Charts -- Oil and Gold Blast Off!

I posted this on my blog this weekend, but just in case you didn’t see it …

Fortis Expects Complete Breakdown of the American Financial Markets Within Days or Weeks
RUSSEL/AMSTERDAM (DFT) - Fortis expects a complete breakdown of the American financial markets within days or weeks. This explains, according to the bank insurer, the series of interventions on Thursday with the aim of strengthening themselves by € 8 billion. "We are ready at the last moment. The U.S. is doing much worse than we had thought,” said Fortis chairman Maurice Lippens, who insists that CEO Votron shall not be replaced. Fortis expects bankruptcies of 6,000 U.S. banks that have low coverage. "But the same goes also for Citigroup and General Motors, and thereby starts a complete meltdown in the U.S.”

In other news …

Oil Rises to Record Above $143 on Concern Iran Supplies May Be Disrupted Crude oil rose to a record above $143 a barrel on speculation the dispute over Iran's nuclear program may disrupt supply from OPEC's second-largest producer.

XX Sean’s note – yeah, that’s really the reason. “Concern.”

BIS Warns of Deepening Contraction (Not for the Fainthearted)

"The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point," it said.

Gold Rises, Set for Quarterly Gain, on Dollar; Platinum Climbs

Gold may extend gains as the European Central Bank prepares to raise borrowing costs on July 3, pushing the dollar lower against the euro, said Manqoba Madinane, an analyst at Standard Bank Group. The U.S. currency has fallen 7.7 percent against the euro so far this year, while gold has advanced 12 percent.

Blind Dog Finds Bone

Thomas Friedman actually says something worthwhile in his most recent column …

“Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.”

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Sunday Afternoon Reading

Man, I've been busy with my new oil report. I just had some time today to kick back and check on stories like ...

Investment Bank Fortis Expects Complete Breakdown of the American Financial Markets Within Days or Weeks
RUSSEL/AMSTERDAM (DFT) - Fortis expects a complete breakdown of the American financial markets within days or weeks. This explains, according to the bank insurer, the series of interventions on Thursday with the aim of strengthening themselves by € 8 billion. "We are ready at the last moment. The U.S. is doing much worse than we had thought,” said Fortis chairman Maurice Lippens, who insists that CEO Votron shall not be replaced. Fortis expects bankruptcies of 6,000 U.S. banks that have low coverage. "But the same goes also for Citigroup and General Motors, and thereby starts a complete meltdown in the U.S.”

In a side note, you can purchase Treasuries direct from the US government, and that might not be such a bad idea.

Dale Allen Pfeiffer: Smell the roses - suicidal tendencies
Now, as oil prices aim for the stratosphere, there is no talk of rationing, or even slowing down. But wait, someone is trying to start a grassroots movement to spur motorists to drive more sensibly and save. And the person who is spearheading this effort is none other than Jay Hanson, the man who established the dieoff.com website that first woke up most people to the idea of peak oil in the late 1990s and shortly after the turn of the century.

Beijing faces turmoil due to water crisis: Probe International
BEIJING (AFP) - Beijing's water crisis is so critical that the city is facing economic collapse and the need to resettle part of its population in coming decades, a leading development policy group said Friday. Experts predict the Chinese capital could run out of water in five to 10 years, according to Grainne Ryder, policy director at Canada-based Probe International.

The Era of Oil Wars
What is most disturbing of all is that the big powers, so far from seeking major adjustments of their energy policies on either the supply or demand fronts or making a major switch into renewables, are actually massively intensifying their competitive struggle short-term for the limited oil reserves left. Despite an unwinnable war in Iraq, the US is still constructing at least five large permanent military bases there in order, according to evidence given to a US Congressional Committee, to control access to Gulf oil, including in Saudi and Iran. As one neocon recently put it, "one of the reasons we had no exit plan from Iraq is that we didn't intend to leave". The US is also trying to force through a new Iraqi oil law that would give western, primarily American, oil multinationals control of Iraqi oilfields for the next 30 years.

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News For Thursday -- Gold, Oil & More

I'm very busy putting the finishing touches on my new oil report. which comes out July 1. Here are a few things to read ...

Tim Iacono over at Seeking Alpha wonders if gold is about to make its next big move higher. And he has chart eye-candy ...Are we really heading for a shooting war with Iran? The Jerusalem post reported Tuesday that former U.S. ambassador to the U.N. John Bolton said that Israel is likely to attack Iran in the time between the November presidential election in the U.S. and the inauguration of the new president. Mr. Bolton also said that he does not believe the U.S. will participate in the attack.

However, CBS thinks the Israelis are trying hard to get the Bush Administration to mount an attack on Iran's nuclear facilities.

What Saudi Arabia giveth, Libya takes away. Libya May Cut Crude Oil Output Because Market Is Oversupplied, Ghanem Says Libya may cut oil production because the market is oversupplied, the nation's top oil official said.

Sean's note -- this is another reason why people shouldn't get so worked up about drilling in ANWR. Let's say it holds oil beyond our dreams and floods the markets. OPEC will just cut production to keep prices high.

Here's a blog I find interesting: BakenShale.blogspot.com

Not everyone is bullish on commodities in the short term. Marc Faber, publisher of the Gloom, Boom and Doom Report, says that Commodities will fall in the next 6 months After a 7-Year Rally. Commodities face a ``correction'' after a seven-year rally, which will help ease global inflation, investor Marc Faber said. Longer-term, he thinks the commodity bull market will last 20 years.

