mdef metals defense energy food

What is MDEF™ Investing? Strategy before tactics. Strategic investments dictate tactical actions in the Metals, Defense, Energy & Food sectors.

- Jeffrey C. Borneman

Energy News

Legislating and Regulating Scarcity

Jeffrey C. Borneman | August 3, 2015

I'm not promoting one candidate for POTUS over another but encourage the debate of the strangulation of basic human needs at the highest of levels.

No matter how, or by whom the EPA is slapped down, castigated or berated it is hell bent de-industrializing the American economy. Today's new-new proposed Rule on Clean Power Plan is meant to literally throw our Energy might like a hail-marry pass back to pre-industrialized America. The idea that "renewable's" can ever take the place of fossil fuels or nuclear has been disproved time and again but the myth persists because it is the train the EPA is on.

As investors ask yourself this: If the EPA is granted the unlimited power's it already presumes to have and regulates at will, what will America look like? Savvy investors know that whatever the government is intending to make scarce is a wise investment.

Don't be fooled by the conciliatory language in the article below and demand that whomever you support politically speak to the EPA's illegal overreach:

Read the Original Article

EPA Issues More Ambitious But Flexible Final Clean Power Plan
By: Sonal Patel Power Magazine Original Article Date: 2015-08-03

The Current Geopolitics of Energy Explained

Jeffrey C. Borneman | February 12, 2015

Several media pundits have recently claimed oil with fall to $20/bbl while others project higher prices soon. Obviously, not all pundits study the layered objectives of the various players, but prefer to repeat others' opinions. I'm asking my readers and investors to understand the Zero Hedge article link below as it details the 5 W's of the Russian/Ukraine/US, Saudi/Syrian/European Energy struggle.

Investors should take care to note that three of the four market sectors of MDEF™ are center-stage in this geopolitcal Chess Match.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Read the Original Article

Another Russian Answer to Energy Sanctions?

Jeffrey C. Borneman | October 27, 2014

"On Oct. 24, Russia launched a new and independent natural gas exchange (in St. Petersburg, Russia) and will make the facility the largest market for natural gas trading in all of Europe. [It will be] known as the St. Petersburg International Mercantile Exchange (SPIMEX)," reports the Examiner. 

Investors should know that the Energy stakes across the globe are larger and much more grim than the majority of people care to admit. Russia will not – cannot - simply accept the US/European sanctions which are debasing its currency and economy. The sanctions are, for all intents and purposes, pushing Russia into an attack on the Petrodollar since they must attempt to trade around it:

"With economic sanctions, and secret oil deals with Middle Eastern producers causing dire financial consequences to Russia's currency and energy industries, the best way to circumvent external attacks is to simply bypass the recognized market structures and create your own platforms of trade, and in currencies that are beneficial to the well being of your economy."

As stated here recently, the US is willing to fight to retain the Petrodollar supremacy. Investors who follow DEMAND for Defense can also see the world is preparing for War. The Examiner article had one interesting quote regarding the Petrodollar I've posted below for your review.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

It is interesting to note that the SPIMEX is beginning operations just two days after the tragic and highly suspect death of Total CEO Christophe de Margerie, who was in Russia to discuss energy topics with government and oil industry leaders.

Read the Original Article

Russia's new gas exchange could lead to energy pricing outside the dollar
The Examiner Original Article Date: 2014-10-27

Thou Shalt Not Challenge The Petrodollar

Jeffrey C. Borneman | October 21, 2014

Christophe de Margerie, CEO of French Energy giant Total died in plane crash in Moscow yesterday after hitting a snow-plough on take off (or during an emergency landing - depending on the source). de Margerie's recent statement: "There is no reason to pay for oil in dollars," was still reverberating around the globe.  

French policymakers apparently assigned de Margerie the task of finding ways to bolster the use of the euro in international business following a record multi-billion dollar U.S. fine for BNP. Of course this translates as "trading away from the Petrodollar" and that simply cannot be allowed. There are many financial analysts that are claiming we "have passed Peak Petrodollar" territory, and are in fact, calling for the end of the reign of the Petrodollar. 

In July of this year, France sent unambiguous indications of its displeasure with the Petrodollar as the reigning currency. Christian Noyer, French National Bank governor and member of the ECB's governing board could not have been more clear: "A movement to diversify the currencies used in international trade is inevitable ... Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar,"  as reported by The 4th Media.

Investors must understand that the Petrodollar is the heart of the existing world order. That world order is changing - for many reasons - but at its root, the organizing principal is Energy: Every geopolitical event of note is an Energy play. I've stated many times that 75% of the US military budget is spent protecting the free-flow of Energy around the globe because it trades via the Petrodollar. The Energy "game" is hundreds (if not thousands) of 3-D chess matches happening simultaneously but always pivoting around the Petrodollar. 

The US will not relinquish the power over world order without a fight - literally. Those predicting the demise of the USD (Petrodollar) from excessive debt issuance should take heed: The USD has quietly but swiftly moved up to highs not seen in a generation as global Instability leads capital back to the one remaining safe-haven, precisely because of its dominance.

Investor note: The crucial rule for investors in the Energy game is to never bet against the house. It is the most crucial of rules. In the current Energy paradigm "the house" is the Petrodollar - backed by the might of the US military and NATO. The new addition to this crucial rule seems to be: Do not make public statements such as: "There is no reason to pay for oil in dollars."

The world is heading to a pivot point, a tectonic shift in the status quo. While much of it planned, unexpected events will have an impact as well. Regardless, it is the reason the MDEF™ Investing strategy was created: Own only the essential market sectors that both governments and individuals must rely on for survival. As events unfold, and DEMAND for non-essential goods and services wane, investing capital rotates into areas of confirmed need and reliable returns.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Energy Spike From Anit-Russian Sanctions Imminent?

Jeffrey C. Borneman | September 21, 2014

"The anti-Russian sanctions threaten the security of the global energy market (emphasis mine), said former CEO of British Petroleum Tony Hayward. "The restrictions on Russian oil and gas companies may lead to disruptions in supplies and rising oil prices."

Hayward also said it remains unclear where new supplies will be sourced when oil exports from the United States reach their maximum, adding " ... the world is experiencing a false sense of security in connection with the shale gas revolution in the United States (emphasis mine) that has led to an increase in oil production in the United States by 60 percent since 2008," (Financial Times).

The danger of a spike (or long term price hike) in the global Energy market is a clear economic threat to dozens of countries currently in recession or even in true depression. Further, removing Russian supply from the established supply chain would likely lead to more than simple disruptions and rising prices. In all likelihood it would mean War.

Individuals who understand that a comprehensive view of world events is critical to the security of their investments should note that Hayward's statements were made in an interview with the Financial Times and reported in Pravda and Russia Today (full article attached) yet were not covered by any US media.

Hayward also made the comment that: " ... (the) shale boom in the United States that concealed the growing risks (emphasis mine) to the global energy market would soon subside, and the economy of the whole world would be defenseless to possible restrictions in oil supplies."

Investors who assume that the trajectory of falling Energy prices will continue based on the reality of slowing economies are frankly, dead wrong. As discussed here Russia relies on Energy exports for 52% of its budget and the sanctions are harming Russia's economy much more than generally reported. The obvious next move for Russia is to wait for its most opportune moment to slow or shut the Energy flow to Europe and the Baltic's, causing maximum pain for and Energy hungry Europe and providing the richest reward to the Russian treasury - most likely in the dead of this winter when the repercussions will be immediate and severe.

The Russian sanctions are setting the stage for another European War and investors should understand this and prepare now. What other market sectors must rise in the event of War? If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

The comments were made against the backdrop of Western sanctions that affected Gazprom, Lukoil and several other Russian energy companies, against which the United States and the EU imposed restrictions for the supply of goods, technologies and services for exploration and extraction of deep shelf resources, as well as for the implementation of shale oil projects.

Read the Original Article

Anti-Russian sanctions to affect oil prices, former BP CEO says
Pravda Original Article Date: 2014-09-21

Capital Flow Addresses Real Energy DEMAND

Jeffrey C. Borneman | September 15, 2014

Accurate title in the piece below. Investors will recognize that value flows with the Energy.

