2011 August 12

The Master Resource Report  2011-08-12

100 million gallons.    (page 1 ) 

Opec spare capacity.    (page 2 )

Solar   (page 3 )

So how is the price of oil doing.

I am afraid that the price of oil is doing just fine if what you want is oil above $100 per barrel. The average price for the all countries price reported by the EIA this year thru August 12th is $107.90. This interestingly is about where Brent is trading this morning. After all the noise about how the price has slid from its high for the year most folks probably think the black stuff is now suddenly below triple digits again. The reality is different.

Click image for larger view.

The average price in 2010 for the all countries data provided by the EIA was $76.18 per barrel, 29% below the current year’s average. In addition it is only $6 per barrel below the year-to-date price level of the spike in 2008 as shown in the graph. The price of oil while down from its high is not following the nearly straight line drop seen in 2008 despite the release from the SPR and concerns over an economic slowdown. The global price of oil is still solidly in triple digits and well above the simple trend line since 1999’s lows (shown in white).

100 mpg car

In last week’s report on page 2 I had some links to an article on the likelihood of building a real 100 mpg car that people would buy. The author Tom Murphy concluded that it was very unlikely given the physics involved. Well yesterday I visited some of the folks with Wikispeed and had a chance to look at their 100+ mpg car that brings some of Mr. Murphy’s conclusions into doubt. Just maybe it is possible to build that impossible car.

In a few weeks after the world slows down a bit (at least I hope it will) I will have more on this fascinating project with global reach.

“The Big Thirst”

A few weeks ago I mentioned a new book this year about water. I highly recommend “The Big Thirst” again along with another good book on water “When Rivers Run Dry”. There are two main reasons the issue of water is so important. Neither of which should be new to readers of the Master Resource Report.

The first relates to the similarities of how the policy struggles and reactions to trying to manage water are similar to those faced concerning energy. Water is so cheap and abundant in most of the developed world that it has come to be seen as nearly free and never ending, just like energy. Cheap abundant water and energy are not viewed as natural resources but rather as god given rights, like breathing with no limits or cost. Therefore how these two problems are confronted and dealt with will be very similar. There are lessons for each within the other.

The other is the relationship between water and energy this report has mentioned many times. Water and energy are really many times two sides of the same coin. It takes energy to provide water and manage waste water; it also takes water to provide energy. Just think of hydraulics fracturing as a clear example. Neither will ultimately be resolved without the other, their relationship is just too tight. If you do not understand water you do not understand energy.

Understanding these two relationships may be one of the most important components of successful investing over the remainder of this century. There will be many opportunities to both make and lose money. Good luck, we are all going to need an abundance of that too.