Intellichoice says the best car to own in these expensive-gas times, based on total cost of ownership, is the Toyota Corolla. Personally, I think my next car is going to be a Honda Civic.

The Energy Information Administration expects that global energy demand will grow by 50 percent over the next two decades.

Check out my new gold and energy blog at MoneyAndMarkets.com

Charts and News for Wednesday

Slate has a good story on Peak Oil with lots of stats: Barrel Fever.

Personally, I can't wait to see what the International Energy Agency comes up with in its comprehensive assessment of the world's top 400 oil fields. From last month's Wall Street Journal ...

For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.

And here's today's news ...
Oil falls as crude supplies rise

Light, sweet crude for August delivery fell more than $3 to less than $134 a barrel on the New York Mercantile Exchange. Oil had been trading down $1.30 before the report's release. The U.S. Energy Information Administration's weekly petroleum report showed that oil supplies rose by 800,000 barrels during the week ended June 20. Economists had expected supplies to fall by 1.7 million barrels last week, according to Platts information service.

Japan's Exports Grow 3.7% as Asian Shipments Offset US Slump Japan's exports grew at twice the pace economists estimated in May, as accelerating shipments to Asia helped the economy withstand a slump caused by falling demand from the U.S. and Europe.

Fed May Begin Shift to Fighting Inflation as Rate Cuts Help Sustain Growth The Federal Reserve may signal today that inflation is starting to replace a recession and the credit crunch as the biggest risk facing the economy.

Sean's note -- I'll believe that when I see it.

Check out my new gold and energy blog at MoneyAndMarkets.com

Happy Monday -- Oil & Gold Charts & News You Can Use

And here is the news ...

Oil Rises as Saudi Plan to Pump More Fails to Ease Nigeria Supply Concern Oil rose to within $3 of a record on speculation Saudi Arabia's output increase may not raise global supply after an Chevron Corp. pipeline was blown up in Nigeria and a North Sea platform evacuated.

XX Sean’s note – I’m covering Nigeria in my new oil report. What a debacle!

OPEC president says sees no demand for more oil
Oil producers cannot pump more without demand for extra supply, and at the moment that demand does not exist, OPEC President Chakib Khelil said on Monday.

Speculators Are Largest Oil Contract Buyers, Doubling Share, Panel Says Speculators became the largest players in oil futures markets, nearly doubling their share in the past eight years as prices rose to records, in a ``radical shift'' for the market, according to a congressional committee.

“This raises troubling concerns about whether the oil future prices have become delinked from underlying supply and demand fundamentals and whether the commodities markets have become a casino for unscrupulous speculators who profit at the expense of the American people,'” Representative John Dingell, the committee chairman, said in an e-mailed statement.

XX – note -- If the government focuses on this, it could spell trouble for commodity ETFs. I'll watch these developments closely. Congress should heed Sanford C Bernstein analysts Andrew Keen, Ben Dell, Neil McMahon and Hugh Wynne, who wrote in a June 20 note: “Every crisis needs a culprit. Active speculation is a catalyst for market movements, not an underlying cause.''

Oil Refiner Insiders Buy Most Shares Since 2000 in Bet Crude Will Plummet Refinery executives are buying more of their own stock than at any time since 2000, prompting investors to bet that a retreat in oil will boost profits and reverse the biggest share decline in a decade.

Iran Supertankers Can Hold Five Months of Saudi Oil Pledge: Chart of Day Iranian supertankers now in the Persian Gulf could store the equivalent of five months worth of the additional crude oil Saudi Arabia pledged to pump to curb prices, according to ship-tracking data compiled by Bloomberg.

OTHER NEWS

Uranium Soon Fetches $90 as India Reactors Drive Global Demand
The uranium industry's worst year is about to collide with a nuclear construction program in India and China that rivals the ones undertaken during the oil crisis of the 1970s.

The result is likely to be a 58 percent rebound in uranium to $90 a pound from $57 now, according to Goldman Sachs and Rio Tinto Group, the third-biggest mining company. Uranium plunged 57 percent in the past year as an earthquake damaged a Japanese nuclear plant that's the world's largest and faults shut down reactors in the U.K. and Germany.

Record Corn Prices Mean More Expensive Meat, Dairy
In the latest bout of food inflation, beef, pork, poultry and even eggs, cheese and milk are expected to get more expensive as livestock owners go out of business or are forced to slaughter more cattle, hogs, turkeys and chickens to cope with rocketing costs for corn-based animal feed.

Check out my new gold and energy blog at MoneyAndMarkets.com

Gasoline Charts

Sorry I didn't post yesterday. I was too busy A) working on my new oil report and B) appearing on Fox Business News. And yes, the new oil report is free for subscribers to Red-Hot Canadian Small-Caps and Red-Hot Global Small-Caps. Anyway, here is a chart from ChartoftheDay.com that you'll find interesting ...As the folks at Chart of the Day explain ...

China announced that it would increase both diesel and gasoline prices. As a result, the price of crude oil dropped $4.75, but still trades above $130 per barrel. With oil prices continuing to trade at historically high levels, it is not all that surprising to find that gasoline prices are following suit. Over the past four months, the average US price per gallon of unleaded has risen over one dollar per gallon. When adjusted for inflation, gasoline prices are at record highs and 18% above its old inflation-adjusted peak of 1981. Also, as illustrated by the today's chart, gasoline prices have spiked above a trend channel (see red line) that has been in existence since the beginning of the century.