To remedy the challenges created by the large influx of oil and natural gas production in the state, numerous regional refineries are being overhauled to meet demand, and billions of dollars in new pipelines are being created as well.

Read the Original Article

Bringing Down The House of Saud = Energy Crisis

Jeffrey C. Borneman | September 11, 2014

There are many stories today on Energy worth investor's time to dissect, however, a reminder of the goal of ISIS should be read again and again as investors have, alas, short memories.

MercoPress has written a short but concise article which speaks to the precarious nature of today's Energy sector. While the article details ISIS objective's and the players involved, it never mentions the effect any victory would have on the Energy markets - which investors will recognize as truly profound. 

First, to capture and secure the most important country in the Muslim world: Saudi Arabia.

Read the Original Article

Islamic State's ultimate goal: Saudi Arabia's oil wells
MercoPress Original Article Date: 2014-09-11

This Is DEMAND for Energy

Jeffrey C. Borneman | September 4, 2014

Read the Original Article

Midstream firms build to meet Eagle Ford condensate production
San Antonia's MyPage Original Article Date: 2014-09-04

Why DEMAND (Prices) For Energy Must Rise - $150/BBL+

Jeffrey C. Borneman | August 26, 2014

The President of MercBloc LLC, a wealth management firm and is the author of "Oil's Endless Bid," has made some brilliant observations as to why the genesis for the next spike in Energy prices may be very different than 2007-8 - but will similar results.

About once a month I come across a must-read article that I'd wish I'd written - that I should have written ... Investors, please understand Dan Dicker's article (linked below) is, hands-down,  this month's winner In the MDEF™ "Why Own It Now" category.

Those who've followed the MDEF™ Investing strategy know that current geopolitical risks to the supply-chain of Energy are unprecedented and worsening - but there's more to the story. Dan brings some thoughts as a Energy trader to the fore that only a seasoned trader can. Here's the money quote (full article follows).

So, let's get the full 2014 picture. We have, I believe, an oncoming massive shortage of crude, but unlike 2008 we cannot get the financial markets to recognize it and incentivize necessary production. Instead of a financial market that's outracing the fundamentals, we now have a fundamentally at-risk market where the financials are unable to catch up.

Read the Original Article

Prepare for an Oil Super Spike to $150
RealClearMarkets Original Article Date: 2014-08-25

Mexico Alters Constitution In DEMAND For Energy

Jeffrey C. Borneman | August 14, 2014

Seventy-six years after Mexico nationalized its Energy sector, its failure in Energy production and investment could be hidden no longer - it needs foreign cash and expertise.

"Mexican President Enrique Pena Nieto signed into law on Monday new rules governing a historic opening of the state-run oil, gas and electricity industries to foreign and private companies," said Energy Secretary Pedro Joaquin Coldwell, according to The World Post. Coldwell added the new laws will allow Mexico to deal "with realities of the 21st century."

Investors should note that Mexico actually altered its constitution to allow this "change in the energy paradigm." Similarly, Japan altered its constitution this year allowing it to expand its Defense sector. Constitutions are not changed without compelling reasons. Make no mistake, the effort demonstrates a fear for the survival of the State itself. Here we have two major countries altering their laws to address DEMAND - one in Energy and the other in Defense - that, left unaddressed, clearly threatened their survival.

Back to Mexico: Pena Nieto dismissed generations of national pride in domestic Energy saying of the reforms, " ... we have overcome decades of immobility, and overturned barriers that prevented Mexico from growing." That was quite an admission of failure on his part.

Now that past nationalization is seen as the impediment to progress, Nieto gave his vision: "With this reform we can extract oil from deep waters and take better advantage of our vast deposits of shale gas, to generate electricity at lower prices" (emphasis mine), and added: "One of those barriers has been the high price of gas (emphasis mine) — much of it imported — and electricity rates that are higher than in many parts of the United States."

We don't hear much in the US about lowering Energy costs. The average price of a gallon of gasoline, inflation-adjusted since 1918, is $2.60 per gallon. So anytime the price of gasoline is above that cost, gasoline is considered "expensive". The amount over $2.60 is considered the "premium" and understood to be an added tax to the consumer. The average price of a gallon of gasoline in America today is $3.75 (it's been as high as $4.90). It is this premium for gasoline (over $2.60/gal) that is stagnating the US economy, and by extension, the world's economies. It is the real reason why the American economy cannot generate jobs and continues to shed them. It is why DEMAND for non-essentials is falling.

Could you imagine if our own leadership were to announce the goal of reducing the pump-price to $2.25-$2.50 per gallon? The futures market would send the cost of WTI to $60 BBL in no time. The DEMAND for all goods and services would skyrocket and the world would literally change overnight. But that cannot happen as discussed here, here and here.

The Mexican president's words were meant to encourage the populace and provide cover for his historic move, but Pena Nieto knows Energy prices cannot fall. It is, in fact, why he's making the move now - Mexico intends only to take advantage of the higher prices with foreign investment capital and expertise. But investors should understand why Energy prices, regardless of DEMAND, must continue to rise.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Wars, Civil Wars & Caliphates = Energy Crisis

Jeffrey C. Borneman | August 5, 2014

"As of today it is at least theoretically possible to scenarize a world oil shock at least equal to the so-called 'Arab oil embargo' of 1973-74 in terms of oil export supply cuts from several key regions and producer states - Russia, Iraq, Libya, Syria,Yemen and possibly the GCC Arab Gulf exporters. The differences then-and-now are however massive ... " says Andrew McKillop of Oil Voice.

Before I give a detailed explanation of the above quote, let me point out that every geoplitical event occurring today, be it War, civil War or simmering conflict has its roots in Energy. 

The ISIS threat:

ISIS in Iraq, Syria and Libya are, to date, not being seriously challenged but causing a realignment of traditional allies (Israel siding with both Egypt and the Saudis?). Investors will remember the Iran/Iraq War was fought only because Iraq was geographically in the way of Iran's march to overthrow the Royal Saudi Family. McKillop added: "The ISIS movement makes no secret of 'the prize' being the overthrow of (the) albeit-Sunni ruling families, called 'impious and heretical' in the GCC countries." 

If Baghdad falls and oil generation (currently 4% of world production) is cut, WTI/Brent is likely to spike to $200/BBL with no immediate resolve possible. ISIS currently has control of both dams supplying Baghdad with water and is surrounding the city for a siege. The US has supplied missiles to Baghdad (read here) but seems ready to allow Baghdad to fall.

On the Ukraine/Russian War:

While nat-gas receives the headlines, the oil-thirsty "EU28 countries source about the same amount of their oil (about 30% - 35%) as gas from Russia. Either 'tap' can be turned off." And while the US administration contends that "Russia doesn't make anything" - Russia could certainly cause further Energy price shock by turning off the its oil supply to Europe.

As Business Insider reports today, "Russia has significantly built up its troop presence along the Ukrainian border in recent weeks, according to U.S. officials, making it ready for a potential large-scale invasion of southeastern Ukraine if Russian President Vladimir Putin so chooses." And it adds, "The White House has openly worried about what would be, for all intents and purposes, an invasion under the guise of a 'peacekeeping' operation."

Investors should reflect on the convergence of events thusly: Just at the time when an unprecedented surge in US Energy production was to challenge the decades-long status quo of Energy control, the world begins to unravel into War. I will repeat something I say often: All the world's currencies are backed by Energy; not precious Metals or Water or Intellect ... Energy - and the War machines being built and used now mean to control it - if an Energy crisis is necessary to achieve that control, so be it. 

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Clarity On Oil At $100/BBL Or Above

Jeffrey C. Borneman | August 1, 2014

"The alarm bells will start ringing if it (Oil) falls significantly below $100, forcing the (Russian) government to pay more attention to propping up an economy already close to recession," reports Reuters.

We are very aware that Russia relies heavily on Energy exports for its budget. Any sustained decrease in Energy pricing will have a direct impact on Russia's ability to both keep it's social programs in tact, and continue to build its War machine. The numbers are not in Russia's favor if Energy prices drop for any considerable period.

