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Crisis in the Middle East and Oil Prices

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Crisis in the Middle East and Oil Prices

Crisis in the Middle East & Oil Prices

Unfortunately, unrest in the Middle East has virtually become commonplace. This unrest is echoed throughout the world through economic impact. More specifically, when the world’s highest oil producing region is in turmoil, prices are affected across the world.

Currently, the world is in disarray due to conflicts spread across the Middle East and the rest of the globe. A civil war is looming in Iraq between two religious groups. Rival Libyan militias are battling for control over the nation. Up north, Russia (the highest producer of oil last year) is battling Ukraine and the rest of the western world. All this while airplanes are falling from the sky, school girls are kidnapped in Nigeria, and Israel and Hamas are continuing a bloody war.

Not a very optimistic outlook.

All of these factors are affecting the price of liquid gold. According to a report by Ernst & Young, second quarter oil prices were up, primarily due to geopolitical risk in the Middle East and North Africa.

However, there is a saving grace. America’s southern states are reaping the rewards of an oil boom and are mitigating the global crisis. Last year, the US began to produce more oil than it imported, something that has not been accomplished in nearly twenty years.

Extraction innovation seen in shale oil has caused rejuvenation for the Permian Basin region, located in western Texas and Southeastern New Mexico. The introduction of shale oil technology allows oil production companies to access resources they previously were unable to.

 

Original infographic from: Saxo Markets UK

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Energy

Mapped: Every Power Plant in the United States

What sources of power are closest to you, and how has this mix changed over the last 10 years? See every power plant in the U.S. on this handy map.

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This Map Shows Every Power Plant in the United States

Every year, the United States generates 4,000 million MWh of electricity from utility-scale sources.

While the majority comes from fossil fuels like natural gas (32.1%) and coal (29.9%), there are also many other minor sources that feed into the grid, ranging from biomass to geothermal.

Do you know where your electricity comes from?

The Big Picture View

Today’s series of maps come from Weber State University, and they use information from the EPA’s eGRID databases to show every utility-scale power plant in the country.

Use the white slider in the middle below to see how things have changed between 2007 and 2016:

The biggest difference between the two maps is the reduced role of coal, which is no longer the most dominant energy source in the country. You can also see many smaller-scale wind and solar dots appear throughout the appropriate regions.

Here’s a similar look at how the energy mix has changed in the United States over the last 70 years:

Energy net generation over time

Up until the 21st century, power almost always came from fossil fuels, nuclear, or hydro sources. More recently, we can see different streams of renewables making a dent in the mix.

Maps by Source

Now let’s look at how these maps look by individual sources to see regional differences more clearly.

Here’s the map only showing fossil fuels.

Fossil fuel power plants in the U.S.

The two most prominent sources are coal (black) and natural gas (orange), and they combine to make up about 60% of total annual net generation.

Now here’s just nuclear on the map:

Nuclear power plants in the U.S.

Nuclear is pretty uncommon on the western half of the country, but on the Eastern Seaboard and in the Midwest, it is a major power source. All in all, it makes up about 20% of the annual net generation mix.

Finally, a look at renewable energy:

Renewables power plants in the U.S.

Hydro (dark blue), wind (light blue), solar (yellow), biomass (brown), and geothermal (green) all appear here.

Aside from a few massive hydro installations – such as the Grand Coulee Dam in Washington State (19 million MWh per year) – most renewable installations are on a smaller scale.

Generally speaking, renewable sources are also more dependent on geography. You can’t put geothermal in an area where there is no thermal energy in the ground, or wind where there is mostly calm weather. For this reason, the dispersion of green sources around the country is also quite interesting to look at.

See all of the above, as well as Hawaii and Alaska, in an interactive map here.

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Energy

The Periodic Table of Commodity Returns

This unique chart shows the performance of individual commodities over the last decade – see commodity returns in 2018, and how they compared to previous years.

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Periodic Table of Commodity Returns (2019 Edition)

Commodities are an interesting asset class to watch.

In certain years, all commodities will move in price together in an obvious and correlated fashion. This is a representation of the cyclical characteristics of commodity markets, in which macroeconomic factors align to create a tide that lifts or sinks all boats.

At the same time, however, each individual commodity is incredibly unique with its own specific set of supply and demand circumstances. In the years when these supply or demand crunches materialize, a certain commodity can surge or crash in price, separating itself from the rest of the pack.

A Decade of Commodity Returns

Today’s visualization comes to us from our friends at U.S. Global Investors, and it tracks commodity returns over the last decade.

More specifically, it takes a closer look at individual commodities (i.e. corn, gold, oil, zinc) to show how performance can vary over time. With a quick examination of the graphic, you can see years where commodities moved together – and some years where individual commodities stole the show unexpectedly.

Palladium: A Perennial Winner

The best performing commodity in 2018 was palladium, which found itself up 18.6% – just enough to edge out corn, which jumped up 17.9% in price last year.

Interestingly, palladium has also been the best performing commodity over the 10-year period as well:

Palladium is the best performing commodity

Palladium has finished in first place in four of the last 10 years, including in 2017 and 2018 – it’s also impressive to note that palladium has only had negative returns twice in the last decade (2011, 2015).

A Crude Awakening

The worst performing commodity in 2018 was crude oil, which fell -24.8% in price.

Like palladium, this wasn’t a unique occurrence: crude has actually been the worst performing commodity investment over the last decade:

Oil is the worst performing commodity

As you can see, crude oil has been the worst (or second worst) commodity in three of the last five years.

Further, as our chart on how all assets performed in 2018 shows, crude oil was outperformed by every other asset class, and the energy sector had the poorest performance out of all S&P 500 sectors last year.

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Sprott Physical Gold and Silver Trust Company Spotlight

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