High gasoline prices have led to a drop in US gasoline use, which has dropped 1% since January from last year. You would think that would lead to lower oil prices, but surging demand in emerging markets will more than make up for our tiny price-force conservation, as this Wall Street Journal story explains ...

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Yes, We Have No Ethanol

Check out this "no ethanol" sign at a gas station in New York. That's because ethanol contains less bang for your buck than gasoline.

I went to Orlando and back last weekend with my family of four in a Honda CRV fueled with a 10% ethanol blend -- and our gas mileage was a little below what I was expecting.

Here's why: A gallon of gasoline contains 115,000 British Thermal Units (BTUs) of energy, a gallon of ethanol contains 75,700 BTUs. Therefore, a gallon of ethanol contains only 65.8% of the energy of gallon of gasoline.

If the fuel you're using has a 10% ethanol blend: 0.9 + (0.1 x 0.658) = 0.9658.

It's true that ethanol boosts octane levels, but in modern cars this does not affect mileage.

Other people are catching on to this as well. Hence, the "no ethanol" signs cropping up at gas stations.

Here is more energy news you can use ...

Shell Shuts Down Nigerian Oil Field After Attack Royal Dutch Shell said it shut down production from an offshore oil field that produces about 200,000 barrels per day after the most powerful militant group in Nigeria launched an attack on an installation there Thursday.

Oil Prices Slip Despite Attack in Nigeria "There was a smaller-than-expected drop in crude supplies and a reasonably healthy rise in distillates," said Mark Pervan, a senior commodity strategist at ANZ Bank in Melbourne, Australia.

The EIA report said crude oil supplies fell 1.2 million barrels last week, less than the 2 million barrel decline expected by analysts surveyed by energy research firm Platts, and inventories of distillates, which include heating oil and diesel fuel, rose 2.6 million barrels -- more than expected.

Still, Vienna's JBC Energy, in its daily report, said the U.S. stock draw was significant when expressed in year-on-year terms, nothing that "crude oil stocks have fallen sharply by around 53 million barrels compared to end June 2007."

Gasoline supplies fell 1.2 million barrels last week, where analysts were expecting an increase of nearly 1 million barrels. However, the EIA also said demand for gasoline is down 1.8 percent, on average, over the last four weeks compared with last year.

Premium Gas Sales Tank as Fuel Prices Rise Demand for high-octane fuel is at its lowest in nearly a quarter of a century and is now primarily consumed by a core group of luxury vehicle owners -- and even some of them are putting lower-grade fuel into their tanks to save money.

World Bank Raises China Growth Forecast China's economy is weathering the global slowdown better than expected, the World Bank said Thursday as it raised its growth forecast for the Asian giant to 9.8 percent from 9.4 percent.
...

The Chinese government has set a growth target for this year of 8 percent following last year's sizzling 11.9 percent expansion.

XX Sean's note -- an expanding Chinese economy is very bullish for oil/diesel/gasoline prices, because China subsidies fuel costs for its citizens. Fuel subsidies cost China about $47.9 billion a year, or about 1.2 percent of the country's GDP. Of course, when your economy is expanding at 9.8%, you can afford that.


XX UPDATE -- No sooner do I write this than the Chinese raise the price of gasoline and diesel by 46 cents a gallon. We'll see how much effect this has on demand. I think the market's reaction to the news is an over-reaction.

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Why Endeavour Is Heading Higher Today

Endeavour Silver is one of the recommended positions in the Red-Hot Canadian Small-Cap portfolio, and I talked about it in a recent Money and Markets.com column after my trip to Mexico. It had some good news today ...

Endeavour Silver Discovers Several New Zones of High Grade Silver Mineralization on San Pedro Properties in Guanacevi

This has sent the stock up by over 6% today. Go, Endeavour!

By the way, here's my MoneyandMarkets.com column for today: Get Rich as Gas Goes Supersonic

Check out my new gold and energy blog at MoneyAndMarkets.com

Shocking Flood Photos and More

A Boston Globe blog has some absolutely amazing /horrifying photos of the recent storms and floods and resulting devastation in the Midwest ...

To see the rest -- and you should -- CLICK HERE.

The human toll is incalculable, and it's probably worse than we know because sewage, farm chemicals and animal waste infest the flood waters. And as for the market effect ...

Corn, Soybeans Jump Near to Records After U.S. Midwest Floods Damage Crops Corn and soybeans advanced close to their records after floods in the U.S. Midwest damaged some crops, increasing the risk of lower production amid rising global food demand. Wheat and rice also rose.

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News You Can Use for Tuesday

Chart of the Freakin' Day ...

Source: The Oil Drum Europe

Mexico is the world's No. 6 oil producer and a key U.S. crude supplier but Pemex's oil output has declined this year due to waning yields at the aging Cantarell oil field and technical problems at wells in recent weeks.

The sheer hypocrisy of this debate on oil
Meanwhile the US Senate has threatened to launch a prosecution of OPEC for its alleged fixing of the world oil market, to the detriment of the American consumer. The American legislature's hypocrisy in this matter takes a different form to ours: the politicians who are now howling with rage about the shortage of oil supply are in essence the same people who have long blocked the oil industry from developing vast deposits both in the Arctic National Wildlife Refuge and off their own coastline - about 80 per cent of the US continental shelf is out of bounds, on environmental grounds.

Crude Oil Drops for Third Day on Concern Economic Slowdown May Curb Demand Crude oil fell for a third day on signs that slower economic growth in the U.S. and Europe will curb fuel consumption.

