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The September 5th DIAC
Striking Oil! How Chevron’s Discovery will help America and Investors
With oil prices still hovering around the $70 a barrel range and the price for a gallon of unleaded gas averaging $2.75 this week, the United States still remains as vulnerable as ever when it comes to supply disruptions and can’t afford to relax in its pursuit of oil exploration or development of alternative fuels.
Well, fortunately for us, our domestic big oil companies are taking matters into their own hands by searching and exploring for the commodity in an effort to maintaining an adequate supply while keeping with demand. Considering three-quarters of the world’s oil supply is off limits to our big oil companies, finding new pools of crude off of our shores is critically important to their—and our—survival.
Black Gold Gushes in the Gulf
Just announced this morning, Chevron Corp. (NYSE: CVX) has successfully completed what it called “a record setting production test” on a well located about 270 miles southwest of New Orleans in the Gulf of Mexico. Chevron said the well sustained a flow rate of 6,000 barrels of crude a day. Unfortunately, the equipment used is not able to maintain more than 6,000 barrels, but we’ll take what we can get.
Chevron owns 50% of the well, with companies like Devon Energy (NYSE: DVN) and Statoil (NYSE: STO) holding the remaining 50% equity interest. All three companies are estimating the new oil field to hold between 3 billion and as much as 15 billion barrels worth of oil and gas reserves. If 15 billion barrels are found, it would boost oil reserves by 50% in the United States.
Discovery may take Years to Produce
Unfortunately, there will be no immediate impact as a result of this discovery as this crude will not be processed into fuel for at least 3 years. However, it will provide a much needed psychological boost to an American population already on edge regarding Middle East violence which could possibly lead to a severe disruption to global oil supplies.
Now, hopefully our lawmakers on Capitol Hill will realize how important oil-friendly measures like the off-shore drilling act—more formally known as the Deep Ocean Energy Resources Act of 2006—are important to helping America end its relationship with foreign oil. The short session—a mere 19 days long—is important to pushing this measure through and permitting additional exploration off of our domestic shores.
Look for oil to take another trading breather today, especially now that the summer driving season has officially ended, and provide a terrific buying opportunity for investors looking to jump back into the oil bull market. Stocks like Chevron, Devon Energy and Statoil should do well today, but these stocks will do well even without additional oil field discoveries. Simple global demand will continue to drive these and other oil companies higher.
Until tomorrow,
Todd M. Schoenberger, Editor
Diligent Investor
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