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Posts Tagged ‘analysis’

The Economic Consequences of Restrictions on Domestic Energy Exploration; Next Generation Biofuels; Devon Energy Reports 2009 Financial Results

In Uncategorized on February 15, 2010 at 9:49 pm

America’s reliance on foreign energy will grow by 19 percent over the next 20 years, expanding the transfer of U.S. wealth to the Organization of Petroleum Exporting Countries (OPEC) by more than $600 billion, according to a report by the National Association of Regulatory Utility Commissioners.  The two-year study broadly examined the social, economic and environmental impacts of continued restrictions on developing America’s oil and gas resources.

“The study highlights the importance of developing our domestic petroleum resources in an environmentally responsible manner,” said American Trucking Associations Vice President Rich Moskowitz. “Continuing restrictions on the development of U.S. energy resources will adversely impact our economic well-being and our national security.”

The study predicts the economic results of maintaining current restrictions on accessing America’s federally owned onshore and offshore energy resources. The results, when compared with the effects that could be expected from a reasonable energy policy on federal energy resources, will include:

•Import costs for crude oil, petroleum products and natural gas will be $1.6 trillion higher;
•Imports from OPEC nations will be 4.1 billion barrels higher, resulting in increased payments to OPEC of $607 billion;
•U.S. production of crude oil will be 9.9 billion barrels lower;
•U.S. production of natural gas will be 46 trillion cubic feet lower;
•Energy-intensive industries will produce nearly 13 million fewer jobs;
•Housing starts will be 200,000 fewer;
•Annual average natural gas prices will be 17 percent higher;
•Annual average electricity prices will be 5 percent higher;
•Real disposable income will be a total of $2.34 trillion less;
•Energy costs to consumers will be $2.35 trillion higher;
•Gross Domestic Product will be $2.36 trillion lower.

The American Trucking Associations is a member of the Consumer Energy Alliance, which was among the public sector and private sector organizations that contributed energy experts’ information and analysis for the NARUC report.

The report was assembled by experts from the Science Applications International Corp. and the Gas Technology Institute and provides the most up-to-date assessment of America’s oil and natural gas resources. Utilizing the National Energy Modeling System, the study renders a quantitative summary of the jobs, revenue and number of housing starts that Americans should expect to surrender in the future under the restrictive energy policies currently in place.

To view the executive summary of the report, click here.

Next Generation Biofuels: Market Drivers, Growth Opportunities and Regulatory Change

Over 80% of the world’s primary energy supply is currently derived from coal, gas and oil (collectively known as ‘fossil fuels’), which are used to generate electricity, power, energy and heat for industrial, commercial, domestic and transportation purposes. The world’s dependence on crude oil for transportation is particularly marked, with the International Energy Agency (IEA) estimating that fuels from crude oil currently supply about 96% of the worldwide energy demand for transport purposes.

As the world’s population grows and developing countries look to expand their economies, this insatiable demand for fossil fuels is unlikely to show any sign of easing, with oil and gas accounting for 60% of the world’s increasing energy demand between now and 2030. Furthermore, with most significant reserves of fossil fuels unevenly distributed throughout the world, energy security is set to become an increasingly critical economic and political issue over the coming decades. Real or perceived disruptions to the global supply of fossil fuels — notably crude oil — are likely to grow in frequency and cause wild fluctuations in the price of energy, as they have done so in the past. However, one of the most pressing reasons for seeking alternative sources of energy and fuel lies in the form of ‘climate change’.

The combustion of fossil fuels releases carbon dioxide (CO2), a potent ‘greenhouse gas’ (GHG), which are considered by some to be responsible for ‘global warming’. According to the IEA, if no changes are made to the world’s existing energy economy, related emissions of CO2 will grow marginally faster than energy use, meaning that by 2030 global CO2 emissions will be more than 50% higher than today. Over two-thirds of that projected increase in emissions is expected to come from emerging economies, such as India, China — both of which are set to rely heavily on coal-based power stations to drive their rapidly developing economies.

The combination of biomass and biofuels accounted for around 26% of the world’s total renewable energy production in 2008. Second generation biofuels have been developed due to limitations of first generation biofuels, primarily that the resources used threatens food supplies. Second generation biofuels production processes include a variety of non-food crops such as waste biomass, the stalks of wheat, corn, wood and miscanthus. Second generation biofuels use biomass to liquid technology, such as cellulosic biofuels from non-food crops. Third generation biofuel primarily references fuel derived from algae. Algae fuel is not yet commercially available or viable due to cost constraints, but through various laboratory experiments promising results have been obtained. In 2008, the US Department of Energy noted that algae can produce 30 times more energy per acre than land crops such as soybeans.

North American Onshore Proved Reserves for Devon Energy at Record 2.6 Billion Boe; Drill-Bit Reserve Additions More than Double Record Production

Devon Energy Corporation reported that 2009 full-year and fourth-quarter financial results as well as its 2009 full-year oil and gas production from continuing operations has reached an all-time high. In addition, Devon reported record-high proved oil and natural gas reserves at December 31, 2009.

“2009 was a pivotal year for Devon as we began repositioning the company to focus entirely on our high-return, North American onshore natural gas and oil portfolio,” commented J. Larry Nichols, chairman and chief executive officer. “We grew North American onshore production by more than six percent in 2009 and replaced more than twice our production with the drill bit at very attractive costs. We expect to receive after-tax proceeds of $4.5 billion to $7.5 billion as we divest our offshore and international properties this year. This will further strengthen our rock-solid balance sheet and enable us to accelerate growth across our U.S. and Canadian asset base.”

In accordance with accounting standards, Devon’s year-end reserve reporting pertains to the company’s continuing operations, which include its Gulf of Mexico properties. Following is a discussion of proved reserves pertaining only to Devon’s North American onshore assets.

