July 7, 2014
- Bigger than Saudi Arabia… again
- The new U.S. oil fortunes… and how it’s not too late to claim your (big) share
- French poor-mouth the dollar: No, this is not a rerun of 1969
- Signposts to watch as the “petrodollar” moves closer to the dustbin of history
- Pulling back from record territory… the next step in 3-D building construction… a new week brings new “conspiracy theories”… and more!
No, it wasn’t a fluke.
Last fall, we noted the United States was due to overtake Saudi Arabia as the world’s biggest oil producer before year-end 2013.
Now comes word from researchers at Bank of America that U.S. production remained No. 1 during the first quarter of 2014, when you account for both oil and the liquids separated from natural gas. Eleven million barrels per day, to be precise.
What’s more, America appears to be on a roll: “It’s very likely the U.S. stays as No. 1 producer for the rest of the year,” says BofA’s commodities research chief Francisco Blanch.
“The shale boom is playing a key role in the U.S. recovery,” Blanch adds. “If the U.S. didn’t have this energy supply, prices at the pump would be completely unaffordable.”
Indeed, Blanch affirms what our own Byron King said in this space last month: The increase in U.S. production essentially offsets any potential loss of Iraqi production as the civil war there simmers. Prices would still rise if Iraqi production comes offline, but imagine how much worse it could be.
“The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” Blanch tells Bloomberg News. “Typically, such a large energy supply growth should bring prices lower, but in fact, we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.”
In that context, we’ll share a chart we’ve shared before: In 2005, the U.S. imported 60% of its oil needs. By 2012, it was down to 40%. And the share is set to fall to 30% by the end of this decade…
Meanwhile, the Bakken shale of North Dakota has become the newest magnet for foreign investment.
A Swiss firm called Stropiq plans a $500 million project encompassing retail, entertainment, office space, hotels and homes. Barons Group of Singapore plans a $300 million project featuring a mall, hotel, spa, offices and condos.
North Dakota is “an emerging market by most definitions, except it is in the continental U.S.,” Stropiq co-founder Terry Olin tells The Associated Press. “We have rule of law and property rights — things that in most emerging markets can be challenging.”
No wonder that according to the Center for Innovation, the oil boom is creating 2,000 new millionaires each year in North Dakota.
“Take Doug K., for example,” says our Byron King: “He and his family just found out that 2 miles below their property is a fortune in oil that’s just waiting to be tapped. This captured the attention of oil companies. Soon, his family ended up with a sweet deal that made them instant millionaires.”
Thing is, you don’t have to own property on top of a rich shale deposit to collect those kinds of riches. With just six steps, Byron says you could turn $500 into more than $2.6 million. He reveals a hidden “road map” to oil wealth when you follow this link.
Did France just call the dollar’s bluff?
The French appear a little ticked off at the $9 billion fine against the banking giant BNP Paribas — a penalty imposed by the U.S. regulators for the crime of doing business with governments Washington does not like.
Thus did the French finance minister Michel Sapin call for a “rebalancing” of currencies used for global payments.
“We [Europeans] are selling to ourselves in dollars, for instance when we sell planes. Is that necessary?” Sapin mused aloud to the Financial Times. “I don’t think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade.”
“Party like it’s 1969,” tweeted The Death of Money author Jim Rickards this morning, alluding to the last time the French poked their thumb in Washington’s eye.
Then, the French saw what “guns and butter” were doing to the value of the dollar. So they traded in their dollars for the gold in Fort Knox, as foreign governments could still do back then. So much gold exited the U.S. that President Nixon “closed the gold window” in 1971.
Now it’s the “oil window” that might be closing.
For it was not only the French finance minister talking smack about the dollar over the weekend.
The chief of the French oil giant Total suggested there’s no reason for oil transactions to take place exclusively in dollars.
“The price of a barrel of oil is quoted in dollars,” said CEO Christophe de Margerie. “A refinery can take that price and, using the euro-dollar exchange rate on any given day, agree to make the payment in euros.”
De Margerie is scorning the so-called petrodollar.
After Nixon cut the dollar’s last tie with gold, Secretary of State Henry Kissinger forged a deal with the Saudi princes: Saudi Arabia would price oil in U.S. dollars and use its clout to get other OPEC nations to do the same. In return, the U.S. government agreed to protect Saudi Arabia and its allies against foreign invaders and domestic rebellions.
As we’ve chronicled periodically in The 5, and more extensively in Apogee Advisory, the 40-year understanding behind the petrodollar is starting to fly apart. The U.S. has less need for Middle East oil these days (see above), and the Saudi princes are plenty peeved about America’s tentative rapprochement with Iran.
So if the Europeans no longer feel the need to price oil in dollars… and the Arabs are losing their incentive to price oil in dollars… and with Russia’s de-dollarization plans we’ve previously chronicled… and China’s continued gold accumulation…
…then the petrodollar’s demise is only a matter of time, triggering the next great financial crisis.