Nymex Oil Futures Price Averaged Over 200 Days Exceeds $100 for First Time Oil prices averaged over 200 days surpassed $100 a barrel for the first time on the New York Mercantile Exchange, an indication of the durability of a rally threatening global economic growth.

More News You Can Use

Stocks in US Show Negative Return on Inflation Gain
Surging commodity prices have eroded earnings and spurred the Federal Reserve to consider raising borrowing costs just as equities are trading at their most expensive in four years. Standard & Poor's 500 Index shares yield 0.22 percentage point more in profits than the interest on 10-year Treasury notes, the smallest advantage since 2004, data compiled by Bloomberg show. The last time corporate earnings returned less versus bonds, the index posted its first quarterly decline in more than a year.

The 39 percent advance in oil, 61 percent jump in corn and 41 percent climb in rice pushed the UBS Bloomberg Constant Maturity Commodity Index to a record this year. That's squeezing profits as raw-material costs outpace consumer prices by the largest margin since the 1970s. Companies in the S&P 500 will earn 7.7 percent less in the second quarter than a year ago, according to analysts' estimates compiled by Bloomberg.

Dollar Falls as Housing Decline Raises Bets Fed Will Delay Rate Increases The dollar fell against the euro after a government report showed housing starts dropped in May to a 17-year low, raising speculation the Federal Reserve will delay increasing borrowing costs this year.

Corn Advances Near to Record in Chicago as U.S. Crop Conditions May Worsen Corn traded close to a record on speculation the U.S. crop will suffer further damage from floods in the Midwest, potentially reducing production in the world's biggest producer and exporter.

US Wholesale Inflation Increased More than Forecast
Producers paid 7.2 percent more for goods from May 2007, compared with a 6.5 percent gain in the 12 months ended in April. Excluding food and energy, the increase was 3 percent from a year earlier, the same as in the prior month.

More on the rise in producer prices HERE.

China's Factory, Property Investment Climbs 25.6%
Urban fixed-asset investment rose to 4.03 trillion yuan ($585 billion) in the first five months from a year earlier, the statistics bureau said, after gaining 25.7 percent in the four months through April.

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Why Oil Is High ... And Going Higher

The talking heads on CNBC are wondering why oil prices keep going higher. Well, a picture is worth a thousand words, so here's why ...

Source: Netoilexports.blogspot.com

You can see exports are down year over year while demand keeps rising. And that's why the Saudi agreement to pump more oil isn't calming the markets -- it's too little too late. Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar curbed their output by 544,000 barrels a day last year. At the same time, their domestic demand increased by 318,000 barrels a day. So, their net exports dropped by 862,000 barrels.

It would seem that the proposed rise in Saudi production of 200,000 barrels from June to July, on top of the 300,000 bpd rise in May, is not enough to even make up for last year's cut in OPEC exports.

Here is some other news you can use ...

Analyst: Air fares could double if oil prices keep rising Airlines may have to double fares this year if crude oil prices rise above $150, industry analyst Michael Boyd warned Friday. Ticket prices will need to jump 80 percent to 100 percent to cover the airlines' jet fuel if oil prices go that high, he said. "As of June 2008, the entire U.S. air transportation system is operating on borrowed time. Between January and today, the situation has degenerated from a crisis to a survival situation," the president of the Boyd Group said in a report.

China Becomes Net Gasoline Importer for First Time China was a net importer of gasoline for the first time in May as rising oil costs discouraged refiners from processing crude into fuels, and in preparation for the August Olympic Games.

In other news, Peak Grain may not be far away ...

Floods push U.S. corn prices to records Rain in the Midwestern United States has damaged crops and delayed plantings, heightening fears that there might not be enough corn to meet global demand for food, feed and biofuel. The fears drove the grain to a record high for the eighth trading day in a row.

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My Latest HoweStreet.com Interview

Phil and I have a great time talking about oil, gold and more. LISTEN HERE.

Check out my new gold and energy blog at MoneyAndMarkets.com

Chinese Drilling for Oil off Cuba -- Urban Legend!

You know that story we keep hearing that the Chinese are drilling or about to drill in Cuban waters just 50 miles from the Florida coast? Turns out those rumors aren’t true, though they are repeated a lot ...

Vice President Dick Cheney, in a speech Wednesday to the U.S. Chamber of Commerce, picked up the refrain. Cheney quoted a column by George Will, who wrote last week that "drilling is under way 60 miles off Florida. The drilling is being done by China, in cooperation with Cuba, which is drilling closer to South Florida than U.S. companies are."

Are you shocked – shocked! – to find out that both Dick Cheney and George Will are bending the truth? From the McClatchy Washington Bureau …

"China is not drilling in Cuba's Gulf of Mexico waters, period," said Jorge Pinon, an energy fellow with the Center for Hemispheric Policy at the University of Miami and an expert in oil exploration in the Gulf of Mexico. Martinez cited Pinon's research when he took to the Senate floor Wednesday to set the record straight.

No one can prove that the Chinese are drilling anywhere off Cuba's shoreline. The China-Cuba connection is "akin to urban legend," said Sen. Mel Martinez, a Republican from Florida who opposes drilling off the coast of his state but who backs exploration in ANWR.

I know, I know, most of us feel stupid when we get suckered by Rush Limbaugh’s or George Will’s talking points. I say most of us because a lady next to me at the Blood Bank this week insisted that Barack Obama refused to sing the national anthem, and she didn’t feel stupid at all.

For the record, I believe we SHOULD be drilling off the coast of Florida. But I’d only do it in concert with a massive government-mandated conservation program. We can start conserving oil tomorrow and that could have a real effect on demand (and prices). Even if we can overcome the objections of the Florida government and open its coast to drilling, we won’t be producing from there for a few years.

