Bob’s Blog – The Market Abhors a Vacuum

The market abhors a vacuum. How will you put your assets to work in this market?

The principles of economics appear in the strangest of places. In chemistry, in biology, and in the commodities market.
“Nature abhors a vacuum” sounds like something Shakespeare would have penned, or be at least scientific, but it’s not. The idiom comes from a novel (written in Latin in 1536) by Rabelais called Gargantua.

Last week I wrote, counterintuitively, that the current malaise of the natural gas market spoke to an opportunity. Partly, I suppose, because if you’re in the energy business, and you don’t intend to chuck it all and put your cash in a money market account, the question is not if you are going to act, but how. How does one put money and assets to work in this market (to paraphrase Donald Rumsfeld: you work in the market you have, not the one you want)?

The scenario I painted last week was of a decline curve event. The EIA (eia.gov) in forecasting oil supply, says “However, after September, EIA expects U.S. crude oil production to decline slightly, averaging just under 11.0 million b/d during the first half of 2021 because EIA expects that new drilling activity will not generate enough production to offset declines from existing wells.”

The opportunity comes in being prepared to fill the hole (vacuum) caused by the decline curve event, coupled with the long arc of increasing demand that resolving energy poverty will create. I’ve written about energy poverty before, but the general drift of it is that energy utilization relates to quality of life, and the disparity in availability correlates directly to quality of life. The vacuum occurs when those who don’t have it realize it can be had. Once that becomes known, there is tremendous societal pressure to improve availability.

Globally, the increasing need for energy has a long way to grow before it levels off. The absolute amount of energy will be lessened as the conveniences of life are addressed more efficiently. The way that energy is produced and stored will change over time. But for the next 15 or 25 or 40 years, hydrocarbon-based energy will be the most affordable, most easily transported, least corruptible method of filling that vacuum.

How will you put your assets to work in this market? At TexhomaLand we can help you securely acquire the assets you need.

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