Sergei Aleksashenko, a former deputy central bank governor and now a scholar at the Higher School of Economics in Moscow, offers investors some clarity of Russia's predicament by saying " ... a $10 drop in oil prices would strip 700 billion rubles ($20 billion), or 5 percent, from Russian budget revenues a year." Reuters adds that "local economists estimate that a $10 price drop could rob Russia of 3 to 4 percent in GDP growth."

Put another way: Russia's future ambitions rise and fall with the WTI/Brent price - so the higher the price, the more latitude Russia has both domestically and internationally. Putin has, so far, scoffed at the the three rounds of economic sanctions.

Economic sanctions are a form of Warfare (not to be repeated in public). It is safe to say the current conflict (War) could be played out with Russia via Energy. If the US were to merely announce the goal of $50/BBL oil; that alone would drive WTI/Brent prices lower and critically wound Putin by freezing Russia's economy in recession. Such a move would hurt the US as well - as Energy is the de facto backing the PetroDollar - but the question then becomes: Which country could sustain itself longer in this scenario, the US or Russia?

This happened just recently: "A drop to $38 per barrel in the aftermath of the 2008 financial crisis sent Russian GDP falling 7.8 percent, and it shed $200 billion of reserves within a few short months trying to defend the rouble (sic), which still lost a third of its value."

Regardless of the above valuable quote, investors should keep in mind that Russia's international ambitions began after WTI hit $148/BBL in June, 2008 - when it became flush with cash. It was when Energy prices rebounded that Russia felt secure enough to rebuild its War machine with the cash-on-hand and anticipation of sustained higher Energy prices.

On Russian's domestic front, a drop in WTI/Brent would be equally catastrophic. Said Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington: "If oil hits $75-80 (BBL), Aslund said 'Russia would have to cut its imports, which would hit the standard of living, investment and economic growth. A decline in GDP and standard of living would be inevitable'."

The takeaway for investors is that Energy is the largest market in the world and the major producers have set their budgets accordingly. Russia certainly intends its resurgence to be both permanent and international and falling Energy prices would threaten those goals. Falling Energy prices would be seen by Russia as a national security threat. This is one case where War (any War) is the obvious option to prop-up Energy prices at $100/BBl or higher.

If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

Read the Original Article

Beyond oil and reserves, Russia running on empty
Reuters - via Yahoo News Original Article Date: 2014-08-01

Oil Too Close to $100/BBL - Watch Libya

Jeffrey C. Borneman | July 28, 2014

"A fire from fuel tanks near Tripoli's international airport that has been ignited by rocket attacks is out of control as clashes between rival militias have resumed in the area," the National Oil Company says.

As I've said here before, oil (Energy) prices will not be allowed to fall without a 'conflict' somewhere that ignites fear of a 'supply disruption issue'. Right on cue, as WTI falls near $100/BBL ($101.17/BBL) we have the month-old 'conflict' in Libya blowing up a main oil tank farm that its government says is an ecological disaster and "warning of a disaster with unforeseeable consequences".

What the government is saying regarding "unforeseeable consequences" is that Energy exports (oil) is the lifeblood of the Libyian economy. The tank farm is also inside the national airport (center of power) perimeter and threatens further explosions of nat-gas facilities. Manufactured scarcity comes in many forms; from the eco-warriors to terrorists as manufactured scarcity serves many different purposes. Investors would be wise to view Energy and its DEMAND in that light.

Earlier on Sunday, France, Britain, Germany and Spain called on their nationals to leave Libya due to the deteriorating security situation after "the US, the UN and Turkey have pulled their diplomats out of the North African country."

I'd say the Energy market will write-off Libyan oil production until that 'conflict' abates and reconstruction commences under a stable government.

Sue & Settle - A Brilliant Overview On Killing US Energy

Jeffrey C. Borneman | July 22, 2014

Or - Using The Courts & Critters To Shut Down Energy Production ... "They want to take hundreds of thousands of acres out of production, and some of this is among the richest oil and gas acreage in the nation," says Stephen Moore, chief economist of the Heritage Foundation.

The EPA and its use of the Endangered Species Act (ESA) is a racket. I've written on it here but Stephen Moore's piece in IBD today focuses on the particulars of tactics used to cripple Energy production in the US. Moore's piece should be read by every investor to understand the implementation of 'manufactured scarcity.' 

Here's another money quote but I'm linking the whole article and highly recommend it:

The land affected by an ESA listing could be in the tens of millions of acres, with rules that would halt development within a four-mile radius of any nesting site. Federal lands used for farming, ranching, water projects and oil and gas drilling would be impacted.

160 Billion Barrels More Than Thought - In America

Jeffrey C. Borneman | July 21, 2014

I've said many times the US is awash in Energy (specifically oil and nat-gas). In thirty years of trading and studying Energy, I've never heard of an oil-well running "dry". When wells become uneconomical to produce at current prices, they are capped and called "dry." 

"It is now estimated that there are 160 billion barrels of oil still trapped underneath this country in what are considered depleted oil fields," says Matt DiLallo at Motley Fool, and the key to its extraction is about to be turned. 

"(The) key is none other than discarded carbon dioxide, with the primary source of this practically prized greenhouse gas coming from none other than coal emissions."

DiLallo calls this "a stunning turn of events that can provide Americans with cheap and cleaner coal-fired electricity as well as enough oil to get our nation off of OPEC's oil." And several companies, so far, agree and have committed sizable capital to meet world-wide Energy DEMAND. Investors should remember: Capital Always Chases DEMAND.

I'm going to link to the DiLallo article below but brought it to readers' attention to remind us that oil wells never run "dry" but replenish over time - Geologists were stunned when testing the North Slope of Alaska wells capped after WWII only to find the oil pressure had returned. This data is conveniently dismissed as the meme of Peak Oil is honored despite clear evidence of Energy abundance. If readers would like more data on this topic, do contact me directly.

Here's a money quote (full article follows):

But thanks to technological advances in carbon capture and storage we're beginning to see new investments that are directed to cleaning coal and using the captured carbon to produce more oil.

Read the Original Article

WHY Energy Prices CANNOT Fall (Explained)

Jeffrey C. Borneman | July 3, 2014

High oil prices are now permanent as "oil producers are making less for the capital they’re spending than they did a decade ago, when U.S. benchmark crude prices were below $30 a barrel," according to a new report by IHS.

The report confirms that "lifting costs,” (the amount of money it takes to extract the oil and gas from the ground) have quadrupled since 2000, to $21 a barrel. That includes the cost of labor, transportation, supplies, pumps, and other expenses.

The report also cites the cost to “find and develop” oil is now another $22 a barrel, as land prices, the cost of hydraulic fracturing and drilling have climbed. In addition, the amount that federal and other governments take through taxes and other measures have jumped to 60 percent of pre-tax profits last year, up from 49 percent in 2000.

In other words, even as the US finds it is awash in Energy and oil hovers at $105/bbl (WTI), the cost of production leaves less and less profit for the Energy producer as both Inflation and taxes push the price higher while constricting profit. This is why some are talking $150/bbl as the next leg up in Energy regardless of the DEMAND. While it is difficult to believe that Energy companies made more profit in 2001 when WTI was $27/bbl than today at $105/bbl, it is a fact. 

The takeaway for investors is to understand the Energy boom the US is currently enjoying but superimpose the geopolitical, Inflation and tax risks our Energy producers face daily. To understand how the MDEF™ Investing strategy is positioned to address each of these concerns, contact me directly.

Here's a money quote from IHS (full article follows):

My guess is that shareholders are asking, ‘What gives?’” said Nicholas Cacchione, a lead researcher for cost and energy performance for IHS, said in a written statement. “The culprit is cost escalation."

Read the Original Article

Rising costs eat into returns even with high oil prices, IHS says
Fuel Fix Original Article Date: 2014-06-30

Assuring US Gas Prices Remain High (A How-To Guide)

Jeffrey C. Borneman | June 25, 2014

The DEMAND for gasoline in America has tanked (pardon the pun) so increasing gasoline to the US market could only depress the price and that will not be allowed - Got it?

