The Master Resource Report

Special News:

This is a follow-up to the article in today's Master Resource Report and the news this week on events at World Oil concerning Art Berman and shale gas. Read this posting on Art's blog concerning his leaving and the firing of his editor over his work on shale gas. Petroleum Truth Report

In this week's report: (click this link to access an online copy of the PDF)

Railroads & Peak Oil. (page 1 )

The shale gas question heats up? (page 1 )

Why wasn't this in the paper? (page 3 )

4-5 trillion barrels of oil, really? (page 3 )

Spain hit 45% of electric power from wind. (page 4 )

Ok, Warren Buffett bought a freight railroad. What about passenger rail?

James Kunstler has some thoughts on passenger rail that he wrote in a forward to a new book "Waiting on a Train: The Embattled Future of Passenger Rail Service" by James McCommons. "Rebuilding the nation's passenger railroad has got to be put at the top of our priority list. We had a system not so long ago that was the envy of the world; now we have service that the Bulgarians would be ashamed of."

Fans of James Kunstler will be happy to hear that his new book is almost out. It is a follow-on to "World Made by Hand". I will try to give it a review when I get a copy.

Mexico?

Bloomberg (Nov. 3^rd) – "Mexico's Congress on Nov. 1 passed a watered-down version of President Felipe Calderon's 2010 budget that Fox [former President Vicente Fox] says is not enough to reverse a "desperate" budget situation brought on by falling oil revenue, which funds 38 percent of spending." Mexico is in a very bad way caught between falling production and lower oil prices.

CNN Money on six electric car companies and their plans for success.

"Each of these carmakers is gearing up to be the next big thing in electric automobiles. Here is how they're charting success." They range from the $30,000 Wheego & Aptera to the $88,000 Fisker. How many will be standing in 3 or 4 years? My guess is not many. Scale will prove to be the issue for most.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access an online copy of the attached PDF)

Jet fuel and distillate fuel demand trends. (page 1 )

Is $80 oil a problem for the economy? (page 3 )

Ten years of US gasoline and distillate fuel consumption. (page 4 )

Chinese investing in wind power in Texas???

Dallas Morning News (Oct. 29^th) – "A Chinese-American joint venture has agreed to build the next massive wind farm on the plains of West Texas." Texas would never let China own their oil wells, but the wind, no problem? I wonder why they couldn't get T. Boone in on this one.

Will the Saudi's intervene to keep oil prices down?

Khaleej Times [Reuters] (Oct. 29^th) – "Saudi Arabia might seek to brake any new oil price spike, mainly to protect a fragile global economy and prolong its own role as the world's top oil producer — and if that hurts regional rival Iran, it will shed no tears." The Saudi Arabian government does not want the world economy to slip backwards into recession when it may just be moving out of one. The spector of demand falling and prices slipping back to the $30/barrel levels of last December will keep their minds focused.

The question is how long can they provide that supply when global demand returns to the levels of 2007-08?

Jeff Rubin clearly thinks not for long and said so on James Cramer's show Thursday. He thinks oil will scale triple digit levels within 12 months and put an end to the recovery. If you watch this video it is like all "Mad Money" clips, only with adult supervision and definitely no children should be present. (Cramer thinks we have 200 years worth of natural gas, enough said) Note: I only knew about this interview thanks to a friend, I am proud to say I normally avoid Mr. Cramer.

North Dakota passes Louisiana in oil production.

Associated Press (Oct. 28^th) – "The agency's Energy Information Administration said North Dakota produced 6.38 million barrels of crude in May, edging Louisiana, which had 6.34 million barrels for the month. Oklahoma was ranked fifth, at 5.7 million barrels for that month, according to the most recent figures." Don't get too excited though, North Dakota's total monthly production would only meet about one-third of a single day's demand for oil in the U.S. In addition number five ranked Oklahoma is now producing less oil than in 1913 (page 2). Never forget SCALE when reading oil production statistics.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access an online copy of the attached PDF)

The Economics of Peak Oil from Denver & more. (page 1 )

Oil prices and the economy. (page 2 )

US oil pipelines are huge storage tanks. (page 3 )

Distillate demand still isn't showing any signs of life.

Financial Times (Oct. 20^th) – "A quarterly statement from CSX, the US railway operator seen as a bellwether of the country's industrial and trade activity, points to weak distillates demand. CSX locomotives used 18 per cent less fuel in the most recent quarter than in the same period a year ago." This is not a sign of a robust economy.

Through August US airline jet fuel consumption is down an average of 12.75% year-over-year according to the US Bureau of Transport Statistics report. This drop is on top of a more than 4% decline in 2008 from 2007 levels.

These two fuels are the number two and three uses of oil behind gasoline in the US. If they were not down as much as they are US oil consumption would not have nearly the magnitude of decline given the consistent 9 million barrels per day of gasoline demand.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report: (click this link to access online copy of PDF)

ASPO in Denver. (page 1 )

Russia goes into the lead in oil production. (page 2 )

Gasoline and distillate consumption. (page 2 )

Kevin and the Chicken Little's. (page 2 )

Financial Times Must Read – Lunch with the FT: David Swensen

Financial Times (Oct. 10^th) – "…you should invest only in things that you understand. That should be the starting point and the finishing point." He then went on with to make one of the best statements I have heard in a very long-time. "The investment community is hopeful – hopeful's probably too weak a word – wildly optimistic about their particular chances ... Never underestimate the gullibility of large pools of money."

One little surprise from the ASPO Conference.

In Denver at the ASPO conference Jeffrey Brown (aka westexas on The Oil Drum) and I discussed this situation he had found. So on Thursday when I found this posted on The Oil Drum I had to share it.

I recently ran some numbers that surprised me. A recent study put the total cost of driving a Honda Civic at $0.50 per mile, assuming 10,000 miles per year. If we assume $2.50 per gallon and 30 miles per gallon, then 333 gallons per year would be consumed, at about 8¢ per mile, leaving the non-fuel costs at $0.42 per mile.

Let's assume the $20 per gallon number, pursuant to the recent book. The fuel cost per mile would increase by a factor of 8, to about $0.64 per mile, so the total cost per mile would be $1.06 per mile (assuming no other changes, which may or may not be the case).

So, if fuel prices went up eight-fold, total driving costs, pursuant to above assumptions for a Civic, would be only about twice as much. Of course, not everyone drives a Civic, and other costs would ripple through the economy, especially food related costs.

However, if our driver cut his miles driven by half, based on the above assumptions, his total driving costs for 5,000 miles at $20 per gallon would be about the same as 10,000 miles at $2.50 per gallon.

It would be interesting to see what would happen if cars came with a cost per mile gauge instead of the rapidly spreading GPS displays. It might change many behaviors when driving your car started to look more like riding in a taxi and watching the meter run.

It will also surprise many people with much larger and more expensive vehicles how close they are to the magical $1/mile. But then again we all know a dollar isn't what it used to be.

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, through KMS Financial Services, Inc. the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.