Energy

[Kosher]

We are living in some interesting times. Governments have fallen, regimes dismantled, and economic markets have shifted. I just finished reading a book entitled, "The Coming Economic Collapse" in which the author makes a very solid case for seeing oil prices going to $200 a barrel by 2010, that would translate to $10 per gallon of gasoline.

In the mid-1940's a geologist named Hubbert proclaimed a theory that has held true. He said that once an oil deposit has had 50% of its capacity extracted, that production will steadily decline until it runs dry. Last week in the newspaper was an article about the 2nd largest oil field in the world in Mexico has arrived at that point. Next to Saudi Arabia, this Mexican field accounts for a large amount of oil production.

30% of the world's oil reserves are in embedded in the Tar Sands of Canada. OPEC has been unable to increase its production in over 12 years! China and India are quickly and unreversibly becoming a global industrial power which puts increasing demand on global energy supplies.

The mission before the space shuttle Challenger blew up, the shuttle was equipped with a special "camera" that was able to look into the earth's crust and map all oil deposits in the world. This indicated a large reserve in the Faulkland Islands (off the Argentinian coastline), the oil sands of Canada, and a massive reserve in Kazakstan which rivals that of Saudi Arabia. However, Kazakstan is land-locked with no viable way of exporting its oil to seaports. It was at this time, I remember, Chevron sold all its ownership in its domestic service stations and UNOCAL sold all of its US oil fields to both go develop the Trans-Caspian pipeline. This pipeline was intended to go under the Caspian Sea and out to a Turkish seaport in the Black Sea. The Russian Cavier farmers objected and so their next route was thru Iraq. For political ($$$) reasons with Sadam this didn't work out, so President Clinton paid the Chinese a visit in hopes of constructing a pipeline to cut across their country to a seaport in the Pacific Ocean. Engineers said it was impossible to build. Therefore, the only way left was for President Bush to take the pipeline down thru Afghanistan and to the seaport in Karachi, Pakistan.

Do you see where this is going yet? I hope so! The space shuttle thing I saw for myself on ABC news. I remember the Faulkland Islands war with England, the rest has been published in newspapers galore!

So where's that leave us? Stay tuned...

[Kosher]

I was watching "Meet the Press" this morning on NBC. The topic was oil and gas prices. I won't bore you with the entire transcript but just wanted to point out a few interesting items for thought:

1. Oil companies do not set prices...oil is a commodity traded around the world; therefore, the price of oil is set by the markets.
2. In 1986 there were 350 refineries in the U.S. Today there are just 140 but even with that, refining capacity has increased 15% in the past 12 years.
3. Valero makes $144,000 per day of profit...Katie Couric earns $85,000 per day.
4. In 1977, the U.S. imported 1/3 of its oil needs, today it imports 60%.
5. The Iraq War has constricted the oil supply.
6. Brazil will be energy self-sufficient by the end of 2006 with its sugar-to-ethanol program. In less than 3 years, 70% of their cars run on flex fuels with little to no price increases.
7. Congress won't waive the $0.50/gallon tax on Brazilian ethanol so it can subsidize domestic producers like ADM.
8. The government is spending $150 million to simply research the energy crisis.
9. The average company in the U.S. earns a profit of $0.077 per Dollar, oil companies average $0.085 per Dollar.
10. American oil companies account for less than 10% of world oil production. Most oil firms are government owned companies with deep pockets.

The Democrats talking about windfall taxes, $100 rebates to Americans, etc. is all just rhetoric and will amount to nothing! The real facts are there is a limited (and diminishing) supply of world oil, BRIC (Brazil, Russia, India, China) are becoming more industrialized and are consuming more energy as a result, putting demands where there once were none. Also, China has secured its own oil and security deals with Saudi Arabia and Nigeria this past week.

Chevron & British Petroleum had President Bush complete their Baku-Tbilisi-Ceyhan pipeline project by ratifying the "particulars" with Azerbaijan's President this past weekend. This was a project started by former President Bill Clinton back on 11/18/1999.

Are we going to war with Iran? I'm guessing bombs will drop on them by June.

Kosher