If a law meant to protect US consumers is in the way - simply alter the law with a pen - whatever it takes to keep cheap Energy unattainable. That law, passed in reaction to the 1970's Oil Embargo(s) essentially prohibited sale of US crude abroad (some shipments exempt). But the amount of crude oil (Energy) currently being produced here at home is correctly seen as a  geopolitcal threat to the established balance of powers and the USD. How many investors know the major sponsor of the anti-fracking movement in the US is OPEC? It makes perfect business sense for them to negatively influence US consumer sentiment, thereby keeping DEMAND of it's Energy high(er).

I'm tempted to start calling this administration "The Pen." Congress has again been circumvented by "The Pen" to allow barely processed crude to be exported as a "condensate." Investors are by nature capitalists and believe in selling products at the highest price possible. After all, gasoline prices in Europe are 2X+ what we pay here at home so "The Pen" chose two companies (to start) to further meet Europe's DEMAND thus disallowing America's need for cheap Energy. Investors know that America was built on cheap Energy and that cheap Energy creates DEMAND. Without the economic engine of the US consumer running on all eight cylinders, the entire world suffers as US DEMAND for other goods plummets.

We are now hearing (even from Republicans) a call to export US Energy and for a 'carbon tax' that will extract/divert yet more capital from the economy. Killing DEMAND is clearly not a concern for either party and "The Pen" is happy to comply. What is the takewaway for investors? It is that America will not be allowed cheap Energy again. It is this very scenario we've covered before (See here and here). It is also the logic behind the MDEF™ Investing strategy. For more information on MDEF™, contact me directly.

A long story below that purports to give both sides of the Energy export story, but I find myself in full agreement with the money quote (full article follows):

Sen. Ed Markey, D-Mass., who opposes oil exports, said the Commerce Department’s decision “puts America on a slippery slope to send more of our oil abroad, even at a time when the Middle East is in disarray and tensions are running high with Russia.” “We should keep our resources here at home for American families and businesses, not send this oil abroad even as we import oil from dangerous regions of the world,” Markey said in a statement.

Read the Original Article

Colorado Crude Estimate Explodes (Again)

Jeffrey C. Borneman | June 22, 2014

Colorado’s booming Denver-Julesburg Basin has grown to 4.6 billion barrels and is nearing Mega-Status and "that’s just using estimates from the two biggest oil and gas companies."  

While thrilling to see the every-increasing estimates of recoverable Energy around the US, Energy companies and investors cannot shake the fear that some rule, from some agency, for some nondescript or nonsensical reason, will decree "Opps, Off Limits To You!" See: The grouse, snail-darter, spotted owl, desert tortoise, California smelt ... then compare with the average price of gasoline and Food costs, utility costs, etc.

The money quote below begins with "If ... allowed ... " Let me say this as plainly as I can to all investors: American's will not be allowed cheap Energy again. The new-normal we were all to accept begins with higher Energy costs which must lift the cost of all goods and services and, by definition, lowers the average standard of living - all brought to you by the magic of Inflation. 

It is this reason the MDEF™ Investing strategy focuses solely in the areas non-discretionary DEMAND. Contact me directly to see if the strategy meets your investment criteria, and here's the money quote (full article follows):

If Anadarko is allowed to drill more wells in an area, that means the DJ could produce 4.6 billion barrels of oil equivalent — under the current estimates.

Read the Original Article

Crude oil potential from Colorado's DJ Basin gets bigger (a lot bigger)
Denver Business Journal Original Article Date: 2014-06-22

US To Pretend To Address Energy Prices

Jeffrey C. Borneman | June 21, 2014

"The House will take up legislation next week to maximize America's energy resources ... ". You feel better already now, don't you? Hundreds of billions spent on an Energy Department since Carter and we didn't know we sat on oceans of oil ...

That's the line we are to assume - we just didn't know ... "It has been believed for years that the country's energy needs could be met only through increasing foreign dependence." If you are four years old, yes, not knowing what is beneath our ground is plausible, but what is the representative's solution to DEMAND and Inflation regarding Energy?

" ... by "building pipelines and transmission lines to connect our energy abundance to consumers, and by using our energy strength to fight back against hostile nations who use their resources to hold the rest of the world hostage."Stop it Upton. No, please - really, it hurts. The US has two million miles of pipelines now. An additional nat-gas pipeline would help the northeast and the XL will only help with exports. He does hint at the problem though:

"The U.S. has entered an era of energy abundance, and now we need the architecture – the infrastructure and policies – to support it, he said." The problem isn't with the infrastructure. The 'architecture' is also ongoing and flexible; the problem lies in the policies of this, and past administrations to restrict Energy production. This will not, and cannot, change with the run-amok EPA which excels at ignoring current laws and writes its own policies to ensure higher costs. That is just a fact for anyone over four years old.

I'll watch the hearings and let you know what is said. The last time Energy prices rose to this prominence in congress, we were given the Energy Department so don't hold your breath.

Here's the flag-waving quote (full article follows):

The "all-of-the-above" energy strategy will join fossil and renewable fuels, expanded production, and conservation, to "help save money for American families, create the new jobs and industries that we want, and strengthen our position across the globe.

Read the Original Article

Rep. Fred Upton: House Taking New Approach on Energy
NewMax Original Article Date: 2014-06-21

Exxon's Largest US Investment - Exported To Help Feed The World

Jeffrey C. Borneman | June 19, 2014

Exxon is not alone in the south's expansion to harness shale gas. " ... the U.S. petrochemical industry has announced about $71.7 billion in new chemical-related investments since the advent of cheap shale gas, according to the American Chemistry Council."

Investors should file this under "Oh My" and appreciate the capital risk Exxon and others have taken to provide for world DEMAND. The long article below is worth the read as the reach of this expansion is staggering, not to mention the jobs and expected tax revenue. It is comforting to know that the out-of-control, say-NO-first environmental crowd does not always win. Note the timing of the expansion as it relates to the price of nat-gas in the money quote (full article follows):

Shortly after U.S. gas prices collapsed a few years ago, a half-dozen energy companies raced to build plants along the Gulf Coast that can break natural gas molecules into parts that can be molded into the building blocks of plastic.

Read the Original Article

Shale's Bounty
Fuel Fix Original Article Date: 2014-06-19

The Strangulation of Energy Extraction Continues

Jeffrey C. Borneman | June 17, 2014

... one small area at a time. At least we now know the name of the next species the BLM is out to save: The Gunnison Sage Grouse (not to be confused with its cousin, also on the Endangered Species list, The Greater Sage Grouse).

Shutting down exploration and production of Energy in another 800,000 acres in prime lands for a bird that is thriving nicely, thank you, demonstrates the BLM's modus operandi. This is never about wildlife. This BLM action is meant solely to help keep Energy prices high. Let me use de Beers' diamonds as an example: If de Beers let out one tenth of one percent of the diamonds it stores, diamonds would be utterly worthless. Rarity is the key to value in any commodity and Energy is no different. 

This is the US Energy Game: Keep as much production off the market as possible for as long as possible - use whatever method most effective; the preferred method, of course, is the environmental lawsuits by NGOs (citizens) but a government declaration of a species' endangerment works well too. Never admit any chink-in-the-armor regarding Climate Change, Global Warming, etc. If you do, the game is over and $1/gal gasoline will be expected. If challenged on the science, use the following steps in order: Ignore it until it dissipates; If it remains, ridicule it; and if fight's back, demonize both the science and proponent. The US government has no intentions of loosing this battle but at least we now know the grouse's full name.

Contact me for how the MDEF™ Investing strategy is performing. Here's a money quote on the BLM (full article follows):

The Denver Post reports the moratorium described in a Bureau of Land Management memo prevents agency officials from offering and selling new leases, and requires that land-use plans be updated. BLM spokesman Steven Hall says it's aimed at improving habitat and increasing populations of the chicken-sized birds.

Read the Original Article

Feds block oil and gas leasing in Sage Grouse habitat
AP Original Article Date: 2014-06-17

Iraq's Mild Pressure on WTI - So Far

Jeffrey C. Borneman | June 15, 2014

World crude prices have spiked to a high of $107/BBL (WTI) this past week and may rise further, depending ...

