Crude Oil

http://www.advfn.com/p.php?pid=commodities&adw=74&gclid=CKbFubH30qUCFYXu7QodA2e-lA

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"When a person doesn't have gratitude, something is missing in his or her humanity. A person can almost be defined by his or her attitude toward gratitude." (Elie Wiesel)

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It's interesting to us that with all the "room" that the NY Times has for "business news" and general news that there doesn't seem to be any mention today of at least yesterday's oil price close (near-term futures, per barrel): $89.19. We're guessing that nobody there is paying attention to what they're paying for gasoline at the "pump." Perhaps one of their editors will read a blog post and realize that the $90 per barrel mark has been reached.

We know oil reached $147 per barrel in February, 2008 before it came back down again to, roughly, $38. The $90 mark looks to us like a half way point for a march back up to the $150 range.

This probably wouldn't be inconsistent with what's going on with gold but, in both cases, we're dealing with speculation, not supply/demand. So, while CALPERS (the largest public employee retirement plan in the U.S. - California Public Employee Retirement System) is busy telling (or threatening to sell their stock) big companies how they should be managed, they're out speculating with their investments by betting on oil prices (etc.). And so, their "retirees," who are already paying too much at the "pump" (especially in California), will now be paying more. And so, CALPERS is preaching responsible management while practicing, what, responsible speculation?

We had to know the price of oil would continue up for two reasons:

(1) "The Ben Bernanke" (we'll see him on "60 Minutes" tomorrow night) printed up $600 billion to try to get money into the economy in an effort to do something to battle unemployment (inflation may be a long term consequence of this action, but desperate times call for desperate measures). We agree with what he did but, as one of my colleagues has said, giving that money to Goldman Sachs is probably not the way to create jobs. He could have had a more direct impact on jobs by actually designating that money for specific regional small banks who are the primary lenders to "small" business which is where most jobs get created or restored. And, "oil" gets traded in "dollars" so the minute "The Ben Bernanke" throws more dollars into the world markets (or, Goldman Sachs), prices for commodities go up, and
(2) The volume of trading in "barrels" of oil has gotten to levels that we're not sure were ever anticipated. One barrel of oil now trades (and there are various numbers and sources for this data so we're just picking one) 36 times before it "lands" for actual use in refining, etc. Now, while we need markets for any commodity, there must be some point at which over trading or speculation reaches a limit. Of course, asking our regulators (and we use that term loosely) to figure that out would be asking too much and we realize that.

OPEC is on record as looking to keep the price of oil at $60 to $70 per barrel which is a price that keeps their member countries at very high profit margins while discouraging efforts to produce alternative fuels or fuel sources. It may be too late. Canadian oil sands alone now represent as much potential oil supply as Saudi Arabia. In the U.S., four western states have enough oil shale to potentially eclipse all of OPEC's output. The only thing that stands in the way of either the U.S. or Canada's expansion of these sources is a sophisticated approach to environmental analysis.

We've attached a current real time source for oil prices per barrel and it basically indicates that the $90 price has been achieved at least twice so far today. We don't think it's going to stop there but not because of the supply/demand balance in the world. Oil is going to continue to rise in price because of speculation. Let's see where it ends. There are some pretty successful investment bankers who think it will end at $500.

Then what?