Re: Musings: Could The U.S. LNG Market Be Derailed Before It Starts?

USRS

4 comment

petro pricing economy

On Nov 20, 2014, at 1:04 AM, Margery Schab <mschab@aol.com> wrote:

> Dear Mike, Gina and Kathy,
>
> A must read. Marge
>
> Begin forwarded message:
>
>> From: Arthur Berman
>> Subject: Musings: Could The U.S. LNG Market Be Derailed Before It Starts?
>> Date: November 18, 2014 at 11:02:21 AM EST
>> To: undisclosed-recipients:;
>>
>> The latest edition of Musings From the Oil Patch is attached. Highlights include:
>> "...natural gas prices have to go much higher than currently available in the gas futures market if the industry is to develop the supplies necessary to meet future demand. Just how high they will have to go is unclear, but if the $6/Mcf scenario is inadequate to meet demand forecasts, especially since they contain a large demand component associated with LNG exports, then we could be looking at returning to the double-digit gas prices of the early 2000s."
>> "We have been skeptical of the potential volume of gas that would be available for export in the form of LNG, so we have watched the rush to gain approval for new terminals as a little bit of the Charge of the Light Brigade into the Valley of Death. We may be wrong, but we are starting to believe more firmly that natural gas prices are headed higher, and substantially higher sooner than most analysts think. At every step-change in commodity prices, there will be winners and losers, and many unintended consequences. Thinking about that future, we believe, is time well spent."
>> "As we wrote several issues ago, when discussing Saudi’s declaration that it could live with oil prices in the $80-$90 per barrel range for up to two years, there were numerous theories about who the country was targeting. After examining five of those supposed targets, we concluded Saudi was essentially attempting to do what it did in the 1980s – stimulate economic activity, especially in Europe, while heading off new Canadian oil sands output from carving out a share of Europe’s future demand at OPEC’s expense."
>> "The Saudis are always thinking about oil markets in terms of decades, not days. Therefore, the Saudis know that the crucial challenge for the long-term health of the oil market is a lack of global oil demand. Lowering oil prices is the only action the Saudis and OPEC can take to try to boost global oil demand. Starting and sustaining that demand is paramount in Saudi’s thinking, and they now must deal with the additional variable of renewables in the demand equation, besides their internal and external political problems."
>> "The renewables variable is something the kingdom has little influence over except that low oil prices could make them uneconomic. Since renewables continue to be heavily subsidized in many markets, the longer they remain uneconomic the greater the pressure citizens will exert on their political leaders to cut those subsidies, especially if oil prices remain low. If the current oil price correction is a repeat of the 1980s, note that it took much lower oil prices and a decade to restore global demand to 1981’s level."
>> AEB
>> --
>> "It was as useless to fight against the interpretations of ignorance as to whip the fog."
>> --George Eliot, Middlemarch
>>
>> αβ
>> Labyrinth Consulting Services, Inc.
>> +1-713-557-9076
> <Musings 111814.pdf>
>>
>