What does the investor do here? How best to view Energy DEMAND in what seems to be a world covered with war-clouds? Remember, even in times of peace, Energy can never go out-of-style. Currently in the middle east, Maliki and his Iraqi army have begun to fight back against the Sunni-led ISIS movement. In my opinion, the world is overreacting by sending crude prices higher. Iraq produces 3M BBLs/day which, while not a minor amount, can easily be supplied by others. As of this writing the southern, and most important Energy hub of Iraq, is still war-free. While no NATO forces have been committed yet, some world leaders are calling for boots-on-the-ground while others merely talk tough and move Defense hardware around. Investors should see Iraq, Russia and China this way: The world DEMANDs Energy and is willing to offer a Defense for it. Here's the money quote (full article follows):

"We have to engage -- and that doesn't mean, by the way, engagement as in Iraq or Afghanistan, and ground troops -- but it does mean that we actively try and shape this situation," Blair said.

Read the Original Article

Iraq Kills More Than 279 in Fight Against ISIL
Assyrian Intl News Agency Original Article Date: 2014-06-15

Utah Employs "All The Above" Energy Strategy & Is Winning

Jeffrey C. Borneman | June 12, 2014

We haven't heard the "All the Above" Energy solution from any politician since the election of 2012. Americans appear too stunned to even recognize the issue.

Utah has the assets and will to produce Energy. See post on Food today and the lawsuits against the BLM in its efforts to constrain the very success touted in Utah. As fun as the article below was to read (a true "All the Above strategy) - I disagree with the tenor of platitudes in the quote below. It's not "nice to know we have the ability to be Energy independent ... " - it's crucial to both know and act on fact that the US can be Energy independent any time it wants. 

WTI is now over $105/bbl due to civil war in Iraq. The situation in Iraq popped up without a hint while war clouds cover Europe and the Far East. Investors should recognize every geopolitical conflict involves control of Metals, Defense, Energy and Food (MDEF™). It's imperative to recognize what areas are in DEMAND, and that these issues are worth war. Think about the MDEF™Investing strategy as buying in-advance what is being slowly taken from us through regulation and Inflation. Here's the money quote (full article follows): 

In a world full of economic uncertainty and strife, it is nice to know that we have the ability to be energy independent. By embracing this energy revolution, we are pulling ourselves, and our entire economy, up by our own bootstraps.

Read the Original Article

Dan Liljenquist: Utah's Energy Revolution
Desert News Original Article Date: 2014-06-12

World Oil Prices Cannot Fall

Jeffrey C. Borneman | June 9, 2014

The US fracking and horizontal drilling revolution has increasing domestic production at a fever pace. Why are pump-prices not falling, and is investing in the Energy sector still wise?

Short answers: They cannot, and; Yes. Investors must remember oil is a world commodity; the US does not price it. How oil is priced is another topic but is similar to the pricing of Gold (a consortium of oil producers). Oil producing countries have no intention of letting oil prices fall - why would they? An increase in its price is preferable to them for reasons I've stated before (mostly military build outs and social programs). 

Nothing is grown, turns on, is transported, stored or purchased without Energy from oil. Russia did not annex Crimea merely for political gain (although it was one reason) - Russia seized Crimea to control massive offshore Energy resources. China military is strong-arming Viet Nam in the South China Sea for Energy assets. It is my contention that if oil usage slips to the point that WTI looks to fall precipitously, a conflict (war) will be conducted to support the current price, if not drive WTI higher. Said another way: No other country cares about the US GDP or the US pump price. The MDEF™Investing strategy is based on this understanding. Here's a money quote from a smart fellow who does not understand the current geopolitics (full article follows):

For the most part, all of these political fears have been resolved. Putin appears to be playing nice, and is even telling Ukraine it has more time to pay its natural gas bills. Libya has calmed down to a whimper. Iran not only had been ignoring earlier sanctions, the U.S. gave it the green light to go ahead and produce as much as it wanted as long as it discontinued the nuclear program.

Read the Original Article

There's No Justification for Crude Oil Prices in the Stratosphere
TheStreet Original Article Date: 2014-06-09

Onslaught Of Studies Against Energy Continues

Jeffrey C. Borneman | June 8, 2014

Not until the burning of fossil fuels becomes illegal will reports like the following cease. Academicians in the UK and US are apparently acting on marching orders; the goal seems to be the ratcheting up of the fear of fossil fuels with studies, each postulating a more horrid future. 

Today's "research has shown" mice-study adds familiar mental health woes to the list of human-caused calamities from fossil fuels: autism and schizophrenia. Adding the mental health issue to the mix of calamities seems to be the next necessary link to justify the meme. Deaths from coal soot are not new. The Industrial Revolution in the UK alone caused black skies for years and the science, if not well known then, is clearly understood now. But never was the sanity of the populace questioned (in this regard). Surely any link to mental health issues would have come to the attention of science before now. The "study" strongly suggests a scientific standard we could apply around the globe and through time - that is the take-away - but by this standard we certainly could expect half of China's population to be bat- excrement crazy by now with the amount of coal soot in the air. But today's Academia are not interested, it seems, in shutting down Energy use in the Far East. 

Investors: keep a wary eye on the purported dangers to our mental health and promises of cost savings to the healthcare system by shunning fossil fuels. You will also notice the MDEF™ Investing strategy focuses on the very market sectors that are becoming either artificially rare(r) or price Inflated. Here's the money quote (full article follows):

The research, published in the journal Environmental Health Perspectives, focused on ultra-fine carbon particles of the type produced by factories and motor vehicles.

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America: Too Stupid or Too Lazy to Invest in Energy?

Jeffrey C. Borneman | June 5, 2014

Goldman Sachs seems to think we're both. The Energy analysts there think too much Energy is being left 'on the table' from lack of insight and will.

 "Instead, the United States seems more on track to export shale, as the United States has lagged other countries in generating the demand ... " Goldman suggests we are wasting resources by not equipping both people and products to accept the plethora of nat gas we own, and are missing out on "the high-value manufacturing jobs that come along with this demand – needed to consume shale gas. In this respect, we believe that the shale revolution may stall and not see the full longevity of the “demand response” phase." This is true, so why stop at shale gas? The US is the Saudi Arabia of every Energy fossil fuel source ... Goldman's analysts didn't mention that ...

Goldman places this "failure of ambition and foresight" squarely on both government and the private sector. This is a stinging indictment of some very smart people (the private sector) and flat-out incorrect. It is not the private sector but government that hinders or encourages development through both regulation and taxes. Let's keep in mind that our government controls the reserve currency so it's not a stretch to say if our government wanted $1/gal gasoline, it could achieve it easily and the resulting growth would lift all economies. If we "stall" in the shale revolution, it will be because government, not unprepared workers or the lazy private sector, choose not to pursue the goal of cheap Energy. Why? Because Cash is (not) King: Scarcity is King. Here's the money quote (full article follows):

Goldman says we appear shockingly willing to allow exports to carry American resources outside our shores, and all because we can't be bothered to put in the effort to allow it to be consumed here.

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America Is Blowing The Shale Revolution
Business Insider Original Article Date: 2014-06-05

Few Know Why Rockefeller Was Behind Prohibition

Jeffrey C. Borneman | June 3, 2014

Most people are not aware that Henry Ford's Model T came in a variation allowing the carburetor to run the engine on farm-made ethyl alcohol. This allowed the operator to stop at local farms (equipped with stills) to refuel. Ford never got Rockefeller's memo ...

Rockefeller's Standard Oil monopoly was threatened by any alternative to gasoline, and you don't threaten billionaires. John D. jumped into the Temperance Movement to ensure everyone bought only gasoline. Why is this not now common knowledge? Today's engines, like those in 1910, can be configured to run on anything that will burn. The story below is just one example of how, one day, we will break from big Energy. As I've said many times, big Energy will eagerly start wars to keep its control over people and money; and until that time has ended, big Energy will be feeding world DEMAND, period. Here's a money quote (full article follow):

Now, without any pretreatment, we can simply take switchgrass, grind it up, add a low-cost, minimal salts medium and get ethanol out the other end," Westpheling said. "This is the first step toward an industrial process that is economically feasible. Read more at:

Read the Original Article

Be Calm On Proposed EPA Rules - They Won't Happen, But It Won't Matter

Jeffrey C. Borneman | June 2, 2014

The very premise that the earth's atmosphere is "Green House- like" in trapping dangerous C02 (necessary for life) shows the power of a repeated meme. 

