Misconceptions

The oil industry assumed that oil production was dead in the U.S. and sold off those assets, wrong move, the independents who bought those assets made money.

The oil industry thought that the age of importing expensive LNG had dawned. It was a great concept and it had some great opportunities for investing massive amounts of capital in attractive locations such as Africa and Middle East. Investment ran the gamut from developing large fields, piping, liquefaction plants, transportation ships and finally the re-gasification plants in America. The oil industry was wrong about the amount of natural gas supply in the U.S. Now what will happen with the expensive LNG facilities in the U.S.? Now the money making opportunity was that this was clearly a mis-allocation of capital and investment, but will the impacts show on the big oil equities? The short opportunity for Cheniere Energy, Inc. (LNG) was there. It was fraud, although I believed it had all the signed agreements as it stated it did. How about the fabricators or the LNG levered shipping companies.

What will happen with the facilities in the Africa, Australia, and the middle east? Has big oil mis-directed massive amounts of capital?

Now there are complications LNG is not wholly consumed in the U.S, so there are opportunities for these assets to return handsome profits for years to come.

Another misconception is big oil is dependent on importing foreign oil, a known fact. Let us assume that if Iran was to become too bothersome in the middle east then the U.S. would engage in war to resume the “friendly” atmosphere in the middle east which allows oil to flow to the U.S. via big oil firms. What happens if Obama does not engage Iran and allows Iran to militarize and cause a nuclear arms race in the Middle East and further deteriorate conditions there and interfere with the oil production industry. What if the Obama Administration will not or cannot maintain control in the Middle East and that causes a large war to breakout between Iran and Israel? Big oil will be unable to conduct business and will have a large part of its assets and energy delivery chain in or effected by a war zone. The burden of supplying energy in the U.S. would fall on other sources such as renewables, or not big oil. This scenario has not been planned for, nor is the U.S. in any position to be cut off from foreign oil.

Money making angles, well there is a lot of considerations, so I will return to this.
If war in the gulf was to come to pass, then the U.S. will have to rely on Canadian oil sources, buy Canadian oil companies. I believe Frontier Oil, is a refiner that is specifically tied to the crude from Canda. I need to check that again.

I think natural gas will be come a huge transportation source for the U.S. and I would like to become involved in aspect of business myself.


Big oil assumes that the republicans will regain political power and the changes initiated by Obama will not come to pass, energy efficiency, increased renewable energy production, etc… will fail.
Big oil is assuming that the capital markets will continue to support their needs for CAPEX by purchases of stocks, bonds, etc…this may be not true in an unstable monetary environment.