In other news …

A US Admiral asks if oil could hit $400 a barrel by 2018. If anything, I think his target is too far away.

The IMF says half the world’s population benefits from cut-rate petroleum prices, and that is driving up the price for the rest of us.

The technologies that could save the planet include improvements in the efficiency of fuels and electricity, fuel economy of cars and lighter trucks, plug-in hybrids and all-electric vehicles, and new battery technology. Problem is, it’s going to cost $45 trillion.

Many people are thinking of selling gas-hog vehicles. Do the math first and see if it's really a smart idea for you. Here’s a story that explains how to do that.

There are more than 200 million cars, trucks, and other gasoline-powered vehicles in the US. Our culture, our modern nation is founded on cheap gasoline. So what do we do now?

Sustainable Energy Transitioner is a peak energy blog with some good links.

Here are more details on the Export Land Model from Jeffrey Brown.

In an age of sky-high gasoline prices, more and more people are riding the railroad. Naturally, The White House threatened on Monday to veto legislation to fund Amtrak for the next five years.

The global harvests need to be excellent this year to keep the world from starving. They’re not going to be excellent. They may not even be good. Even the much-vaunted Australian harvest will likely produce only 5 to 15 million tons of wheat for export.

Could rising oil prices finally derail the globalization freight train? Bloomberg reports that global retailers may cut orders from China and India and source more goods locally in developed markets because of increased energy and transportation costs.

Hey, China! The USA still kicks your butt when it comes to greenhouse gas emissions.

Should the US ration gasoline? Impose windfall taxes on oil companies? UPI mulls it over. A recent CNN/Opinion Poll shows that 55% of Americans fear rationing and long lines most, while 45% fear high prices most.

Econobrowser – a site I’ve mentioned before – has some nice charts to explain The Oil Shock of 2008. Another site worth checking out is ASPO USA.

Check out my new gold and energy blog at MoneyAndMarkets.com

Pinch at the Gas Pump: Consumers Are Changing Driving Habits

Here is a nifty chart from consumer/retail analysts at NPD ...

So American consumers are changing their driving habits. The problem is that consumers in India and China are changing their driving habit too -- driving a lot more. In fact, the number of cars on the road could double by 2050.

So unless we change our driving habits faster than they change theirs, the price of oil will continue trending higher.

Check out my new gold and energy blog at MoneyAndMarkets.com

How the New Oil Crisis Affects You

My latest MoneyandMarkets.com column is up. It's on the oil crisis ...

How the New Oil Crisis Affects You
by Sean Brodrick
Wednesday, June 11, 2008 7:30 AM
In ancient times, when mapmakers came to uncharted territory, they would scrawl: "Here There Be Dragons." Flash-forward to the 21st Century; oil markets went into uncharted territory on the ... [More...]

Here is other news you can use ...

OIL AND GAS

IEA Says World Facing `Oil Crisis,' Ready to Release Emergency Stockpiles The world faces an ``oil crisis,'' and the International Energy Agency stands ready to release emergency stockpiles even as the biggest consumers discuss measures to contain spiraling demand, the agency's chief said.

Global Crude Oil Production Dropped for First Time in Five Years, BP Says Global oil production fell for the first time in five years in 2007 and reserves also declined as prices rose to records, BP Plc said in its annual Statistical Review of World Energy.

Gasoline Hits a New Record Oil prices rebounded as the dollar weakened against major currencies Wednesday, but investors braced for a volatile trading day ahead of a report on U.S. crude inventories. Gas prices, meanwhile, advanced further into record territory Wednesday, reaching a new record national average of $4.052, according to a survey of stations by AAA and the Oil Price Information Service.

West Australian Gas Supplies Disruption May Last Until October, UBS Says Western Australia's natural gas supplies may remain disrupted until October because of damage to Apache Corp.'s production plants on Varanus Island, off the state's northwest coast, UBS AG said.

Indian Oil to Reduce Discount on Diesel Sales to Industries to Cut Losses Indian Oil Corp., the nation's biggest refiner, is cutting discounts on diesel sales to corporate and bulk clients to narrow losses from selling fuels below cost to retail buyers.

Petrobras Aims to Become World's Third-Biggest Refiner With Two New Plants Petroleo Brasileiro SA, Brazil's state-owned oil company, said it may become the world's third- biggest oil refiner with a plan to build two new plants.

AGRICULTURE

Corn Climbs to Record in Chicago as Heavy Rains Threaten U.S. Production Corn rose for a sixth day to a record in Chicago, leading gains in soybeans, wheat and rice, after the U.S. cut its output estimate by 3.2 percent from a May forecast as cold, wet weather delayed planting and flooded fields.

NUCLEAR

Additional Nuclear Reactors, Increased Imports of Uranium Planned by China China, the world's second-biggest energy consumer, plans to add more nuclear-power capacity by 2020, step up uranium imports and explore for the fuel in nations as diverse as Kazakhstan and Niger.

US ECONOMY

Is The Dollar Doomed? Ever since Robert Rubin began the tradition in the mid-1990s, it has been a significant element of the U.S. Treasury Secretary’s job to continuously state that a strong dollar is in the national interest. It is widely regarded that such utterances, if repeated often enough, can constitute the sum total of what is still laughingly known as the nation’s “strong dollar policy.”

