Ready for more punishment: Investors load up on oil share offerings

The $9.2 billion investors paid to snap up new equity offerings from U.S. oil companies in 2016 proves those investors are indeed ready for more punishment.

The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown more dour. In June of last year I wrote:

New investors in U.S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC's work is not done and accounts in part for the decision to leave production quotas unchanged. OPEC's next task is to convince those making new investments in oil that rather than catching a bottom in oil prices, they have caught a falling knife.

A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday's close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn't have as far to fall this time around. Still, it seems they misunderstand OPEC's strategy or believe that that strategy will fail. As I said in the same piece:

The cartel must dampen enthusiasm for investment for the long term if the organization's members are going to benefit. A crippled U.S. oil industry without friends in the investment world is the only way to assure that rising prices won't simply lead to a stampede back into U.S. shale deposits.

It seems that the oil industry still has friends in the investment world and that OPEC's work is therefore not yet done. The big question then is: Will OPEC stay the course or relent with a production cut this year to raise prices?

"The Future" as a sales pitch

No one can know the future. But it turns out we can invent a place called "The Future" and invite people to inhabit it.

In order to inhabit "The Future"--which is really just an enactment of our ideas about the future--you need the right accessories. For starters you'll need the basics: the latest iPhone with the latest social networking app, a fully electric car (if you can afford it), and a FitBit watch. To that you can add your own personal drone, personal robot, and a farm cube for growing your own lettuce indoors.

In fact, before the pageants we call trade shows (such as the Consumer Electronics Show, coverage of which is linked above), we had world fairs that allowed us to "see the future." Perhaps the most important thing to note about such events is that they began by focusing mostly on scientific and technical progress and its resulting consumer products. At these events our future political and economic system apparently remains unchanged. This is, in part, because political and economic reform cannot be packaged and sold like consumer products.

Of course, I could fill up this entire piece just listing all the other futuristic devices and even places that are available to us today and not scratch the surface. We are a society that venerates progress and that always has its eyes on the future. We think of ourselves as innovative and regard innovation as almost invariably good.

Toward a new rhetoric of political ecology: Can religion teach us something?

Aristotle tells us that humans are political animals. For Aristotle this characteristic seems to distinguish humans from other animals enough to provide a unique area of study that applies only to humans--hence Aristotle's The Politics, a work which informs our political thinking to this day.

Political ecology, on the other hand, posits that while humans are political, the political process, of necessity, includes the natural world as a political actor. The human and the nonhuman are not distinct categories, but rather part of a seamless order that is (currently) best described by political ecology.

If the rhetoric of political ecology is to remain merely descriptive, we can stop here. But if we want that rhetoric to become a tool of change, we must go beyond the notion that “facts speak for themselves.” (We will get to the question of religion further on.)

The late Sen. Daniel Patrick Moynihan once said, "Everyone is entitled to his own opinion, but not to his own facts." We find ourselves now in an age where people believe that they are indeed entitled to their own facts. Many politicians and their supporters have come to believe that the facts provided by scientists are tainted by social, political and financial factors. In short, the politically-motivated critics of science have discovered the postmodern French critique of science.

Stability begets instability: The challenges of the post-2008 world

Most people value stability in their lives. And, this makes perfect sense. Stability usually means an adequate, secure income; an established group of friends and family members with whom we are close; an identity in our communities based on our jobs, community involvement, and personal networks; physical safety in our daily lives, that is, no war or extreme violence where we live; and relative psychological calm that reflects that stability.

But humans value other things such as variety and novelty. In short, we can get bored. And, in order to address our boredom, we must actually seek out instability in our lives. We proceed to upset the very stability which we believe makes us comfortable and safe by engaging in activities that subject us to physical, financial and emotional risk such as sports, gambling or new relationships.

There is, of course, the disruption of our routine that comes from external events, from things that we do not necessarily choose: the loss of a job, a divorce, the death of a loved one, or injury due to accident. External events can also be positive: an unsolicited job offer, an unexpected romance, or the miraculous recovery of a loved one.

As it is with individuals, so it is with nations and complex social systems such as corporations and markets which reflect these same seemingly contradictory desires for stability, but also variety and novelty. It seems the social mood cannot go long without experiencing some interesting disruption: a war, an economic boom or a bust, a change of political parties, a change in fashion, a disruptive technology.

