That's simply not true. Domestic Chinese companies have made plenty of money. So have foreign companies like McDonalds, ABB, Coke, and even GM, which have been fabulously successful there because they've taken the time to localize their products.
Not many people know this, but the ultimate sign of executive status is a jet–black Buick minivan in Beijing at the moment. How's that for a contradiction?!
As you might imagine, I get a lot of questions about China—it's topical and it's very important to our future.
Most are really just reincarnations of concerns voiced since 1970 when China first began to open up. In that sense, they're really nothing new.
So rather than tackling the same old "they'll never succeed because they're not democratic" or "ghost cities" arguments that seem to incessantly make the rounds, let's frame them in terms of what's in the news lately and dig into the subtleties that escape most Westerners.
And, let's start with one of the questions I get the most.
Q - Is China going to have a "hard" or "soft" landing?
A - This one stumps me. Where have the people asking this question been? China's had a soft landing for the last four years. They are already there—the economy is slowing, debt is rising, and the urban migration may be closer to an end than people think.
The fact is that nobody can define what a Chinese soft or hard landing actually is because Western metrics don't apply. It's just a catch phrase that gets bandied about in the media.
That's why I believe this question is really a matter of perspective. For example, there is no question China faces huge challenges, but those challenges are no different than many we've faced here in our own past.
During the last century we experienced two world wars, multiple recessions, a depression, and a presidential assassination—and still the Dow rose more than 20,000%.
China will, too. The genie is not going back in the bottle.
As I recall, many people in England thought that America was a pretty silly venture at one time. And don't forget that the world thought Japan was good for nothing more than cheap tin toys following WWII.
Looking at China through Western lenses is a mistake. The losers are those who show up simply expecting to "show the Chinese a thing or two" by virtue of their success in Western markets.
In their rush to condemn China, people have conveniently forgotten that European markets were problematic to crack, too.
It wasn't all that long ago, for instance, that executives anxious to sell into Germany via the Internet didn't understand that many German consumers still prefer cash. Eventually they began to understand that the payment framework was a big deal and the key to profitability.
With regard to imitation and copycats, both frustrate Western executives unused to the practice, which has existed for centuries as a matter of China's cultural fabric.
In reality, both speed up the product development cycle and sales.
Companies that are unprepared or do not have the right partners cannot compete no matter where in the world they operate (an argument, by the way, that is laid out very well by Kal Raustiala and Christopher Sprigman in their new book, "The Knockoff Economy" (Oxford University Press).
People may not like how the Chinese handle things, but that's a different story and one that requires a different set of responses.
Q - Export growth is failing, therefore China must be failing. . .right?
A - Nope. The inconvenient reality is that China is still operating at 3–5 times the speed of Western economies, which will be extremely lucky to eke out 1% growth this year despite the trillions thrown into the hopper.
I find that people who voice the connection between exports and China's complete collapse are often voicing their own frustrations about the lack of growth in the West, or perhaps outright jealousy that it continues practically unabated there.
Even if the data is completely faked, Chinese demand backed by 1.3 billion people completely outstrips anything we have in the West and creates a tailwind that will last for decades. Like every country that's gone before it, this will involve ups and downs both political and economic. It will not be a flawless nor smooth journey by any stretch of the imagination.
The challenge - and what makes so many people so uncomfortable—is that China's goals are now intertwined with the world's fiscal future.