COMMODITIES

Make Way for the Economic Power of Generation A They may earn only about £2,000 a year but they are 400 million-strong, scattered across the globe and have just bought themselves a fridge. Meet Generation A, who soon could become the most important economic force on Earth.

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Daily Blah

Chart of the freakin' day ...

You can see the original HERE.

Gazprom expects oil to hit $250 a Barrel "in the foreseeable future". And at the same time, Citigroup boosted its 2008 Brent outlook 22 percent to $116.60 a barrel, while Merrill Lynch raised its forecast by 14 percent to $114. The International Energy Agency lowered its estimate for non-OPEC output this year by 300,000 barrels a day to 50.04 million, in its monthly report today.

Saudi Arabia Calls for Summit on Energy Costs After a cabinet meeting led by King Abdullah, the Saudi government said, “the increase in prices isn’t justified in terms of market fundamentals,” according to a statement from the official Saudi Press Agency. No date was given for the energy summit.

XX Sean's note -- talk is cheap.

Bernanke Tries to Talk Up the Dollar, Vows Pigs Will Fly XX Okay, that's not the real headline on this Bloomberg story, but it might as well be. Bernanke also says on inflation, "Who you going to believe? Me or your lying eyes?" Or as Bloomberg puts it ...Federal Reserve Chairman Ben S. Bernanke said policy makers will "strongly resist'' any surge in inflation expectations, delivering his clearest message yet the central bank is done lowering interest rates.

Trade Gap in U.S. Widened in April to $60.9 Billion on Record Oil Imports The U.S. trade deficit widened in April as the surging cost of oil boosted imports to a record, overshadowing the biggest gain in exports in four years.

Corn Crop in U.S. May Shrink 10% as Midwest Rains Reduce Yields, USDA Says The U.S. corn harvest will be 10 percent smaller than a year ago as Midwest rains lower yields, the U.S. Department of Agriculture said. Inventories are projected to fall to a 13-year low.

Global Growth to Slow in 2008 on Higher Oil, Food Prices, World Bank Says Global economic growth will probably slow to 2.7 percent this year from 3.7 percent in 2007, checked by spiraling food and energy prices and the subprime credit crisis, the World Bank said.

Putting a face on "demand destruction." Senator Bernie Sanders collects stories of hardship caused by rising fuel costs and a downward economy. Some examples ...

• “We have at times had to choose between baby food and heating fuel.”


• “By February we ran out of wood and I burned my mother's dining room furniture.”


• “We also only eat two meals a day to conserve.”


• “My husband and I are very nervous about what will happen to us when we are old.”

Here is the IEA's latest Oil Market Report. And here is the EIA's International Petroleum Monthly. Some highlights of both ...

1. Global oil supply rebounded by 490 kb/d in May to average 86.6 mb/d, lifted by higher OPEC crude supply. The rise however comes after extensive downward revisions to 1Q08 non-OPEC production.
2. Global oil product demand is expected to average 86.8 mb/d in 2008, according to the IEA. So, you can see that supply already has trouble keeping up with demand.
3. According to the IEA, in April, oil production fell by a whopping 1.09 million barrels per day, not 400,000 barrels per day as they thought last month. That's because the IEA comes out with their estimate way before the vast majority of countries report their production. So they can do nothing but guess.
4. Non-OPEC production reached its current plateau in November of 2003, 4.5 years ago. In march non-OPEC production was 40.99 mb/d.
5. According to the EIA, World oil (crude and condensate) production in March was down by 134,000 barrels per day to 74,494,000 barrels per day. Production in January and February were revised downward.
6. March saw OPEC production drop 110,000 bp/d and non-OPEC production drop 24,000 bp/d.

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Gas Price Map -- How Much Do You Spend?

The New York Times has a great map showing how much people spend on gasoline (as a percentage of average income) in different parts of the country.
Click on the image of the map and it will take you to the real thing on the New York Times website.

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Monday Is Chart Day -- Oil, Gold, Corn and More

All CNBC can talk about this morning is Lehman Brothers. How many people does that effect? Meanwhile, oil is not pulling back much from its biggest one-day surge EVER on Friday. Don’t you think that deserves more headline time? The average price of a gallon of gasoline in the United States hit $4 for the first time ever Sunday. I think that affects a heck of a lot more people than Lehman Brothers.

More on gasoline prices HERE.

Gold Rises in London as Dollar, Near-Record Oil Heighten Inflation Concern Gold rose for a second consecutive trading session in London as the dollar declined and oil traded close to a record, bolstering demand for the metal as a hedge against a weaker U.S. currency and faster inflation.

Corn Climbs to Record on U.S. Midwest Flooding; Soybeans, Wheat, Rice Gain Corn jumped to a record as rain in the U.S. Midwest flooded fields, delaying planting and threatening to reduce crops. Soybeans, wheat and rice also gained as soaring oil costs and the dollar's drop boosted demand for an inflation hedge.

Now to the charts …

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Late Night News Roundup

China's Car Sales Up 17.4% in the first 5 months of 2008 Auto sales in China were expected to exceed 10 million units this year, which would represent a full year sales growth of 14 percent, CAAM said.

Canada Oil Sands Output to Nearly Triple by 2017
Production from Alberta's oil sands climbed to an average 1.32 million barrels a day last year, a 5 percent rise over 2006 and could get to 3.2 million per day by 2017, the province's energy regulator said on Thursday.

In its annual reserves and supply-demand report, Alberta's Energy Resources Conservation Board said the province's output of tar-like bitumen rose to a total 482 million barrels in 2007 and could rise above one billion barrels within nine years.

