Friday, May 16, 2008

This Oil Move Is For Real

Jim Cramer: This Oil Move Is for Real

It doesn't stop. I hear about less gasoline use. I hear about big alternatives to energy. I hear about mass transit. They are meaningless to oil. Far more important to oil is the Petrobras decision to try to glom onto 80% of the world's rigs. That's a killer. No one else can drill deep if they do that. Plus, the cost of drilling is monumental now. Meanwhile, in the political landscape, we worry about the Strategic Petroleum Reserve, not drilling offshore where there is lots of oil and gas. We worry about taxing oil companies' windfalls, not encouraging them to drill year-round. And the result? Look at your screen. There is still, even at these prices, no marginal oil available. As an aside, why don't all the pundits ask the speculators to sell us some? They are sure to replace it with drilling.


Anaconda said...


When an increasing demand can be met with an increasing supply -- that's a good thing -- that means the market is working.

Mr. Cramer misses the mark (from what can be read).

What is exciting about the Petrobas move, is that it spells out that Petrobas believes there is tremendous supply available for production.

The oil market hasn't shown this investment pattern for decades. It's a solid, heathly investment in increasing supply of the most productive substance on Earth.

Oil is the stick that stirs the drink...of the world economy.

This is not a bunch of pansies chasing after tulib bulbs.

This is no Dutch tulip speculation.

"That's a killer." Wrong. Rather, Petrobas' investment in drill rigs, signals to others that additional investment can be made with a reasonable expectation of profit and bottom line, profit makes the market move.

Maybe, Mr. Cramer has never seen a market with pent up demand and the reaction when there is a sudden realization that the pent up demand can be met (now that there has been a supply breakthrough) with available supply that, heretofore, was failing to reach the market.

Mr. Cramer is a crybaby. "No one else can drill deep if they do that." For a time, possibly, but already, keels are being laid down for additional ultra-deepwater, deep-drilling ships -- that's how a healthy market works, Mr. Cramer.

"The cost of drilling is monumental now." Right, but as demand creates production of deepwater rigs, and competition rises to capture that demand, technological efficiency and innovation will reduce costs.

Transocean promotes that concept in their marketing materials right now.

This is Econ 101. Why is it that the teaser presented ,here, suggests Mr. Cramer doesn't know one thing about economics? When, of course, Cramer does. So what gives here?

Possibly, Mr. Cramer believes the Peak oil advocates, so doesn't appreciate this simply is a market reacting approprietly to increased demand; and a sudden realization that supply is not permanently constricted, and can meet demand and, in fact, rising demand.

This is a healthy market action: Because capital is being invested in a product that practically spells: P-R-O-D-U-C-T-I-V-I-T-Y, for both the world economy and the American economy.

This investment Blitz is based on a new paradigm: crude oil is available -- you just have to go get it (invest).

And also helpful: Time is of the essence. Notions of competition are good.

That's the story: Oil investors understand they won't be casing each others tails in an empty "bidding war" over limited supplys of oil, as the Peakers want people to believe. But no, this is a race for hard assets: chasing giant, super-giant, and even small oil plays: All are welcome to the market.

An open market, not controlled by the few, but rather invigorated by the many.

A traditional market reaction to the news: "There's gold up in them, there hills!" Pent up demand can be met. It's exciting, it's healthy.

Too bad some people don't understand that.

Anaconda said...


Exploration discoveries,
Arthur Berman, Contributing Editor,
May 2008
(direct link available at left-hand column under Online Magazines)

Asia. Calvalley Petroleum discovered oil in granitic basement while drilling its Quarn Qaymah-2 exploration appraisal well in Yemen's onshore Block 9.

The well drilled 2,451 ft. into basement, where strong oil shows and high pressures were encountered in fracture zones. The well was drilled to a total depth of 13,042 ft.

How many times does oil have to get discovered in bedrock before oil geologists accept that oil is abiotic?