Q - Doesn't Bo Xilai's recent removal imply that China's leadership is more fractured than ever?
A - I hear this one a lot lately.
By way of background, in case you are not familiar with him, Bo Xilai was China's version of a political rock star.
Rising from meager beginnings as Dalian's mayor, he became one of the most powerful men in the Communist Party as its Secretary in Chongqing and a member of China's Central Politburo. He was widely considered to be in line for President of the People's Republic of China.
Unusually charismatic for a senior Chinese politician, he seemingly could do no wrong. . .right up until his top lieutenant and police chief sought asylum in the American consulate in Chengdu and exposed all sorts of conduct unbecoming of a senior politician.
It didn't help that his wife, Gu Kailai, was charged and subsequently found guilty of murdering British business man Neil Heywood, possibly with Bo's help.
Contrary to what most Westerners believe, the speed and totality of Bo Xilai's dismissal is not a sign of weakness.
Instead, it reflects significant strength because it suggests that the Chinese leadership is consolidating power and closing ranks to keep the system strong, just as they have over 2,000 years of history whenever a dynastic structure was threatened.
And yes, before somebody gets going on that one, I consider the Communist Party to be another dynastic structure for all intents and purposes, even though technically speaking it's something entirely different.
Q - There's no way the dollar can lose out to the yuan as the world's reserve currency. Besides, the amount of trading allowed now is so small that it can't possibly have an effect on the U.S. dollar and the euro. . .Right?
A - I know this is the perception, but the reality is different.
First, the United States has gone from the world's single biggest creditor to the greatest debtor in the history of the world. We owe ourselves more than $222 trillion at last count, according to Boston University Professor Lawrence Kotlikoff and the CBO. The dollar is a disaster enjoying temporary strength by virtue of the EU crisis.
Second, it's already well under way. China has quietly set up hundreds of billions in bilateral yuan swaps with nations all over the world to safeguard against the global financial crisis, strengthen the yuan outside the normal currency pairs, eliminate currency risk and strengthen trade ties.
As of last February, China had signed agreements with 18 nations, the most recent of which is the $30 billion bilateral contract with Brazil.
Lest you think this is isolated to second tier players, it's worth noting that the Bank of England was actively considering such an agreement until March when it was kyboshed. Germany is also rumored to be considering the possibility.
At the same time, there are also new "panda-bonds" being floated that further tie the international community into yuan. Shanghai, meanwhile and on a related note, has set up futures markets already trading in yuan-denominated instruments.
Citi just became the first Western bank to launch a yuan-denominated credit card, obviously with a local partner.
The implications are clearly global and already in process. The dollar is already being supplanted. It's only a matter of time before traditional dollar-based markets find themselves outgunned by the amount of yuan-based trade that bypasses traditional currency channels. The same can be said for the euro, although on a lesser scale. . .so far.
Not only that, but I believe there is a good argument to be made that the establishment of these agreements actually takes a lot of pressure off the dollar, too.
At the end of the day, what Western leaders and bankers fail to grasp is that a parallel currency exchange mechanism is being built right under our noses.
So what should you do?
That's up to you, but the way I see things you've only got one decision to make. Imagine the Dragon is coming to lunch next Tuesday; ask yourself if you want to be at the table or on the menu?
Then, consider this bit of common sense advice from the legendary Jim Rogers: it's far easier to get rich in China with its tailwinds than it is to get rich in America with its headwinds. (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation).