Another electric car will make its debut in 2009. If only we have enough batteries, it's going to be a great year for electric cars.

Why We Need a Real Fiscal Stimulus Package, Pronto
Make no mistake. We're in a recession. Today's unemployment report showing nonfarm payrolls falliing by 49,000 jobs, is the fifth month in a row in which payrolls declined. Over the past six months, the economy has shed 411,000 private sector jobs. You will hear some cheerleaders tell you to disregard all this, pointing out that the economy continues to grow at a healthy pace. Baloney. Those growth numbers are illusory, based partly on the fact that, with fewer employees, productivity per employee has obviously grown. And partly on the temporary effect of the little stimulus package now in place.

What to do? Monetary policy is frozen. Bernanke and company don't dare to cut rates now, for fear of spurring inflation. They're wrong -- the inflation isn't coming from inside the United States. Employees have no power to demand higher wages, and companies have no power to raise prices. Inflation is coming from outside the US. Demand from China and India is pushing up commodity prices. And the dollar is dropping, which makes everything we buy from abroad more expensive.

Thoughts on why oil breached $138 a barrel plus, here's a very good discussion on the economics of nonrenewable resources.

Apparently it's illegal to keep unregistered gold in a suitcase in a London vault. I'd keep mine elsewhere, that's for sure.


“It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford.

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Sunday Reading List -- My Analysis of Current Events

G-8 to fight oil prices with efficiency, tech

XX Sean's note -- rolling back the speed limits and strict, enforced conservation measures never enter the conversation. We are so doomed if we are led by these babbling idiots for much longer.

Also adding to the problem ...

Some 86 billion barrels of oil and 420 trillion cubic feet of natural gas are beneath America's waters, DOI says. Of those amounts, 19.1 billion barrels of oil and 83.9 trillion cubic feet of gas lie in federally-controlled territorial waters that are completely off-limits to leasing and development.

But don't worry. OPEC says there's plenty of oil on the market.

In other news ...

West Australian Miners Brace for Productivity Drop
Western Australian miners, which supply the world with metals and iron ore, fear sharp falls in productivity and lay-offs after a gas-plant explosion robbed them of power, industry and local government officials said on Sunday.
Western Australia lost about a third of its energy supplies last week when an explosion crippled a gas-handling plant on the tiny island of Varanus, about 100 km (62 miles) off Australia's northwest coast. The Varanus plant, close to offshore gas fields, is operated by a unit of U.S.-based Apache Corp.
Tim Wall, managing director of Apache's Australian unit, said on Sunday he was sticking with an earlier estimate of "months, not weeks" before damage to the plant and associated gas pipelines was repaired and operations could restart.

XX Sean's note -- Western Australia supplies about a third of the world's iron ore, 20% of its gold and copper, zinc and nickel as well. This is very bullish news for the short-term price outlook in these commodities.

ESPN Wonders, Which Will End the World First: Global Warming or Peak Oil

XX Sean's note -- ESPN actually manages to inject some much-needed humor into a serious subject.

The Gods That Failed: How Blind Faith In Markets Has Cost Us Our Future
XX Sean's note -- More analysts are starting to say the financial class has "betrayed" the middle class. That makes me nervous. I don't want to see a replay of the French revolution, and my guess is, neither do you. That ended badly for all concerned (Robespierre, who led the Reign of Terror that beheaded so many Frenchmen, was himself later dragged to the guillotine. How's that for irony?).
Another example of an article targeting the financial class would be Countdown to $200 Oil Meets Anglo Disease. I agree that America's national interests are not currently well-served by the high finance crowd. But what remedies, exactly, do the agitators have in mind to achieve their goals?

Interestingly, from a historical perspective, the French Revolution is where we get the terms Left Wing and Right Wing, among other things.

Southern Indiana is Under Water
XX Sean's note -- That's big corn/soybean country. Heavy rains have flooded corn crops in Indiana, Ohio, Nebraska and other states, giving farmers their wettest spring since 1993. There are some farmers in Indiana who had already replanted fields a third time, and now we get ANOTHER flood? This is tragic on many levels. First off, for the people involved, and secondly for our national food supply. I'd say this is very bullish for corn and soybeans.

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Consumers Go Down While Commodities Go Up

The U.S. lost jobs in May for a fifth month and the unemployment rate rose by the most in more than two decades to 5.5%. Obviously, the US consumer is in trouble. And yet prices for hard assets and commodities keep soaring, as I showed you with a list of links in my post earlier today.

What the heck is going on? How can prices of things go down when US consumers can't buy.

Well, this is where we need a giant Dr. Phil to confront Uncle Sam and bellow, "It ain't about you."

Instead, it's about global demand. China has a huge natural disaster -- a massive earthquake -- and what do the Chinese do? Buy more cars, in a nation that is adding 8.5 million new cars to its roads this year alone. In the US, if we had a massive earthquake, we'd probably all stay home and watch endless loops of the video on CNN.

India is another nation that is buying a lot of cars. It's way behind China -- Indians bought just 1.6 million cars last year -- but Indians do buy 8 million motorcycles and scooters a year. And auto sales in India should nearly triple to 4.6 million by 2014.

Now, we are seeing countries like India, Indonesia, and other emerging market tigers cut their fuel subsidies. This may crimp spending going forward. Still, right now, experts expect that India's consumer spending should quadruple by 2025, overtaking Germany and making it the fifth-largest consumer market, behind the US, Japan, China, and Britain.

I think Peak Oil will have a lot to say about global consumerism, and may even derail it. But until then, we are probably going to see the standard of living rise in other parts of the world even as the standard of living goes down in the US.