If the notion that America’s energy bounty might bring on the next financial crisis seems outlandish, it’s explored in detail here.
Stocks are in the red as a new week begins. The Dow is holding onto 17,000 by mere fractions of a point.
Small caps are taking an even bigger hit; the Russell 2000 is down 1.4% and has sunk back below 1,200.
Gold has slipped to $1,314, and silver has lost the $21 level for the moment. Crude is sinking to $103.36.
How can you top a 3-D-printed building? A 3-D printed building from recycled materials, of course.
Two months ago, we showed how a private firm in China was using giant 3-D printers to make 10 full-sized houses a day for less than $5,000.
Now Computerworld tells us about the next logical step: “Using four huge 3-D printers, Yingchuang New Materials Inc. was able to print the shells of 10 one-room structures in 24 hours and at a cost of only about $5,000 per building,” according to Computerworld. “The buildings had to harden at the factory and then be transported and assembled on site.”
They’ll be used as office space at an industrial park in Shanghai.
Everything but the roof came from a giant 3-D printer…
As with all 3-D printing, the materials are deposited one layer at a time, “in a process that’s similar to squeezing frosting from a pastry bag,” says Computerworld.
Company founder Ma Yihe — who’s also behind the 3-D printed houses we mentioned in May — figures in time, 3-D printing technology can take the pulverized remains of demolished buildings and make spanking-new skyscrapers.
We’re still high on the potential of 3-D printing… but we were squeamish when the sector got ahead of itself earlier this year. Now would be an outstanding entry point to take advantage of the technology’s staggering potential.
“I believe Monsanto and Big Pharma are trying to depopulate,” reads the first entry in a new wave of “conspiracy” emails we solicited on Saturday.
That’s all this one said.
As it happens, we have an expose in the works you’ll want to see. “Depopulation” schemes don’t quite figure in, but nonetheless, it’s something you won’t want to miss. Stay tuned…
“I believe the stimulus money has been shuttled back to the players in the big financial firms (that should have gone to prison) to prop up the stock market to prevent a larger financial meltdown,” writes another reader, “and that Obama is a puppet for some sort of cabal, whether he knows it or just believes his own press.”
The 5: That’s all? You’re no fun…
“Obama gets five gold stars for carrying out his programs to fundamentally change America, including creating the ‘civilian national security force’ he said we needed in 2008. People scoffed.”
This was not the only email to that effect: “Many small police departments,” another says, “receiving armored vehicles…select fire weapons…house-to-house clearing training….the gradual elimination of our Bill of Rights…”
As it happens, the militarization of local police is something that long predates Obama.
As we explained in 2011, the “1033 program” was passed by Congress in 1997 as a “war on drugs” measure. Now the Pentagon delivers hundreds of millions of dollars of grenade launchers, helicopters, military robots, M-16 rifles and armored vehicles.
The expansion of SWAT tactics beyond truly dire situations like hostage rescues has an even longer history, also connected to the “war on drugs”…
“I believe,” writes a Canadian reader, “that in every case where the U.S. has gone to war there has been a staged event designed to get the populace on side from the Boston Tea Party to Sept. 11. Every one!”
“Have you considered what the purpose of the gold transfer to China might be?” a reader writes in a conspiratorial vein.
“For example, might it finance a Chinese war on some country or countries? For hundreds of years, bankers have financed wars. Using our gold to finance a war against our allies would be an interesting idea.”
The 5: As long as you brought it up… You know what the big news is in China today? The 77th anniversary of the start of the Second Sino-Japanese War in 1937. (For China, World War II started two years before the war in Europe.)
Remembrance ceremonies were covered live on China Radio International, with extensive analysis in light of Japan’s decision last week to “reinterpret” Article 9 of its constitution, dialing back Japan’s renunciation of the right to aggressive war.
As we’ve pointed out the last 18 months, it would all be an interesting academic discussion were it not for the fact the United States is sworn to Japan’s defense…
“The ‘Shakespeare’ industry is an industry in denial,” reads an email that may or may not be tongue-in-cheek, “built on the ever elaborated misconstruction of a 16th-century hoax/conspiracy/Tudor policy that the real author would not be known.
“Rather than deal with the imminent paradigm shift, academic practitioners prefer to accuse anyone who doubts their myth a ‘conspiracy theorist.’ Check out the recent documentary Last Will. & Testament for details. Your support is warmly solicited.”
“There is no better publication for my paltry dollar than The 5,” a reader writes with unsolicited praise — “especially if you’re interested in reality! (and making a few bucks along the way!) Thanks, guys.”
The 5: You’re welcome.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. One more time, as this conspiracy thing winds down: Here’s our JFK expose that inspired a week’s worth of conspiracy chatter.