Casey, chairman of Casey Research and expert on crisis investing, is on the
search for real wealth—not investments in companies that push around
paper. In this exclusive interview with The
Energy Report, Casey shares his pragmatic take
on what's next for oil, gas and nuclear power.
Report: There will be a Casey Research Summit on
"Navigating the Politicized Economy" in Carlsbad, Calif., in
September. At the last conference, Porter Stansberry caused some
excitement with his argument that oil could go to $40/barrel (bbl). What's your view?
Doug Casey: We
like to have a range of defensible views represented at our conferences. But
personally, I don't think it's realistic to suggest oil prices will drop as
low as $40/bbl. I am of the opinion that the Hubbert
peak oil theory is correct. In the 1950s, M. King Hubbert
projected that U.S. oil production would start declining in the 1970s, and he
was accurate. Then he projected that in the mid-2000s, the world's production
of light, sweet crude would start declining. He was quite correct about that,
always be plenty of oil at some
given price, but to produce oil—even conventional, shallow, light sweet
crude—now costs close to $40/bbl in in many
places. It's extremely expensive to produce oil through unconventional
techniques like horizontal drilling and fracking.
Producing oil from tar sands is very expensive and problematical. Drilling
15,000 feet under the ocean is very expensive, and has a lot of risk.
Drilling in politically unstable jurisdictions with sparse infrastructure is
neither cheap nor fun. We're talking about production costs of at least $80/bbl in many cases.
I don't think
oil is going down much from here. Let's not, in addition, forget that it's
the most political commodity in the world, and that most of it still comes
from the Middle East, where tensions will remain high. I'm neutral to bullish
on oil. I'm not bearish at all.
will U.S. natural gas impact oil prices?
thing with natural gas is that it's almost an entirely local market. Oil is
very transportable, very fungible—it's a world market. Oil prices are
relatively consistent—say within 20–30% worldwide. But the price
of gas differs by hundreds of percent around the globe because it's not very
transportable. It doesn't seem that's going to change in the near future.
The price of
gas is going to stay low in the U.S. for some time because of new
technologies, namely horizontal drilling and fracking,
which allow the exploitation of vast new deposits. These deposits can produce
large amounts of hydrocarbons, albeit at relatively high cost. As soon as
prices start to rise, however, wells that have been shut because of low
prices will start producing again—and that will keep a lid on gas
prices for some time to come.
you see potential for the U.S. to become a natural gas exporter at some point
in the future?
problem with gas is that, unlike oil, it's hard to move and inconvenient to
export. There are basically two ways that you can move gas: One is via
pipelines. That doesn't work very well across oceans. The second is by
liquefying it and putting it in liquefied natural gas (LNG) tankers and then
transporting it to some place where it is re-gasified again, but that is
expensive and it's actually quite dangerous because the LNG tankers are
almost like floating bombs. I'm not convinced that gas is ever going to
become a truly international commodity. At least not until it's much more
expensive. The idea of the U.S. becoming a huge gas exporter is a
we assume that you're not as bullish on gas as you are on oil?
Yes. I'm much more bullish on oil. Oil is a much more concentrated energy
than gas. Oil is needed for cars. It's needed for airplanes. It's needed for
everything. Gas is mostly used for utilities and heating. Oil is both a much
denser energy and a much more important form of energy.
of concentrated types of energies, you have called nuclear the safest,
cheapest and cleanest form of mass power generation, yet we still haven't
seen the uranium price return. What's your view on the future of uranium?
have to be bullish simply because of reality. It really is the safest,
cheapest and cleanest form of mass power, but unfortunately it's also the
object of mass political hysteria. Many misinformed but well-funded
non-governmental organizations simply hate uranium, for purely ideological
thorium would be an even better form of nuclear power than uranium. We've
been using uranium primarily because you can't make nuclear bombs out of
thorium, and the U.S. was building up its nuclear arsenal from World War II
on. This is how uranium came to be used for nuclear power plants instead of
thorium, but that's a whole different discussion. Of course, now the disaster
at Fukushima is held up as proof that nuclear isn't viable; the Japanese and
German governments are panicking and shutting down their nuclear plants as
quickly as they can. But doing so is extremely foolish. To start, Fukushima
used 50-year-old technology. That plant was—like most plants in the
world today—an antique, two generations behind current designs. It was
also poorly located. It should never have been put right on the ocean. Other
design mistakes were made. Still, even over the next decade, only a few
people will die from radiation released, whereas at least 20,000 died from
the earthquake and tsunami.
But the real
question is: if nuclear is not going to be used for mass power generation,
where is the power going to come from? Most of the world's power is generated
by coal, but coal is extremely dirty and dangerous in every way
possible—in the production process, and in the residues that it leaves
both on the land and in the air. In an industrial world with 7 billion
people, the only energy source that makes sense is nuclear power. Sure, you
can use wind and solar from time to time and in certain places. But those
technologies are extremely expensive, and they absolutely can't solve the
world's energy problems. Certainly not when electrical grids start going
down, as they did in India last month. That's why India and China will be
building scores of nuclear plants in the years to come.
TER: Doug, thanks for sharing your insights. I greatly
Thanks for having me. I encourage your readers to attend the "Navigating
the Politicized Economy" summit. If you can't make it, the audio
collection is a great way to benefit from the information the
conference's 28 expert presenters will be sharing. And if you preorder, you
can save $100. It's a great deal.
Casey's tips on crisis investing in his Gold
Report interview, Doug
Casey Predicts Day of Economic Reckoning Is Near.
chairman of Casey Research, LLC, is
the international investor personified. He's spent substantial time in more
than 175 different countries so far in his lifetime, residing in 12 of them.
And Doug's the one who literally wrote the book on crisis investing. In fact,
he's done it twice. After "The International Man: The Complete Guidebook
to the World's Last Frontiers" in 1976, he came out with "Crisis
Investing: Opportunities and Profits in the Coming Great Depression" in
1979. His sequel to this groundbreaking book, which anticipated the collapse
of the savings-and-loan industry and rewarded readers who followed his
recommendations with spectacular returns, came in 1993, with "Crisis
Investing for the Rest of the ineties." In
between, his "Strategic Investing: How to Profit from the Coming
Inflationary Depression" broke records for the largest advance ever paid
for a financial book. Casey has appeared on NBC News, CNN and National Public
Radio. He's been a guest of David Letterman, Larry King, Merv
Griffin, Charlie Rose, Phil Donahue, Regis Philbin
and Maury Povich. He's been the topic of numerous
features in periodicals such as Time, Forbes, People, U.S., Barron's and the
Washington Post—not to mention countless articles he's written for his
own various websites, publications and subscribers.
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1) Karen Roche of The Energy
Report conducted this interview. She personally and/or her family
own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: None.
Streetwise Reports does not accept stock in exchange for services. Interviews
are edited for clarity.
3) Doug Casey: I personally and/or my family own shares of the following
companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this
interview: None. I was not paid by Streetwise Reports for participating in this