The EIA Oil Report Debacle
Is there Panic at the EIA?
Within the last three years, several discrepancies were found in the amount of oil reported in storage. Let's take a closer look at one of those instances...
On September 16, 2009, the EIA reported a loss of four million barrels of oil from the Cushing storage hub in Oklahoma. That day, oil futures climbed 2.2%.
Now, before grabbing your torches and pitchforks, remember that this isn't some malicious cover-up. Some of the errors were reported to the EIA by the companies that made them. According to the EIA, these errors are rare and mistakes are typically adjusted later on.
The EIA isn't without excuses. For starters, their system hasn't been updated for nearly three decades. Furthermore, much of the data must be put in manually.
Is the EIA reporting debacle a cause for panic?
Does this warrant concern? I'd say so.
Then again, we should be used to shady numbers within the oil industry.
OPEC has become a master of cooking the books. Anyone else remember when OPEC members suddenly doubled their proven oil reserves? Iraq managed to do it twice within five years.
The reality is this: Even though the EIA messed up, their mistakes shouldn't change your outlook on the oil industry in the slightest — especially when it comes to your oil investments.
The Death of Conventional Oil
There's a very specific reason why our outlook hasn't changed.
If one thing has become apparent by now, it's that conventional oil is on its deathbed. To a certain degree, you're seeing the last drops of that easy-to-get oil right now, and what is now considered "conventional" is continually changing.
The Cantarell oil field should ring a bell. The once-mighty Cantarell field was the third-largest oil field in the world. Today, it's one of the chief reasons why Mexico's oil exports are shriveling.
Who knows, perhaps production from Alberta's oil sands will one day be considered conventional. I know some of you would argue that the cheap stuff is already gone, and to a certain point, I would agree with you.
When was the last time you read about a massive oil discovery?
Was it when the Tupi field found off the coast of Brazil, considered the largest oil discovery in the Western Hemisphere within the last 30 years, made headlines?
Petrobras, Brazil's state-run oil company, recently boosted its spending by approximately 26% to tap into this offshore oil. They're spending up to $220 billion over the next five years.
(So much for cheap oil... )
It's not too easy for the world's top producers, either. This week, Iran announced it is looking for $200 billion in oil, gas, and refining investments to 2015. Then again, that's needed just to avoid a production decline.
Re-Vitalizing the North American Oil Industry
Interestingly, the U.S. is getting better at avoiding oil from the Middle East. For the first time in twenty years, oil imports from Saudi Arabia are below one million barrels per day.
That's not an error in the EIA numbers. The fact is that we've been slowly shying away from Saudi oil.
It couldn't have come at a better time... And to think, all it took was a massive collapse in oil prices.
That and the fact that for the first time since in decades, we have a reason to feel good about U.S. oil production.
You see, the North American oil industry is finally getting a well-deserved boost. Advancements made in drilling and fracturing techniques have investors rushing into the area.
And while not all companies are going to come out on top, several small oil companies — highlighted in this special report — are pulling out all the stops. The best part is that the latest market sell-off makes right now the perfect time for you get your fair share of the profits. Simply click here to learn about these opportunities.
We can only hope the U.S. government takes this mess as a lesson and gives the EIA additional resources to help them manage the numbers. Let's face it, your make-or-break decisions aren't solely based on their inventory reports.
Over the next few weeks, I'll be taking a deeper look at some of these North American oil plays. If there are any areas in particular that you want to know about, please feel free to leave a comment below — even if you just want to offer your own two cents on a specific play.
Until next time,
Energy and Capital
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