Gloom & Doom II

From: Innovatia <dennis@innovatia.com>
Date: Sun Sep 05 2004 - 14:21:37 EDT

Oil Watchers:

The following gloom and doom is taken from two of my finance/economics sources about what effect the plight of oil is having on the global economy. Here is a complex interaction of sci/tech, the environment, and the world economy.

Dennis Feucht

Tom Dyson, under the gray and rainy skies of Baltimore... (www.dailyreckoning.com)
- If the average domestic price of an unleaded gallon of gasoline at $1.88 is starting to hurt, dear reader, spare a thought for the poor people of Asia. They might be amassing all the dollars; they might soon get all the jobs. But they can't buy enough oil to fuel their factories - not at any price, it seems.

- Beijing's senior economist reckons China will have to pay an extra $8.8 billion to maintain crude oil imports at 2003 levels. But trouble is China's demand for the black stuff has increased by 20% since then. It's doubled over the last 20 years. In February, China overtook Japan to stand second only to the United States in terms of its thirst for oil.

- Still, second place to America puts China a long way behind. The average Chinese consumer uses only 10-15% of the energy an average American guzzles, according to a BBC report. There's a lot of catching up to do. Governments across Asia are worried...

- In Bangkok, starting last week, department stores must close at 8 p.m.; petrol stations will close at midnight; billboards will no longer be lit after 10 p.m. The Thai government reckons this should save the economy 3 billion baht, around $72 million.

- Over in India, the Bombay government has cut customs and excise duties on gasoline and diesel duties from 20% to 15%. In the Philippines, meantime, rising oil prices helped create a $142-million trade deficit in June. The same month last year saw a surplus of $132 million. Worse still, analysts say exports could fall if demand from China and the United States starts to fall...which it already has, according to figures just out from Taiwan.

- The Taiwan Republic of China - or the 23rd province of the People's Republic, as Beijing would like it to become - saw industrial output rise by 8.4% in July, compared with 15.7% growth in June. The wonks in Taipei attributed the slowdown to cooling U.S. and Chinese demand. The U.S. Fed, naturally, disagrees.

- Last week, Fed governor Ben Bernanke told PBS viewers that while "There's going to be a little bit of a slowdown effect [due to the high oil price]...I think it won't derail what looks like a self-sustaining expansion at this point." Dallas Fed President Robert McTeer - he of the SUVs - repeated the claim for CNBC. Growth "is self-sustaining, and it's not terribly fragile," he said...which is a curious phrase to use when you think there's nothing to worry about.

...

- Last week, NYMEX WTI for October slipped $4.68, nearly 10%, to $43.18...did news that Russian President Putin had called the White House to assure the United States that he will keep the spigots open - even if he does close Yukos - cause the sell-off? Or was it something more technical?

- Over in New York, stock market investors took Vladimir at his word. The Dow rallied another 95 points from last week's tiptoe turnaround. It closed Friday at 10,195 - a six-week high. The S&P also limped ahead, adding 9 points, to 1,108, for a 0.8% gain on the week. And the Nasdaq pushed 24 points higher, closing at 1,862, a four-week high.

- Away from the noise of the markets, however, the fact remains - OPEC production is running at 95% of capacity. Deutsche Bank reckons oil demand in 2004 has increased at twice the rate it did in the previous 20 years. So while the price of oil might slip in the short term, it's only headed higher, we think, as 2004 heads into winter...[Ed. Note: Increasing Asian competition for oil combined with Middle Eastern unrest makes for a volatile cocktail. You wanna bet oil will be cheaper in dollar terms in five years time? We didn't think so...

The Oil Crisis Report

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And from Jay Taylor, http://www.gold-eagle.com/gold_digest_04/taylor082904pv.html

I had an to opportunity to review some very elegant energy charts this afternoon, with one in particular giving me great pause. I saw a new pattern forming (incomplete as of today) which shows crude oil, forming itself in readiness for a tremendous oil rally. This chart, combined with Fibonacci Retracement Levels, Elliott Wave Theory, and support and resistance levels, tells me oil could possibly be headed for $72.00 per barrel. I recalculated the problem three times in disbelief, as this did not seem possible. Now I think it is, if the rest of the chart formation plays out the way I think it will. The problem is to determine which waves are the last two in this chart, as this analysis is frequently open to argument. No matter how this chart plays out, or is interpreted, oil is going up again after a profit taking session(s). Here are some oil facts: We have three declining weeks in a row for reserves. The President is not going to open the emergency reserves; in fact, more will be added to completely fill the storage facilities. More attacks hit Iraq pipelines today (Friday, August 27). The oil price closed at $43.10, from its recent high of $49.00+. Professional energy analysts, not talking heads, claim a real, fundamental oil shortage, and a distinct lack of worldwide refining capacity.

{Graph omitted for byte brevity; find at:}
Published with Permission from http://www.decisionpoint.com/

One oil company plans a brand new refining plant (none built in years and many shut down) in Arizona at a multibillion cost. Big oil is trying to buy other big oil companies, not drill for it. They are clutching their cash and trying to avoid expensive drilling risk and dry holes. All of this oil news bodes well for a gold rally this fall. The normal August price for winter heating oil is about $.75 a gallon in August; right now it's over $1.15 and was even higher last week. Not enough heating oil has been manufactured for the winter heating season. Prices for heat will be much higher this winter.
Received on Mon Sep 6 13:42:54 2004

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