The oil drum is my favorite site when it comes to oil. They talk production levels, demand, and thus price. They also discuss the how of the production mechanics, which I know nothing about, but new things are important to learn. Today while reading the site I noticed some great production graphs that showed world oil production has been relatively flat for the whole of a decade. Where will an influx of oil come from? Not Iraq, their reserves are smallish. The House of Saud has not increased production for years and some doubt they have the ability to. Russia peaked production capacity over two decades ago.
All of the media is posturing higher oil prices for various reasons. Some are China demand and others are global peak production. Whatever it is the world revolves around oil, and it will continue until we change the way of life for all of the world. That will take years, 20 if the Hirsch report is correct.The best we can do at this point is prepare for the worst and enjoy the ride.
Oil corporations are set to benefit more than any other entity. The socialist governments that have oil wells will prosper based on oil revenues. Oil past its peak of production will steadily become the most important resource ever. I think gold will rival it for the next ten years but unless a new technology emerges that can create free energy or store more energy by battery power then the long run is bleak.
Even James Cramer has turned into a resource first ask questions later adviser. He has been hawking gold like there is no tomorrow for some time now. His new vocabulary consist of oil, which joins his coal in his stocking...he loves coal in his stocking. I am not sure how the average American will handle $4 per gallon but at this point it seems nothing will stop the American dream.
Americans will not all be able to afford the lifestyle when oil is over $100 per barrel. Many will be stranded with expensive transportation, food, and still overly expensive real estate thanks to the Fed. The only deflation allowed has been marginal. It has come in trivial things such as marijuana prices and never ending furniture sales When the great deflation in real estate is actualized there will be critical mass. That could come with the looming Fraudclosure scandal.
Fraudclosuregate has been echoing in the mainstream media chamber along with other harbingers. It will be a real mess. People believed in housing and real estate. They believed the paper would be accounted for. The system was poor and the people failed to watch it appropriately. Now the failed mortgages will be a reckoning. The industry will be wrecked.
After the fall of the dollar the world will try and forget any one country had the impotence of a reserve currency. As of today, the World Bank has issued its first Yuan bond. The world is diversifying slowly yet surely out of the dollar. The inflection point will rain on the American parade.
The President is reported to issue mandates with executive order to maintain position as Chief Fascist. He will have a corporatist health care system. The oilgarchy will be kept in place come hell or high water. If the tide is coming in, what does that mean?
What could come of all this? Well the monie that is left will buy the bottom (wherever that may be) but also turn to the only asset that has performed well for the last 10 years without a hitch in its stride. That is precious metal. It will continue to reign until the mess is sorted out. The current price should slowly move to the top of this range by the end of this week, around $1420, before popping up into new territory by next week.
Silver bounced nicely off of $29.50 and I think there is several dollars of upside for gold's sister metal. The news that the CTFC is going to break up big trades on the market may have been a reason for the sell off today. I also think investors were freeing up cash for '11. Either way, it all made Carlos Slim very happy to BTF'nD.