Thursday, February 09, 2012

It's a Gas Gas Gas

This weeks EIA natural gas storage report shows that there's 2888 billion cubic feet in storage. Natural gas is seasonal. In a normal year, it peaks around 3000 bcf about Halloween and then bottoms out at 1200 in late March. Anything over 3500, they're wondering where to put it. So, with winter winding down, we have enough in storage to start a whole new winter.

You can see that this is a problem. Everybody went crazy into fracking at the same time a few years ago, and due to the long lead time, they're all going into full production at the same time, so that now the stuff is absurdly cheap. Gas at $2.50/ 1000 cubic feet is energetically equivalent to oil at $15/ barrel. Oil is trading at $115/ barrel. So, some companies are going under, and then, the price will shoot back up. That's capitalism!

Once the gas is gone, what do we have?

Yep. Sunshine. Meanwhile, how are gas companies getting by? Producing at $5 and selling at $2.50 is not easy. First, strip out every bit of longer hydrocarabons & sell it. When petroleum engineering fails, go to financial: Capitalize everything, then every 3 or 4 years, write off a billion. This makes it look like they're profitable in general, but have the occasional bad year.

Until the writedown leaves them insolvent & the next bond won't sell. If you're ready for the serious version, AE Berman at TheOilDrum
(Edited because the first video bored me & the wrap needed clarity)


Dan Riley said...

Are we really going to have a falling out over Kirstie Allie? And if you find Shelley Long really so terribly Ewwwwww worthy, was it Tom Cruise that did it for you in Losing It?

Downpuppy said...

Hi Dan! Let me explain "Losin it" by quoting csweetleaf from the IMDB review:

This movie is about 3 high school seniors who want to go to Tijuana in search of sex (without their parents knowing it) and things don't work out the way they want it as Dave's little brother Wendell 'Wimp' (John Navin) goes along for the ride and later they shoplift a grocery store and the owner's wife goes with them cause she claims that she's gonna divorce him and she finds out that they stoled some items at the grocery store but she didn't care, the situations that the boys got themselves in Tijuana are hilarious and they later meet crooked cops, insane marine sailors and junkyard ruffians, will they get out of Tijuana alive, will the three boys lose their virginity, in order to find out, watch this movie and it's way better than the movies of today, I think that Losin' It deserves more recognition than what it gets cause it's a funny movie and if you can find this movie at your local video store, rent it and have a good laugh, it's a great way to spend a weekend evening.

What more can you say in one sentence?