Thursday, July 06, 2006

Oil, Oil Everywhere But Not a Drop to Drink...

Oil was once again making headlines this week as crude topped $75/barrel. The economist in all of you is probably saying "Well of course, supply is limited and demand is sky high so prices are rising". Well, that's what logic would say and that would be wrong.

According to the latest data out of the US Dept of Energy - Crude oil inventories stand at 341.3 million, leaving them 3.6 percent higher than last year. HUH??? Inventories are HIGHER THAN LAST YR?

``Inventories are ample; there's plenty of supply,'' Kyle Cooper, director of research at IAF Advisors in Houston, said yesterday.
Gasoline Declines

Okay, but surely gas inventories are lower even if crude inventories are up. "U.S. stockpiles of the motor fuel rose after imports jumped 33 percent to 1.27 million barrels" Inventories are up 33%???????

``If demand continues, there's a very good chance we could see prices try to test the $80 level,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut energy consultant.

So, Inventories are "ample" perhaps even a bit excessive. Why am I still paying $3.00/gallon?

"Prices leapt July 5 after North Korea test-fired at least seven missiles in breach of a United Nations moratorium on the testing of long-range weapons."

Are you kidding me? This guy should have zero credibility on the world stage, but unfortunately our missteps in Iraq, our distraction with Iran and our lack of credibility on the global stage make the oil markets susceptible to the whims of a nutcase with 6 nukes and no means for delivering them.

Just wait until we hit the heart of hurricane season and a Cat 5 is churning in the Gulf of Mexico. $3 gas might look like a bargain.

Cheers.

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