Crude Oil Blues
Research for Online Investors

by John Dalt

3/31/09

Crude oil has been on a good run lately, pushing over $54 per barrel last week.  Since then oil has backed off to under $50.  A lot of the strength of oil was because of the falling dollar, traders were moving to oil as a hedge against inflation.  Will oil continue lower?  That probably depends on the rebound of the world’s economy.

It is important to remember a few statistics about our oil supply. U.S. oil production peaked in 1970 at 9.6 million barrels of crude per day. In 2007, U.S. daily production averaged over 5 million barrels. Last year production averaged 4.95 million barrels. With oil at record prices, drilling and investment chasing opportunities, we were not able to increase daily production. This marked the lowest U.S. oil production since 1946. Oil prices have collapsed from $147 to under $50; drilling rigs are parked in yards waiting for the price to recover.  Oil prices are headed higher, whether because of dollar weakness, world economic recovery, or OPEC production cuts; the handwriting is on the wall.  By 2010, it will be too late.

Where will oil come from next year?  The administration has cancelled leases for oil exploration that are in the proximity of national monuments.  I guess tourists do not want to see where the gasoline comes from.  Some of these ‘Monuments’ are not even tourist attractions, they are just open range areas or unique rock formations in the West that are protected.  Well, at least we have off shore oil drilling….no that is dead in the water too.  OH! Bama is playing a dangerous game with our economy, and it is predictable.  He is choking off any supply for oil other than OPEC, as oil prices increase Washington will get what it wants.  What does he want?  More renewable energy and funding because of the emergency he is helping create.  We still do not have a visible national energy policy.  Make no mistake, Oh! Bama has a national energy policy, and it has nothing to do with cheap energy.

The Stimulus bill that was passed by congress included $43 billion for renewable energy.  Consumers can take a 30% tax credit on the value of a new solar installation, before state incentives.  If your state offers tax credits, you may be able to install a renewable source of energy at very little actual cost.  Check with your state for state tax credits.  The General Services Administration estimates 75% of the federal tax credits will go to solar installations.  You might look at the GEX ETF for a diversified group of alternative energy stocks.  It is down for the year but trending up.

I heard today that OH! Bama took over 500 people with him to the G-20 conference in London.  We would have been better served if he would take one person, Texas Congressman Ron Paul.  The bonus is it would be entertaining.

Now that the government is telling GM how to run the company, I probably will not buy another GM car. I hate it too; I love Chevy pickups, Tahoes, Corvettes, Camaros, and Cadillacs. Wow, those were great vehicles. Now Pelosi and Geithner will probably have them buying the blueprints to Yugos. Can you imagine that we have come to this point? Russia and her satellites could not build anything worth owning, and now our government is going to try. New five-year plans are going to be comical. I can hardly wait, just like the Commie’s five-year plans that never worked out. I hear the Volt electric car is cancelled, Waggoner was told to leave, and Gettlefinger is still on the job after not helping GM cut costs.  Thank goodness, I can go to Washington to get my warranty work done.  Oh! Bama says my warrantee is now backed by the full faith and credit of the U.S.!

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The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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