Monday, July 23, 2007

Last week, the price of U.S. crude in the spot market crossed $80 per barrel. The data continues to support the case for much higher oil prices, and much lower supplies. For those of you who have politely listened to my rants of the past 2 years, I appreciate your patience and would like you to note the following from the front page
of today’s Bloomberg news:

“July 23 (Bloomberg) -- The $100-a-barrel oil that Goldman Sachs Group Inc. said would prevail by 2009 may be only a few months away.
Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year.

``We're only a headline of significance away from $100 oil,'' said John Kilduff, an analyst in the New York office of futures broker Man Financial Inc. ``The unrelenting pressure of increased demand has left the market a coiled spring.'' New disruptions of Nigerian or Iraqi supplies, or any military strike against Iran, might trigger the rise, Kilduff said in a July 20 interview.

Higher prices will increase revenue for energy producers from Exxon Mobil Corp. to PetroChina Co., while eroding profit at airlines including EasyJet Plc and railroads such as Union Pacific Corp. The U.S. and other oil-importing nations risk accelerating inflation, while higher energy costs threaten to restrain growth.” - Bloomberg

For better or worse, the price signals are telling you something important – that the probability of coincidence of my position on oil supplies is falling with the ascending price of oil as well as each production report. Perhaps the balance of my analysis is correct as well – that U.S. food supplies in an energy constrained world will be a much bigger issue than energy supplies – and energy supplies are going to be a big problem.

Whoever said “To you who have ears to hear…” should have met the guy who said “may you live in interesting times” because you really need to and you will, like it or not.

mentatt (at)

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