23:09:2012 Glenn Olnick’s Thought for the Day
I continue to watch China closely and also those commentators whose job it is to interact with its economy and businesses.  The recent conference in Gstaad, Switzerland, hosted by Citywire, provided a platform for many of these people.  One that caught my eye was Pippa Malmgren, president of Principalis Asset Management, who believes there is a very real threat that food and energy inflation spikes in China could result in mass demonstrations and protests like last year’s Arab Spring.  According to Citywire’s follow-up report, Malmgren had previously warned of inflationary risks ‘ripping the emerging markets apart’ but she added this has become a real very concern in China, with residents over areas such as Wukan protesting over government policies.  For the full article, go to Citywire’s site at http://www.citywire.co.uk/global/china-edging-towards-arab-spring-style-unrest-says-malmgren/a620297?re=20680&ea=274749&utm_source=BulkEmail_Global_Weekly&utm_medium=BulkEmail_Global_Weekly&utm_campaign=BulkEmail_Global_Weekly
My advice as Glenn Olnick, is to watch closely and especially the continued contraction in China’s economy.  This will all have repercussions for the natural resource sector.    (Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation).

 

12 March 2013 Glenn Olnick’s Thought for the Day

 

I have been an observer of the Keystone Pipeline project for many years, and am still appalled at the way Obama and his administration have been dragging their feet.  However, it now appears that Obama has no leg to stand on when it comes to the ‘environmental’ argument. It appears that the State Department has tried to hide their latest report on the pipeline’s development which stated that it would pose minimal environmental risk.  This counteracts Obama’s arguments, and ultimately holds up job creation, and the supply of oil to the US from a US-friendly country.  A good analysis of the situation has been written up by Amy Payne for The Foundry.  You can read the article at the website here: http://blog.heritage.org/2013/03/04/obama-administration-buries-good-news-on-keystone-pipeline/

Alternatively, you can read the extract below:

In Washington, a presidential Administration releases news it doesn’t like at 5 p.m. on Fridays. So it pays to pay attention when everyone is leaving work for the weekend.

Late last Friday, the State Department released a positive environmental review of the Keystone XL pipeline. President Obama has been delaying this pipeline—which would carry oil from Canada to refineries in Texas—for more than three years.

The delay has meant that America is still waiting on an additional 700,000 to 830,000 barrels of oil per day from a close ally, not to mention 179,000 American jobs.

Why has this taken so long, when all environmental reports thus far have been positive? Heritage’s Nicolas Loris, the Herbert and Joyce Morgan Fellow, explains:

Given the need for jobs and more oil on the global market to offset high prices, the permit application had been moving along positively with bipartisan support without much attention until environmental activists made blocking the Keystone XL pipeline their issue to rally around for 2011. Although President Obama and the Department of State (DOS) said they’d make a decision at the end of 2011, they ultimately catered to a narrow set of special interests, punting the decision until after the 2012 elections.

The State Department, which is overseeing the pipeline because it crosses a U.S. border, has “already conducted a thorough, three-year environmental review with multiple comment periods,” Loris reported last year.

The review has been comprehensive:

DOS studied and addressed risk to soil, wetlands, water resources, vegetation, fish, wildlife, and endangered species. They concluded that the construction of the pipeline would pose minimal environmental risk. Keystone XL also met 57 specific pipeline safety standard requirements created by DOS and the Pipeline and Hazardous Materials Safety Administration.

Canada has oil to sell, and it isn’t likely to wait forever. Forbes writer Brigham McCown saidthat “Delays in approving the upper portion of the pipeline have bewildered many Canadians who see the U.S. as their closest ally and trading partner.”

McCown pointed out that “Even without the pipeline, Canada will continue to extract the oil which would be most likely transported by pipeline and rail to Canada’s coast for shipment to Asian markets.”

Because the State Department is overseeing the application, the new Secretary of State, John Kerry, will be giving his recommendation on the pipeline. Ultimately, the decision rests with President Obama. But Heritage’s David Kreutzer says Congress can, and should, step in if the President continues to block it:

Should the President reject Keystone again, Congress should wield its power to regulate commerce with foreign nations and approve the pipeline’s construction once the State Department again finishes its review of the rerouted project.

These delays are pointless. The Keystone pipeline has passed its environmental reviews, and the Obama Administration is only hurting America by holding it up

 

(Author: Glenn Olnick.  The views included in this website are the personal views of the author Glenn Olnick and should not be regarded as advice or recommendation).

 



Glenn Olnick's Recent Book Recommendations

 Glenn Olnick's Recent Book Glenn Olnick's Recent Book Recommendation
Hot Commodities
How Anyone Can Invest Profitably in the World's Best Market
Jim Rogers - Buy Now on Amazon

Current Commodity Prices

Oil (Light Crude)
Price Open Prev Close Change Volume Days Range
           

 
© 2013 Glenn Olnick