The Energy World is Flat: Opportunities from the End of Peak Oil
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A stronger, more informed approach to the energy markets
The Energy World Is Flat provides a forward-looking analysis of the energy markets and addresses the implications of their rapid transformation. Written by acknowledged expert Daniel Lacalle, who is actively engaged with energy portfolios in the financial space, this book is grounded in experience with the world of high-stakes finance, and relays a realist's perspective of the current and future state of the energy markets. Readers will be brought up to date on the latest developments in the area, and learn the strategies that allow investors to profit from these developments. An examination of the markets' history draws parallels between past and current shifts, and a discussion of technological advancements helps readers understand the issues driving these changes.
Energy has always been at the forefront of the economic agenda, being both the key to and a driver for development and growth. Its centrality to the world of finance makes it imperative for investors and analysts to understand the energy markets, irrespective of where on the wide range of energy spectrum observers they fall. The Energy World Is Flat is a guide to the past, present, and future of these crucial markets, and the strategies that make them profitable. These include:
- Understanding the state of the energy markets, including key developments and changes
- Discovering the ten pillars of a successful energy investment strategy
- Reviewing the history of the energy markets to put recent changes into perspective
- Learning which technologies are driving the changes, and how it will affect investors
The recent energy market changes were both unexpected and so fundamental in nature that they represent a true shift in the energy macro- and microeconomic landscape. Investors and analysts seeking a stronger approach to these markets need the expert guidance provided by The Energy World Is Flat.
formations thanks to the combination of horizontal drilling and hydraulic fracturing. And the potential was massive. The United States, once thought to be in critical shortage of natural gas, was now enjoying an abundance with enough supply to cover over 100 years of demand. I remember the ﬁrst time I heard “US energy independence is real”. It was in 2006, and I was meeting large oil and gas producers in Houston. I had endless debates about decline rates, lack of commerciality, environmental
of energy between 3% and 10%. In 1998, energy became just 3% of the overall economy.23 The Asian crisis had sent oil prices towards $10/bbl and coal and natural gas prices were very depressed too. Oil-producing nations such as Russia were under severe pressure and eventually “cracked”, resulting in the Russian moratorium. The energy producer industry was breaking down. Such low prices were unsustainable. In the 1970s, energy surpassed 10% of the overall economy.24 The oil shocks had quadrupled
DESTRUCTION There can be economy only where there is efﬁciency. Benjamin Disraeli I grew up in the 1970s. I was too young to remember the ﬁrst oil shock, but I can recall with great nostalgia those cold winters sitting next to the wood ﬁres. And that, despite our complaints, my parents would only set the electric heating at night. Electricity prices had skyrocketed, but the main reason why the house felt so cold was the very poor insulation. The windows seemed to whistle when the wind was
creating disinﬂation across the board. Producing countries that rely on high prices for their budgets are possibly the ones who will lose the most from a widespread energy domino. NOTES 1. Osmel Manzano and Jose Sebastian Scroﬁna. Resource Revenue Management in Venezuela: A Consumption-Based Poverty Reduction Strategy. http://www.revenuewatch.org/sites/default /ﬁles/Venezuela_Final.pdf 2. Deborah Ball, Paul Sonne and Carrick Mollenkamp (2011). UBS: Rogue trader hit ﬁrm. Wall Street Journal, 16
12/19/2014 Page 176 FLAT On the other hand, renewable subsidies in Europe and the United States are granted by adding debt and deﬁcit to the budgets of countries. My personal view is that subsidies are not good and should be erased everywhere. All of them. The discussion that follows will address the unintended consequences and second- and third-order effects from subsidies and intervention. Rule change #6 – Governments can change the rules anytime Similar to Warren Buffett’s “when investing,