The meme of green-house gases effecting climate is so dubious it's comical. That aside, the EPA's proposed Rules to limit such gases by an additional 25-30% will be the death of much of America's ability to function. This is not hyperbole. Let's take another tract on what will happen if these proposed Rules become law: Coal generated electricity will cease very quickly. The idea that the system of coal production, purchase, transportation and use, can continue without massive price increases and the breaking of current contracts, is as dubious as the meme of greenhouse gases itself. Without the DEMAND for coal at current levels, its production becomes un-viable. Plants close early because all rate increases must be approved by state electric rating agencies ... That's the real picture but we don't hear it described this way - yet. The new EPA Rules have nothing to do with 'saving the planet' and everything to do with driving Energy prices higher. Comments for the new Rules will be open for one year before any possible action, so think of that in terms of the mid-term elections and a new congress. The legality of the administrations orders will also come under heavy legal scrutiny... DEMAND for Energy cannot cease and adults will eventually weight the pain and say 'hell no' - but electric rates would have already spiked - mission accomplished. Here's the money quote from a UK paper (full article follows): 

Coal’s share of electricity generation falls from 40 percent last year to only 14 percent in 2030. With this decline in coal-fired power comes huge increases in power prices. Americans will pay $17 billion more per year in electricity as coal-fired power is retired. Read more:

Why Pump Prices Are So High in American - It's DEMAND; But Not Ours

Jeffrey C. Borneman | May 31, 2014

There are many imperatives for investor to understand but STEP 1 is a clear understanding of the most basic: DEMAND.  

The ZeroHedge article stating the decline of gasoline sales of 75% since 1998 is getting quite a bit of attention. Understanding that if DEMAND had fallen even half that amount in normal times, a sharp decline in price would be inevitable. These are not normal times. However, in the case of gasoline it has only risen to hover at $4/gal. Remember when Energy Secretary Chu decried how the US must find a way to raise its pump prices to European levels? 

The article assumes all storage facilities are burgeoning with gasoline produced but unsold. This is just not so. I've stated many times the US is now a major exporter of "refined products" regarding petroleum. We are shipping our refined gasoline to countries that pay $9-$12/gal. What company - or government, for that matter - want oil or gasoline prices to retreat? Think of the lost tax revenue and know that is why prices can only continue upwards. Note in the graph of gallons/time in the article. What do you recall was happening politically at the times of gasoline usage/contraction: We see September, 2001; we see the spike in 2008, and lastly; we see the election year of 2012 ... The more America does without, the more we pay. Here's the money quote (full article follows):

However, even that previously published data, and the grim analyses which accompanied it could not prepare me for the horror story contained in data passed along by an alert reader. U.S. “gasoline consumption” – as measured by the U.S. Energy Information Administration (EIA) itself – has plummeted by nearly 75%, from its all-time peak in July of 1998. A near-75% collapse in U.S. gasoline consumption has occurred in little more than 15 years.

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U.S. Gasoline Consumption Plummets By Nearly 75%
ZeroHedge Original Article Date: 2014-05-31

Killing DEMAND One EO at a Time

Jeffrey C. Borneman | May 28, 2014

June 2 is the expected release date of the new EPA mandates that promise new, costly and useless Clear Air Act compliance.

Voters may remember the Cap 'n Trade legislation pushed by the administration died in the US Senate. Undeterred, a mandate was handed to the EPA, effectively performing a pivot around the congress. The new EPA "rules" will mean loss of generating capacity, jobs, higher utility bills and a siphoning of capital for a failed Green agenda. No one knows the true losses the US economy will suffer, but seeing what must come through the eyes of decreasing DEMAND for goods and services, is a good place to start. Here's the money quote (full article follows):

The administration is focusing on an approach that would let states set up their own systems to achieve mandated cuts, including linking into existing cap-and-trade networks ...

Read the Original Article

Chamber Study Predicts Obama Climate Rule Will Kill Jobs
Breitbart Original Article Date: 2014-05-28

This is Real DEMAND in Energy - A Home Grown Qatar

Jeffrey C. Borneman | May 28, 2014

"As an economist, I can only say,'Wow. Holy Cow,'" said Loren Scott, a Louisiana economist who has studied the state for 40 years. This is the next move of "perpetual check" in the geopolitical Energy chess match. 

A fascinating history combining DEMAND, necessity and nefarious people converge in Louisiana to create one of the largest engineering projects since TVA. And the Sasol project is just one of many: "In all, some 66 industrial projects—worth some $90 billion—will be breaking ground over the next five years in Louisiana ... " This is the kind of project the Saudi Royal Family fears most and why it has financially backed the anti-fracking movement here in America. Will this mean lower Energy costs for Americans? Time will tell but building the infrastructure alone will be a boom to DEMAND in employment - That is truly exciting. Here's one money quote (full article follows):

Assuming that most will, you realize we are still probably underestimating the positive impact of the gas boom on both local and national economies.

Read the Original Article

Are We Underestimating America's Fracking Boom?
WSJ Original Article Date: 2014-05-28

Exxon Ignores US Imposed Russian Sanctions and Signs Deal ... To Frack

Jeffrey C. Borneman | May 27, 2014

US Energy companies hold the monopoly on fracking technology. They will, despite all efforts to shame, export that knowledge for gain.

"To be clear, the oil companies are not legally running afoul of international sanctions." And no one wants any illegal deals - not even the White House, so it will be allowed. Great summation below of the geopolitical pull 'n push taking place but the takeaway here; the key to understanding the future of Russia's Energy sector is, Russia must learn US fracking techniques. The earth's crust differs in infinite ways in small areas, much less different continents. But it is US companies that will unlock much of Russia's future Energy to meet worldwide DEMAND. Here's the money quote (full article follows):


a pilot project in the Domanik formations, and if successful could lead to the development of shale oil in Russia.

Read the Original Article

Exxon, BP Defy White House; Extend Partnership With Russia
Zerohedge Original Article Date: 2014-05-27

Bakken To Feed Energy DEMAND For Extended Time

Jeffrey C. Borneman | May 26, 2014

"First, the play has been de-risked and its areal extent defined. Bakken operators now known where and what the Bakken is." The take away from this quote is: The USGS didn't understand the ocean that is the Bakken and it is private-sector leading the way.

The real Energy question has always been: How much 'recoverable' oil exists in the United States? Our government has functioned under the guise of "If it can be measured, it will be measured" for almost 50 years; leading someone of average intelligence to assume we'd know exactly what we have. The article below is by far the best explanation of the Bakken I have seen this year. I highly recommend you read it in it's entirety. I'm not publicly recommending any public company mentioned (ask me personally) but the author understands the geology and has a great sense of humor. Here's the money quote (full article follows):

So it’s possible late 2014 I’m writing a story…the Bakken only producing 2 million barrels a day? Pffffttt…that’s old news.

Read the Original Article

Digging Deeper into the Bakken: The Three Forks Oil Formation
Oil & Gas Investments Original Article Date: 2014-05-26

Energy Production, The Endangered Species Act & Some Truth

Jeffrey C. Borneman | May 24, 2014

The newest addition to The Endangered Species Act (ESA) is the prolific "Lesser Prairie Chicken ... a species of bird that is no danger whatsoever of extinction. 

The addition of the prairie chicken, coupled with the speed in enacting conservation efforts to "protect them," demonstrates to any investor the true intent: Slow or shut down oil production in the Permian Basin by whatever means possible. Making this an environmental issue, or in this case, a conservation effort, is a plus - it gives their effort the deeper-sheen of legitimacy. What is clear: Energy prices are being driven higher by restricting access under the guidance of the ESA and protecting Gaia; jobs and prices be damned. Here's the money quote (full article follows):

And it follows warnings that the decision would result in the loss of hundreds of millions of dollars in oil and gas development in one of the country's most prolific regions, the Permian Basin in Texas and New Mexico.

Read the Original Article

Oil, Oil Everywhere and Not a Drop to Drill

Jeffrey C. Borneman | May 23, 2014

The "Peak Oil" meme died years ago. But its entrenched reverence among the faithful still affords the "Peak Oil" specter great sway. The world is awash in oil. Let's all say it together: The World is Awash in Oil ... 