Devon increased North American onshore estimated proved reserves by 20 percent to a record 2,641 million oil-equivalent barrels (Boe) at December 31, 2009. The company added 669 million Boe to its North American onshore proved reserves from all sources. Costs incurred applicable to North American onshore properties were $3.3 billion.

Successful drilling (extensions, discoveries and performance revisions) accounted for 492 million Boe of North American onshore proved reserve additions. The company invested $3.2 billion of associated drill-bit capital during the year. Revisions related to changes in oil, natural gas and natural gas liquids prices increased 2009 North American onshore proved reserves by 176 million Boe.

North American onshore oil and gas production increased more than six percent to 220 million Boe in 2009. The reserve life index (proved reserves divided by annual production) for the North American onshore properties is approximately 12 years.

Proved developed reserves of 1,869 million Boe at December 31, 2009, represented 71 percent of total North American onshore proved reserves. Proved undeveloped reserves were 29 percent of the total. Year-end North American onshore proved reserves included 653 million barrels of crude oil, 9.4 trillion cubic feet of natural gas and 419 million barrels of natural gas liquids.

Related Links: IBISWorld industry reports

Oil Drilling & Gas Extraction in the U.S.

Global Oil and Gas Exploration and Production

Petroleum Refining in the U.S.

Rail Transportation in the U.S.

Natural Gas Distribution in the U.S.

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Majority of Americans Pessimistic About Economic Recovery

In Uncategorized on December 23, 2009 at 10:35 pm

As 2009 comes to a close and Obama’s popularity dwindles, the majority of Americans are filled with significant uncertainty and anxiety about the state of the US economy – and its prospects for a quick recovery in the New Year.

Of the 1,000 Americans surveyed by telephone over the weekend by polling firm StrategyOne, nearly 9 in 10 Americans (87%) believe the US is still in a recession and 3 in 4 (78%) disagree with economic experts that the US is no longer in a recession.

Despite increasingly optimisic talk from experts about the health of economy, just 1 in 4 (26%) believe the economy will recover fully by the end of 2010. Instead, the majority of Americans – 51% – believe the economy won’t fully recover and be back on track until sometime until the end of 2011 – or even 2012. A frighteningly high 15% believe the economy will never fully recover.

“Consumers appear more likely to believe the economy has stabilized compared to the summer, but see a pretty long road to full economic recovery,” said Bradley Honan, Senior Vice President of StrategyOne, who authored the survey. “15% of US consumers believing a full recovery won’t ever take place speaks to how deeply scarred America has been left by the recession – and how the hangover is likely to last well beyond the ‘official’ end of the recession.”

The StrategyOne survey also found that slightly more people believe that the economy is on the wrong track (48%) than on the right track (44%), and most Americans believe the economy has either “not yet bottomed out and will get worse” (34%) or that “it’s at the bottom and not getting better or worse” (19%).

That’s not to say that opinions are not shifting more positively though, indeed they are. For example, Americans are not nearly as negative about the state of the economy as they were in July.

Today 42% say the economy has “bottomed out and is getting better” compared with just 30% who felt that way in July of this year. The current StrategyOne survey found that the youngest consumers polled, those 18-34 years of age, were most likely (50%) to believe the economy has already “bottomed out and is getting better” compared with just 38% of those 55 years and older, who feel the same way. There is clearly a significant generational gap about perceptions of the economy today.

“It’s clear some of the positive discussion about the economic recovery has broken through – but there is still much, much more consumers need to hear to regain their confidence in the direction of our economy,” said Bradley Honan of StrategyOne.

Survey Methodology:

StrategyOne conducted 1,000 telephone interviews among a representative sampling of Americans between December 16 and 20, 2009. The overall margin of sampling error at the 95% level of confidence is = +/- 3.1% overall and larger for subgroups. Statistical weights were designed from the United States Census Bureau statistics.

Commodities Continue Positive Performance Across All Index Sectors

In Uncategorized on November 19, 2009 at 6:20 pm

Christopher Burton, Co-Lead Portfolio Manager for the Credit Suisse Total Commodity Return Strategy said, “The commodities market continues to perform well as global markets remain on track for recovery. Despite minor losses in equity markets, performance remains positive year-to-date. Although commodities have recovered some of their losses from 2008, we continue to believe current prices offer an exceptional entry point into the asset class, especially as central banks announce their intention to maintain low interest rates, which could lead to the stockpiling of certain commodities.”

Co-Lead Portfolio Manager, Andrew Karsh, added, “As inflation has not yet developed in terms announced by government figures, the potential for unexpected inflation remains quite high. Considering the fact that commodities are a leading indicator of inflation, we believe the time to invest in commodities is now, well in advance of lagging indicators such as in increase in CPI.”

The Dow Jones-UBS Commodity Index Total Return gained 3.28% in October as a result of positive performance from all sectors, bringing the year-to-date performance of the Index to 12.64%. Lean Hogs, continuing its positive performance from September, was the top performer in October, gaining 14.33% most likely due to the conclusion of China’s ban on U.S. pork products. Gasoline also demonstrated strong performance this month, up 10.51%, because of a larger than expected reduction of stored gasoline. Sugar was the worst performer in October as it reversed its recent gains, declining 10.16% in October, but is still up significantly, 57.63%, for the year.

Related Links

Credit Suisse Report
Clarifying Misconceptions About Commodity Indexing

IBISWorld industry reports
Commodity Dealing and Brokerage in the U.S.
Cattle & Hog Wholesaling in the U.S.
Excise – Petroleum Product Wholesaling – Federal
Global Sugar Manufacturing
World Price – Agriculture – Sugar