Today, as we
switch our focus from Governments, Gold and Money to the Global Energy
Outlook, we hasten to remind our readers that, in tomorrow's world, energy
and money will continue to be closely linked. Last week we quoted our
Esteemed Swiss Banker saying, "while Gold is the King of Money, Oil is
the King of Commodities.
For several years
we have maintained the view that Energy (oil & gas) is set to become
increasingly scarce and expensive in the years ahead. This will be a quantum
change that is likely to have significant effects on the economy and
potentially our way of life.
Earlier today we
were joined on a conference call by a smart oil and gas reserves engineer who
made the comment, "Gentlemen, the more we look at the global reserves
picture, the more alarming the prognosis becomes."
"alarming prognosis" referred to by our reserves engineer is not
hysterical doomsday accounting, but simple supply/demand fundamentals.
Doing a quick
Mega-Field Count paints an interesting picture;
"Mega-field" is an Oil Field that has recoverable reserves of over
500 million barrels of oil during its lifetime. Usually a Mega-field has the
potential to produce up to 100,000 barrels per day of oil.
2) In 2005 the
world consumes 1 billion barrels of oil every 11½ days. The world is
consuming THIRTY (30) Mega Fields each year (this rate of consumption is
growing each year).
3) The rate of
discovery of new Mega-fields nowhere near matches the rate of consumption of
In 2000 just 16 new Mega-Fields were discovered
In 2001 only 8 new Mega-Fields were discovered
In 2002 only 3 new Mega-Fields were discovered
In 2003 NO new Mega-Fields were discovered
4) The rate of
new Mega-fields coming online nowhere near matches the rate of depletion of
old and existing Mega-fields;
In 2003 only 7 new Mega Fields were brought online
In 2004 only 11 new Mega Fields were brought online
In 2005 only 18 new Mega Fields are coming online
In 2006 only 11 new Mega Fields are planned to come online
In 2007 only 3 new Mega Fields are planned to come online
In 2008 only 3 new Mega Fields are planned to come online
Globally we are
consuming energy at a far quicker rate than we are discovering or bringing
new reserves online. There is a lag rate of many years or even decades
between discovering reserves and bringing them to the market.
Since the late
1970's the western world has been living in an artificially low energy price
environment, which has led to careless over-consumption of a commodity that
is becoming increasingly scarce.
What does it mean
for us in the future? The fundamentals behind this highly political market
seem to indicate that we will see energy becoming progressively more valuable
and expensive in the days and years ahead. It has been said that times of
great change are times of great opportunity.
by Philip Judge
Philip Judge is the 3rd generation of a family that has had
substantial involvement in the Precious Metals markets. He has researched,
written and spoken on the gold, silver and commodities markets for over a
decade. Philip works in the marketing and operations department of The
Anglo Far-East Bullion Company, an internationally based Bullion Banking,
Investment Management and Financial Services Company