Crude Oil Will Fall in a big way
Believe it or not, but crude oil prices are about to fall in a big way. Thanks to fresh technology, the market is about to see a big surge in the price of crude.
When I flew to Williston, N.D., five years ago, it was one of the oddest flights of my life. I told my wife (after I retrieved my luggage from the bed of the airport's pickup truck) the plane was so small and old, my job was to lower the landing gear when the pilot gave me the word.
But what really stood out about the trip was the fact I didn't know anybody on the flight. I was an outsider and it was obvious.
Everybody was a neighbor, a cousin or a customer. Back then, Williston was a farm town. In fact, on my springtime flight, the hot topic was who was tilling their CRP land to take advantage of soaring corn prices. (This was the peak of the ethanol boom.)
But now... oh boy, poor Williston.
It's no farm town these days. Nope... it's the sixth-fastest growing "city" in the country.
And, as the working hub of the Bakken, it's the epicenter of the nation's oil boom. Or at least it gets all the attention.
The truth is, there are "Willistons" all across the country... the continent... and the hemisphere. This tiny town is merely the hyperbolic example of what's happening everywhere else.
You see, we are on the cusp of a huge energy revolution. I argue it will create one of the greatest shifts in power and – therefore – wealth we've seen in modern history.
The statistics are staggering.
To start, the Bakken is huge. It stretches far beyond tiny Williston. The thin layer of oil-rich shale(160 feet thick at its widest point) covers 25,000 square miles. The USGS tells us the rock holds 200 billion barrels of crude.
But while the mainstream press sensationalizes sleepy North Dakota's leap into the twisted world of Big Oil, the boom spreads.
Kansas, for example, pulled 41.5 million barrels of oil from its ground last year – about a quarter of North Dakota's production. It's all thanks to fracking technology. But I bet you didn't hear about it on the nightly news.
And let's not forget Alaska – the most undervalued energy play in the country.
Thanks to horizontal drilling technology, Alaska is about to send a huge surge of crude and gas onto the market. The thing is, though... nobody expects it.
If you believe the mainstream headlines, you think Alaskan oil wells are gathering dust. ANWR is off limits, right? There's no offshore drilling in the Artic -- not with all the baby seals and homeless polar bears. Isn't that what we're told?
Truth is... it's booming.
Just this week I got word Exxon Mobil (XOM:NYSE) is on track with its plans to develop the Point Thomson field. The play sits just east of crude-rich Prudhoe Bay and is expected to hold hundreds of millions of barrels of oil and as much as 25% of the North Slopes natural gas.
It's a big move that spells a huge step forward in Alaska, but Exxon's work is nothing when compared to what our friends at Shell (RDS:NYSE) are up to.
They are proving offshore drilling isn't just a sport for the folks in the Gulf of Mexico. In the next week or so, Shell will cast off the dock lines in Seattle and send its Kullukdrill rig north (way north) to Alaska's Beaufort Sea.
This artic-class rig will spend the rest of the year exploring the area seaward of Exxon's big expedition. If the science is right... Shell should tap into 27 billion barrels of oil.
In other words, lil' Williston has big company.
But let's not be naïve. The technology that's driving America's energy boom is handing our competitors (and enemies) the same advantages.
Just this week Venezuela's crazy-like-a-fox president says he plans to double his nation's oil output.
Further south, Argentina is wishing it fought a bit harder for the Falklands. It turns out the islands are slimy with oil -- over 450 million barrels' worth.
And then there's Brazil. Its deepwater drilling efforts are the envy of the world. State-run Petrobas has about 100 billion barrels at its fingertips.
All told we've uncovered a staggering 1.5 trillion barrels of recoverable oil in recent years. It's already changing the spread of the world's wealth and power, but the biggest changes are just now creeping onto the horizon.
Over the next decade, the same dynamics that have turned the natural gas industry on its head will come to the crude industry. Prices will fall. Companies will go bust. And cheap energy will make a surprise appearance.
North Dakota and its booming countryside may be the headline makers today, but it's merely an icon of what's happening across the planet.
The energy sector is changing in ways most folks thought impossible five years ago. Most investors are clinging to the same naïve views.
That, my friend, is your opportunity.
Take advantage of the misinformation. Let the herd believe Alaska is dead or America will forever remain addicted to OPEC's teat.
Smart investors made a ton of money playing the "unexpected" slide in natural gas prices.
And now crude prices are embarking on the same long slide lower.
Use the oil glut in your favor.
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