However, if one's goal is to control currencies and economies by restricting cheap Energy, one needs more tools than dead memes. The Fight for Humanity via environmental laws and shame is that tool.  A favorite joke is: What did the environmentalist use before candles? Electricity, of course ... The UK's discovery of a large oil reserve will be a fight to watch. Will the Greens continue to force $10/gal for imported gasoline while sitting on it's own massive reserve? The geopolitical map is being redrawn for Energy resources and all pipelines lead to China. So, at what point do the people of the UK, or the US for that matter, say enough? Here's the money quote (full article follows):

This would offer Britain greater energy security and help drive down fuel prices, but extracting it will involve fracking – a controversial drilling technique used to split rocks below ground and release their stores of oil or gas.

China's Energy Expansion: By Contract or The Gun - Whatever Works

Jeffrey C. Borneman | May 22, 2014

“The dynamic growth of China’s economy and energy growth is reshaping global energy markets, and both the economic and strategic implications are still being developed,” said Mark J. Finley, BP’s general manager for global energy markets and United States economics.

The New York Times' snapshot of China's Energy grab demonstrates China's generational thinking by addressing its DEMAND for Energy with the very all-of-the-above approach we were promised in the US. China is also not hesitating to flex its military muscle to further its Energy "bank." This bully approach bodes ill for the Pacific Rim countries who will look to the US for assistance. But we should not forgot: China bought or contracted much of its imports at pennies on the dollar so can feed its machines rather cheaply. Conversely, we have been conditioned to accept that Energy prices will never retrench to the sub-$50 BBL level. It was cheap Energy that was the basis for the US economic miracle; we will not see it again, and is why Energy is part of the MDEF™ investing strategy. Here's the money quote (full article follows):

China used only half as much energy as the United States in 2000. Nine years later, it surpassed the United States as the world’s biggest energy user and last year it leapfrogged the United States as the No. 1 oil importer.

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China’s Global Search for Energy
NYT Original Article Date: 2014-05-22

Signed, Sealed & Delivered - Russia's Prize

Jeffrey C. Borneman | May 21, 2014

We expected this and it's right on time. Russia and China ink the 30 year deal for nat-gas ...

The article below gives some interesting details but I thought the use of the term "bruised" regarding the west's sanctions on Russia was disingenuous - Russia was hurt and will not forget. The sanctions caused a substantial contraction of Russia's GDP and investment capital fled the country in truck-loads. However, investors must always be studying the timing of world events as nothing happens by accident. All agreements between Russia and China should be viewed as positioning: the real goal is to challenge the west both financially and militarily. The head-turner for investors here is China's payment for nat gas will not be in USDs. The total dollars involved is not huge for this deal, but it is another hit to the USD's superemacy. Here's one of the money quotes (full article follows):

The contract is worth a total of $400 billion, Gazprom CEO Alexei Miller told Russian news agencies. That figure is greater than the GDP of South Africa. Gas is due to begin flowing to China as early as 2018.

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China & Russia Finally Ink Gas Deal
Foreign Policey Original Article Date: 2014-05-21

Miscalculation might not lead to war because there is nothing miscalculated about what China is doing. China intends to start a war.

Jeffrey C. Borneman | May 19, 2014

David Archibald's piece in American Thinker is "must read" in understanding the intentions of China, both in its sphere of influence and beyond. 

In the geopolitical 3-D chess match unfolding before us, Archibald makes a classic case for the MDEF™ investing strategy via the geopolitics of DEMAND. The US could easily play on this stage but is about to be left behind; seemingly content to supply weaponry to NATO while strangling DEMAND here at home through fiscal mismanagement. A money quote from an excellent overview (full article follows):

All the countries of East Asia know that once Vietnam is defeated, their turn will come. They will effectively become vassal states under the Chinese jackboot.

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China's 'Mobile National Territory'
By: Archibald AmericanThinker Original Article Date: 2014-05-19

Major Pivot in DEMAND for Energy

Jeffrey C. Borneman | May 19, 2014

The major geopolitical shifts happening right now are hard to appreciate for their long term effects.

The 30-year-deal for Russia to supply China with nat-gas solidifies a relationship that the west fears but cannot stop. The opportunity for Russia to have a reliable buyer of its nat-gas allows it diversify away the fear of non-payment from an economically crippled Eurozone and fund its space and military programs (but I repeat myself). The 70-year schoolyard hierarchy of national strength of importance is fading fast and it is DEMAND driven. History is replete with examples of similar pivots that invariably lead to war(s). Here's the money quote (full article follows):

A deal after nearly two decades of talks would secure the world's top energy user a key chunk of supply as demand for the cleaner burning fuel is set to surge.

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Russia's Massive Underwater Energy Grab

Jeffrey C. Borneman | May 19, 2014

"When Russia seized Crimea in March, it acquired ... the rights to underwater resources potentially worth trillions of dollars," is the opening sentence ... 

... of a rather interesting article by the New York Times. Most all the Energy (and military) analysts had been concentrating on the Russian power-play of oil and nat-gas on Ukraine's terra firma. 

The addition of trillions of USDs in both oil and nat-gas would give Russia a massive advantage in the world Energy market. This North Sea-sized discovery would strengthen the ruble and fund much R&D and weaponry manufacturing. Announced late last week, we learned of Russia's $52B cash infusion to its space program to upgrade both rocket and military satellite technology. The New York Times article also gives us insight into Russia's learning-curve of the assets discovery as "it (Russia) had tried, unsuccessfully, to gain access to energy resources in the same territory in a pact with Ukraine less than two years earlier ... ".  When this failed, the invasion plans began. Russia denies the connection but make no mistake, War's justification is always seizure of resources and expansion. Russia aims to control an ever-increasing segment of the world Energy market, and it's my guess it's not to lower the pump price for America's.  

Read the Original Article

In Taking Crimea, Putin Gains a Sea of Fuel Reserves
NYT Original Article Date: 2014-05-19

Energy: Wars Have Been Fought for It, and Lost for Lack of It

Jeffrey C. Borneman | May 17, 2014

That title is from my piece "The Cold Equations of Crisis Investing" and speaks to the 'pivot' of world order(s) we are experiencing now.

Russia can ill afford to lose its Energy grip on Ukraine for many reasons, but mostly because Russian pipleline's feed its real ATM: selling Energy to the Eurozone. Chevron signed a $10B deal in '13 to explore shale gas in western Ukraine. This is shaping up to be an undeniable war of economic interests and America plays a key role in that we are the only teachers available for fracking technology. Ukraine appears to have enough nat-gas to be Energy self-sufficient, and this can only be allowed if under the Russian tent. The possible loss of Energy income and influence, coupled with American technology means, to Russia, that the US military cannot be far behind. This is the geopolitics of warfare effecting DEMAND for Energy and Defense. 

“I would say that the economic interest in this case is what’s driving the coup regime in Kiev to launch military actions against its own citizens, because they stand to make a profit from these contracts signed by the previous government,” foreign affairs expert Nebojsa Malic.

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Driving the Cost of Energy Higher with Each Lawsuit

Jeffrey C. Borneman | May 15, 2014

The last nuclear plant built in America (Seabrook) was originally a duel-plant station at a total cost of $3B (1970s dollars). 

The Greens sued hundreds of times. Whole sections were built only to be demolished as the NRC succumbed repeatedly to abstract Green demands. The delay and added costs reduced the final plant to a single power station costing $6B. See today's proposed EPA rules for refiners to consider what will happen to DEMAND for gasoline, etc., in America. The money quote is almost the whole article (no link):

The U.S. Environmental Protection Agency has proposed changes to oil refinery rules that would compel operators to monitor benzene emissions, upgrade storage tank emission controls, ensure waste gases are properly destroyed and adopt new emission standards for delayed coking units.

Energy Prices Up - Correlation & Causation

Jeffrey C. Borneman | May 14, 2014

"Tension" is the preferred word in describing any rise in the WTI/Brent price. Tension refers to conflict in oil rich areas or distribution lines.

