On May 1, 2012, Porter Stansberry and I made a bet. Porter predicted that oil would go below $40 per barrel within 12 months. I stated that there was no chance that this would happen (my reasons are presented at the link above).
Putting our money where our mouths are, we both agreed to bet 100 ounces of silver on the matter.
I have a lot of respect for Porter, who is a very smart man. When he talks, I listen. But when he discussed the reasons why he thought oil was going below $40 per barrel, I knew I had him—this was going to be one of the easiest bets I have ever made.
One of Porter's main arguments was that a global shale-oil revolution would push volume way up and prices way down. It is definitely a sensible argument, yet it was missing something very critical: timing.
The shale gas boom that happened in the United States did not occur in a vacuum. Rather, it was built upon decades of experience in new technologies such as hydraulic fracturing and horizontal drilling. This was then based off of more than 150 years in conventional oil and gas exploration. Today in North America, there are thousands of rigs and hundreds of thousands of skilled oil and gas workers to work on the projects.
This simply does not exist in the rest of the world.
For a new shale discovery—however large it may be—it would take years just to prove up its commercial viability, another few years to get the infrastructure running, and even more years before it produces enough to matter.
This means there are tremendous opportunities to profit while we wait for the rest of the world to catch up.
Marin Katusa
Casey Research
