Good morning,

It is December 18th and the news is rife with reports that the republicans may finally, just for once, have their act together enough to do something worthwhile for the American people. 

Tax reform, for the first time since President Reagan in the mid 80's, appears to be a reality. This, in my  opinion, will be a help to royalty owners. Remember that not too long ago many feared and opined that we were stuck in a perpetual down market for oil and gas even though the markets had never in their history gone down in value without rebounding. We were stuck in the boosh/obama malaise, assured that 3% economic growth was a thing of the past and that renewable energy was leaving the fossil fuel market behind.

Amazing what a simple electoral change of direction can do for an economy. obama never had a single year of 3% growth in GDP, the first American president to not do so, even though he doubled the national debt in his 8 years in the White House.

American business collectively describes his presidency either as a waterboarding or a gun to the head hostage situation. Hard to argue with reality.

Well, all that seems to be in the past now. President Trump has steadily rolled back the anti-business regulatory morass left behind by obama and now appears to be set to sign tax reform into law by Christmas.

The New York Fed is reporting GDP in their sector at 4% for this quarter, the Atlanta Fed chimes in at 3.3%, we are pretty sure that this will mean the first 3 full quarters of the Trump administration will be consecutive with 3% or higher growth. Post tax reform it is not unlikely that by the middle of 2018 we could see healthy, widespread growth at 4%, despite nearly every obama friendly economist assuring us over and over that growth could never again be that high and that 2% was now the bench mark for a booming economy.

GDP growth coupled with tax savings for corporations AND individuals cannot help but spur energy consumption. American Shale now essentially guarantees expanding production. What was needed was a more disciplined production effort by American shale as well as a big uptick in consumption. The consumption increase was never going to be substantial in an economy of 2% growth.

All that has changed now. Watch the markets through to the summer of 2018 and I predict WTI will be in the $70-$75 a barrel range. I recognize that royalty owners are not paid  that figure, but the relationship between the price reported and the price paid to royalty owners exists, the more WTI goes up the more we should be seeing on our statements.

Of course I could be wrong, I am after all just some hick up on a Guernsey county ridge with a laptop and the internet. But economics are cyclical, as are politics, and we are undeniably in an upswing. I was one of the few saying 2017 would see WTI near $60 a barrel back when we seemed stuck in the low $40 a barrel range. We'll see soon enough.

Hoping everyone has a Merry Christmas and a happy, healthy and prosperous New Year !