It is my contention that if oil prices may decline from lack of DEMAND or oversupply (and we have both now), some tension is introduced into the system. Today's tension is Ukraine, again. NOTE: Tension(s) are reusable, rechargeable and also provide DEMAND for Defense. It is how the system works and this understanding is the basis of the MDEF™ strategy . Here's the money quote (full article follows):

The price of U.S. oil climbed above $102 a barrel Wednesday amid ongoing tensions in Ukraine and an industry report showing crude stocks falling at a key U.S. storage hub.

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Oil above $102 on Ukraine crisis, US supply drop
Yahoo Finance Original Article Date: 2014-05-14

EPA's Rule-Making War on Energy: Accelerating Inflation, Job Loses, Hunger & Fear

Jeffrey C. Borneman | May 13, 2014

Taken to logical extremes, the un elected EPA rules would have us vying for burning dung for cooking and heat.

In all seriousness; if any intelligent person were to take any current EPA proposal on either The Clean Air Act, or Clean Water Act, and visualized the logical and expected outcome, we'd be lucky to only scroll ourselves back to the mid 19th century. There is an active war afoot, cloaked in vibrant green, meant only to Inflate prices of necessary goods that will eventually cause American deaths. Here's the money quote (full article follows):

The proposed rule is an example of regulation at its worst in that it attempts to direct market forces with only the vague hope of being able to deliver real benefits,” ERCC said. “Unfortunately, the costs of the proposed rule are very real in terms of limiting future electricity generation options, with consequent potential threats to electric reliability, affordability, and all of the economic and health harms that are associated with those results.

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Coal Rules Will Devastate, Say Biz Group
The Hill Original Article Date: 2014-05-13

After Ordering a Ukraine War, The IMF Talks Europe & Energy

Jeffrey C. Borneman | May 13, 2014

A brief European update: Today Russia threatened to cut off all gas supplies to Ukraine (and Europe) by June 3

A brief European update: Today Russia threatened to cut off all gas supplies to Ukraine (and Europe) by June 3; Europe is having the same issue with non-payment of loans as China (both north of 70% "non-performing), and; the IMF again meets with European heads of State and bankers to decry the situation in Ukraine it is now stoking. The take away is the money quote but note the mention of Energy (supply) and Defense (turmoil):

Asked where the biggest dangers lay, the IMF chief pointed to the turmoil in Ukraine having an impact on international trade, foreign direct investment, international capital flows and Europe's energy supply.

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Original Article
Business Insider Original Article Date: 2014-05-12

We Are Swimming in Oil - Why Are We Paying $4+/Gal?

Jeffrey C. Borneman | May 10, 2014

I referenced the title above in a post the other day and received a few challenges to its accuracy.

I referenced the title above in a post the other day and received a few challenges to its accuracy. Read the following article to get an idea of the amount of oil that is waiting for shipment abroad (legally). The article states that this glut should bring WTI prices lower "later this year." I disagree wholeheartedly, as too much of the world's power structure is based on this globally priced commodity and not one producing nation can afford to decrease it's GDP now. Here's the money quote (full article follows):

You can’t get all that light, sweet crude out, it’s all kind of piling up,” said Jeff McGee, the founder of Makai Marine Advisors LLC in Dallas, who previously led research at two shipbrokers and worked as a refinery planner. “You couldn’t find a spot Jones Act ship to save your life right now.

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Original Article
FuelFix Original Article Date: 2014-04-10

War & WTI at $150/BBL?

Jeffrey C. Borneman | May 10, 2014

I was told by a Hollywood friend that I need a "Buy Now" button on this wall for the MDEF Portfolio(s) that investors who understand the current geopolitical risks, can act on.

I was told by a Hollywood friend that I need a "Buy Now" button on this wall for the MDEF Portfolio(s) that investors who understand the current geopolitical risks, can act on. I cannot provide any such button but am open to any private message request for data. The table is set for DEMAND to be dragged, kicking and screaming, to the MDEF strategy. Below is the most comprehensive article I've read that describes just the Energy risk at play today. Here's one of many possibles for the money quote (full article follows):

In the absence of Russian barrels, world oil prices would undoubtedly spike – causing economic pain for the large oil import-dependent countries such as the EU and reducing the growth potential of the world economy.

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Russia & $150BBL Oil
ZeroHedge Original Article Date: 2014-05-02

The Faux Environmentalist - It's Always About Control

Jeffrey C. Borneman | May 10, 2014

My friend Eric sent this to me and it drips with environmental irony. Putin's message is clear: For the sake of the environment (and children, of course) do not frack -

My friend Eric sent this to me and it drips with environmental irony. Putin's message is clear: For the sake of the environment (and children, of course) do not frack - Energy independence is a bad thing; "we've got you covered." I've pointed out many times the goal of Russia's Energy monopoly is to build a war-machine to challenge the west and the MDEF strategy recognizes the changing geo-political map. Here's the money quote (full & humorous article follows):

Natural-gas prices in Europe are quadruple those prevailing in the United States, and by maintaining a near-monopoly on overpriced European natural-gas imports, the Putin regime assures itself of a vast source of revenue. This allows it to rule and rearm Russia without permitting the freedom necessary to develop the country’s human potential.

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Original Article
National Review Original Article Date: 2014-05-08

Maintaining Artificial Scarcity ... For the Children, of Course

Jeffrey C. Borneman | May 9, 2014

It's not often I openly challenge Heritage but this needs to be clarified. Federally controlled lands in the US contain more oil and Nat gas than all of the rest of world combined.

It's not often I openly challenge Heritage but this needs to be clarified. Federally controlled lands in the US contain more oil and Nat gas than all of the rest of world combined. If you're unfamiliar with the topic, this may sound hyperbolic - it is not. The excuse offered by Heritage that Energy production on federally controlled lands is due to "inefficiencies" in the paperwork process is utter nonsense. These Energy assets are being denied to the taxpayer, period. The reason is obvious: Energy supports the USD. A better way to state this is: US oil reserves ARE the petrodollar. Energy in the ground is akin to gold in the vault. The less gold, the higher it's value. Here's the money quote (full article follows):

Congress should consider privatizing some of the federal government’s land, Loris says, but in the meantime, free the states to join in this economic boom – and provide homegrown energy for their neighbors while they’re at it.

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Federal Government Holding Back Oil Production on Federal Land Original Article Date: 2014-05-09

Slowing DEMAND - Q1 GDP

Jeffrey C. Borneman | May 1, 2014

It is not a question of "if" a market rotation into "need" from "want" will take place - DEMAND dictates it

Watching heads explode on MSM on the terrible Q1 GDP print. Buried in the details we find two key pieces of data. The first: " ... investment on equipment (Cap-Ex), another key economic cog, fell 5.5% to mark the biggest drop in almost five years." CEOs are paid real money to protect their companies (not waste money on non-returning investments). CEOs see much lower DEMAND, hence lower Cap-Ex. NOTE: Always look at the comparisons to '08-'09, a particularly bad economic environment.

The second is the export numbers: "Exports (-7.6%) fell faster than imports (-1.4%) to push the trade deficit higher and also act as a drag on growth." This number speaks to dwindling world-wide DEMAND and with no catalyst for growth across the globe (with the exception of "conflict[s]"), we can expect continued layoffs, calls for higher minimum wage and cover for the Fed to continue - if not raise - the QE. 

It is not a question of "if" a market rotation into "need" from "want" will take place - DEMAND dictates it. Here's the story:

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First-quarter U.S. GDP barely rises, up 0.1%
By: Jeffry Bartash Market Watch Original Article Date: 2014-04-30

Why DEMAND is in Free Fall

Jeffrey C. Borneman | May 1, 2014

This should surprise no investor. It is certainly no surprise to the Fed as it sees these numbers in real-time. Investors don't need that particular luxury as trajectory is just as valuable.

This should surprise no investor. It is certainly no surprise to the Fed as it sees these numbers in real-time. Investors don't need that particular luxury as trajectory is just as valuable. There are many money quotes, here's the one I chose:

One-fifth of the families in the entire country do not have a single member with a job. That is absolutely astonishing.'

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The Real Unemployment Rate: In 20% Of American Families, Everyone Is Unemployed
By: Michael Snyder Zero Hedge Original Article Date: 2014-04-29