As the great Bruce Springsteen wrote in My Hometown, "These jobs are going boys, and they ain't coming back."

Well, that's depressing. Try to have a happy Friday and good weekend. Here's a video to cheer you up ...

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$45 trillion to combat global warming ... and other news you can use

$45 trillion needed to combat warming- The world needs to invest $45 trillion in energy in coming decades, build some 1,400 nuclear power plants and vastly expand wind power in order to halve greenhouse gas emissions by 2050, according to an energy study released Friday.

More on this story HERE.

Mexico sees lower oil exports for 2008 Pemex Chief Executive Jesus Reyes Heroles said the state-run company's oil exports were headed for an average of 1.40 million to 1.45 million barrels per day over 2008, around 15 percent below a goal set in Mexico's 2008 budget of 1.683 million bpd. The estimation is also well below an average export level of 1.686 million bpd in 2007.

Crude Oil Rises a Second Day on Supply Concerns, Dollar Outlook ``People are really responding to longer-term supply issues,'' said John Vautrain, vice president at consultants Purvin & Gertz Inc. in Singapore, in an interview with Bloomberg Television. ``Every time we hear good news about some big new find somewhere you have to counteract that with the news that there are a couple of million barrels a day disappearing from the market every year just because of natural declines.''

Corn Reaches Record, Soybeans at Three-Month High on Heavy Rain in Midwest Corn climbed for a third day to a record and soybeans rose to a three-month high in Chicago as excessive rains in the U.S. Midwest flooded some fields, raising concerns about slowing crop development and production losses.

Gold Gains in London Trading Before U.S. Jobs Report; Platinum Also Climbs Gold led precious metals higher in London on speculation a U.S. jobs report will indicate slower economic growth, buoying investor demand for a hedge against declines in the U.S. dollar.

Apache May Take Two Months to Restore Partial Gas Supply to West Australia Western Australian natural gas output may be reduced for the next two months because of an explosion, cutting supplies to Rio Tinto Group, Alcoa Inc. and Newcrest Mining Ltd. at a time of rising metals demand and prices.

China May Auto Sales Grow at Faster-Than-Expected Pace of 16% After Quake China's passenger-car sales grew a faster-than-expected 16 percent last month, as demand spurred by economic growth withstood the effects of the country's deadliest earthquake in 32 years.

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Home prices are falling even faster than during the Great Depression

Are you ready for your daily dose of depression? And by that, I mean Great Depression ...

From the Economist:

AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

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Scorching Hot Food Inflation

Today, we are seeing the US dollar go up and gold go down. That's interesting, considering that inflation is nowhere near tamed.

U.S. Agriculture Secretary Ed Schafer: " We are anticipating this year an over 40 percent increase in food price inflation globally, 43 percent approximately." Schafer added: "Of that we can identify two to three percent of that price increase that is driven by biofuels."

So Mr. Schafer says something to scare the pants off us -- 43% food inflation. The same number was cited by Edward Lazar, chairman of the Council of Economic Advisors, in his testimony to the Senate last month. Most people seem to have missed that.

At the same time, Schaefer's 2% to 3% figure for biofuel-caused inflation sounds bogus. So what can we believe?

If you believe the IMF, the shift of crops out of the food supply to produce biofuels accounts for almost HALF of the recent increases in the global food prices.

Here's a fact: 25% of total US corn production was dedicated to ethanol in 2007. Now, you can argue that if it weren't for ethanol, farmers wouldn't be planting all that corn. Maybe the truth is somewhere in the middle between the IMF and the USDA. In any case, inflation is hot and getting hotter.

We have already seen the Reuters/University of Michigan Surveys of Consumers gauge of five-year inflation expectations rise to 5.2%. That's the highest since February 1982, when even beleaguered consumers couldn't grasp how high inflation really was. The actual consumer inflation rate at the time was above 7%.

Mr. Schafer says much of the world faces 43% food inflation, but here in America, the world's breadbasket, things aren't that bad ... yet. At the same time that global food inflation clocked 43% (the 12 months ending in March 2008), US food inflation was just 4.5%.

On an annual basis, U.S. food prices rose 4% in 2007, compared with an average 2.5% annual rise for the last 15 years, according to the U.S. Department of Agriculture.

But prices keep accelerating. Slate explains that food inflation in the US is now running at a 9% annual rate, up from the normal 2%:

Food already eats up about 14 percent of the typical American's household budget. By Rosenberg's reckoning, Americans sticking to their regular diets are paying an extra $25 billion per quarter compared with last year.

Food, Fuel and the Tax Rebate

Along with food prices, energy inflation is also squeezing consumers. Energy inflation is so bad that 17.2 million tax-refund recipients plant to use some of the money to buy gasoline.

American companies are already lining up to siphon those tax rebates for the high cost of groceries. Kroger grocery stores have set up programs that permit people to exchange stimulus checks for gift cards with a 10 percent bonus.

The tax rebate is going to be worth about $120 billion. The combination of food and fuel inflation will cost Americans an extra $50 billion in just the current quarter. You do the math -- we'd have done much better to keep a lid on prices and skip the tax rebate.

But I don't think the government can keep the lid on prices. That genie is out of the bottle.

Bottom line: I think the move higher in the US dollar and down in gold is short-term, and due to the jawboning by Fed Chairman Ben Bernanke and rotation by fund managers and others. I think the longer-term trend will be much higher. It's likely this pullback will give us a chance to do some bargain hunting.

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