Friday, September 7, 2007

The production data for June 2007 will be posted in the next week at the U.S. Department of Energy’s Energy Information Administration (“EIA”). You can count on a summary of the data here by "yours truly" shortly after the release. Unfortunatley, the weekly inventory numbers published by the EIA each Wednesday tell the story long before the production data is released. Despite near record prices, inventories have fallen precipitously. Not coincidentally, the U.S. dollar has been doing its own version of “the dive”, and U.S. market and economic data continue to point to the distinct possibility of a recession. Let me be abundantly clear: If in fact 2005 holds as the peak year for world oil production, economic recession will be the new paradigm. The world economy might be able to wring a couple years, perhaps as much as 3 years, of economic growth from efficiency… but no more. Perhaps that is where we are now. It will not be entirely clear until several years after the fact, but if you do not hedge your bets before that time…

This is what I envision the other side of the “Peak” would look like: Employment, vehicle miles traveled, automobile and home purchases, consumer purchases, etc… all cease to grow. The dollar declines, gold rises, the Yen carry trade is undone, the U.S. equity market wobbles, and commercial oil inventories begin a steep decline (at least until the market realizes that “this is it” and then prices will rise enough to slow or stop the inventory decline), and special interest groups do their best to muddle the picture for the public. Well, let’s see now… Check, check, check, and check.

Look, there is a lot “we” could be doing, but “we” won’t. There is a lot “they” could be doing, but “they” won’t, either. So it is all pretty much up to “you”. What will “you” do?

Yours for a better world,

Mentatt (at)

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