Politics in a full world

When Scientific American published Herman Daly's "Economics in a Full World" in September 2005, few people knew what lay ahead: oil climbing to $147 a barrel, the relentless rise in global temperatures due to greenhouse gas emissions, the food riots of 2008 sparked by rising food prices, the economic crash that followed, and the development of an increasingly yawning gap between the rich and everyone else in subsequent years. For the vast majority of people on the planet, growth effectively stopped in 2008. Their incomes have essentially flatlined or declined.

Daly's thesis seems more relevant than ever as government policymakers puzzle over lackluster global economic growth despite unprecedented government spending (and debt) and ground-hugging interest rates in the seven years since the crash. Maybe we have reached the point, as Daly would argue, when economic growth is uneconomic, when the costs outweigh the benefits (except, of course, for a very narrow stratum of people at the top who get to put the costs on everyone else).

If we are moving toward a low-growth or even no-growth world because growth is becoming much more difficult and problematic, then Daly's outline of a new economics will need a companion outline: politics in a full world. I have a preliminary candidate for that outline: Bruno Latour's Politics of Nature. Daly's steady-state economics always implied a revolution in governance without being explicit about it.

Latour never mentions Daly and may never have read him. But Latour clearly understands that politics--which has always held nature at arm's length while nevertheless dealing daily with its demands--must now explicitly invite the natural world to the bargaining table.

'Occupied' Norway a window into our fossil fuel addiction

Okay, I admit that the premise of Norwegian television's new political thriller series "Occupied" is far-fetched. But that premise is a window on just how addicted to fossil fuels we are.

In "Occupied" Norway's Green Party wins parliamentary elections and makes good on its (not-altogether-fictional) promise to shut down oil and natural gas production in the country as a way of addressing climate change. This fictional Green Party simultaneously builds a thorium-fueled reactor to provide electric power. The Greens promise many more reactors as they embrace the electrification of transportation to reduce Norway's need for liquid fuels.

Norway's oil and gas customers--the countries of the European Union and Sweden--object to the loss of critical fossil fuel supplies. They conspire with Russia to force Norway to restart oil and gas production. At first this involves a smallish invasion by Russian soldiers and a takeover of offshore oil and gas platforms which are restored to production by Russian work crews.

When the series was conceived, Norwegian television thought the idea was too implausible. But with the Russian annexation of Crimea and the war in Ukraine, "Occupied" has touched a nerve in a newly anxious Scandanavian population who now see Russia as more of threat. (And, of course, there is the memory of Germany's occupation of Norway during World War II that still arouses fear and loathing in the hearts of many Norwegians.)

Volatility, oil and stock markets

"Down" is such a downer word. That's why when prices fall for practically anything Wall Street wants to sell you, Wall Streeters talk about volatility instead.

Volatility allows for the possibility that prices will recover soon and go to new highs. Any setback is just temporary. The market turbulence, it seems, is merely designed by invisible market gods to test your character as a long-term investor. Don't give in to panic, the investment people say, and you'll be rewarded.

Until you aren't!

A year ago I said the crash in commodity prices signaled a weak economy and that financial markets would eventually have to reflect this fact. The widely watched S&P 500 Index closed at 1,994.99 on January 30, 2015 just prior to the publication of the linked piece. Last Friday's close was 1906.90. The U.S. stock market hasn't exactly reflected the weakness in commodities, but it hasn't gained any ground either.

The great condensate con: Is the oil glut just about oil?

My favorite Texas oilman Jeffrey Brown is at it again. In a recent email he's pointing out to everyone who will listen that the supposed oversupply of crude oil isn't quite what it seems. Yes, there is a large overhang of excess oil in the market. But how much of that oversupply is honest-to-god oil and how much is so-called lease condensate which gets carelessly lumped in with crude oil? And, why is this important to understanding the true state of world oil supplies?

In order to answer these questions we need to get some preliminaries out of the way.

Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry's own engineers classify oil as hydrocarbons having an API gravity of less than 45--the higher the number, the lower the density and the "lighter" the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70. (For a good discussion about condensates and their place in the marketplace, read "Neither Fish nor Fowl – Condensates Muscle in on NGL and Crude Markets.")

Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.

No post this week

Circumstances have conspired to prevent me from writing a post this week. I should be back next week Sunday, January 17.

Taking a short break--no post this week

I'm taking a short break and expect to post again on Sunday, January 10.