If it's Wednesday, It's Catastrophe Day

So, the government bailed out AIG to the tune of $85 billion, AFTER saying in yesterday morning that a federal bailout was off the table. Don't you like how Uncle Sam keeps changing the rules from hour to hour.

Anyway, have you heard about this? Wednesday catastrophe: breaking the buck. Click through and you’ll read how Reserve Primary Fund - a $64.8 billion money market mutual fund – has seen its net asset value fall below $1 a share. The fund held $785m in Lehman commercial paper and MTM notes.

And that’s not the only piece of interesting news. Russia’s stock market has shut down. Yep, shut down in the middle of the day after big losses. To be sure, the Russian stock market is less important than you might think. Still, I think this could really hamper development of Russian oil resources, don’t you?

In other, less scary news …

US lawmakers vote to end 26-year ban on offshore drilling

The new bill, which was put forward by the majority Democrats in the House of Representatives, was approved by 236 votes to 189. It would allow drilling off the US coastline up to a distance of between 50 to 100 miles (80 to 160 kilometers) overturning a 1981 federal moratorium.

XX Sean’s note – at last we’ve gotten this red herring out of the way and we can talk about real energy solutions. And if you think opening up more areas to offshore drilling is a real answer, I challenge you to try to find drillships for hire, or spare crews to man them.

As Oil Speculators Lose Backing, Market Exodus Could Ripple

Evaporating access to credit and fears of an economic washout are taking a toll on oil prices, forcing speculators using borrowed money out of the market. Lehman Brothers Holdings Inc.'s sudden bankruptcy filing and Merrill Lynch & Co.'s pending sale to Bank of America Corp. suggest big banks may be less willing or able to absorb debt to boost trading positions, with implications for the inherently leveraged oil-futures markets. Analysts believe that could have a ripple effect on other speculative investors in the market.

XX Sean’s note – this is exactly the point I make in today’s MoneyandMarkets.com column … “Global Margin Call Pushing Oil Prices Lower”

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