Hurricane Sarah

Sen. John McCain's (R-AZ) vice-presidential pick of Gov. Sarah Palin (R-AK) a little more than two weeks ago and has mattered in this election cycle more than any in my memory. What was initially seen as a cheap trick designed to lure Sen. Hillary Clinton's (D-NY) voters away from the Democrats and to the Republicans, is now being viewed as as stroke of genius that caught the campaign of Sen Barack Obama (D-IL) completely off guard. The McCain-Palin ticket can credibly position themselves as reformers while painting the Obama-Biden ticket as an "inside-the-beltway, conventional wisdom, more-of-the-same" ticket. The vast middle of American -- where elections are typically won or lost -- will probably agree with this assessment.

Indeed, we are already starting to see a siginicant shift in this "independent" demographic to the McCain-Palin ticket in terms of polling data. What happens next? As soon as Obama starts losing, watch for democrat constiuency groups to start peeling away from the coalition and start blaming the other coalition partners impending loss. College students -- the enthusiastic shock troops of teh Obama campaign in the early going -- will be less enthused and migrate back to traditional colligiant pasttimes like football games and keggers. The fasr left Netroots crowrd will scream that Obama is losing because he "abandoned" his base by picking the conumate Washington insider in Sen. Joseph Biden (D-DE). Working class Catholics -- so-called Reagan Democrats -- will slowly drift over to the McCain-Palin camp because of their distrust of his bona fides regarding his committment to mainstream American Christian values. This will Left the Obama-Biden ticket with only the hardcore left and African Americans as parts of their coalition, which is not enough to carry the whole nation.

While there is still a lot of election to go, its my contention that this will increasingly look like a rout. Then, I suppose, everybody who didn't vote for the freshman senator from Illinois, will be branded a racist.

Oh well.

Sarah Palin is Big Mac's Veep pick

Any academic arguments regarding Gov. Sarah Palin's (R-AK) miss the essential genius of this pick. She is a very "real" person, unlike the phony that Sen. Barack Obama (D-IL) seems to be. Americans love real people -- as opposed to Ivy educated career politicians. As long as she doesn’t act like a lightweight, the electorate would see her as one.

Besides that, the base is jazzed like I haven't seen since Reagan '84. My suspicion is that this is going to be a McCain-Palin avalanche.

More tomorrow.

Oil skids along in the $110s

As King Dollar recovers it's luster, oil prices continue to beat a retreat. Look for crude future in the $100 range during September when demand falls even more and the summer driving season ends.

Oil rose yesterday on reports of a fire at a Turkish pipeline

Oil spiked up about $2.00 yesterday on reports that a there was fire at a Turkish oil pipeline. However, today the fire is out and crude futures are down below $118. Next stop, $100.

Crude is trying to build a base at $118

If the bulls are successful, we'll skid for a while at these levels. If not, watch out $100.

The laws of supply and demand are axiomatic

Irwin Kellner’s piece at Marketwatch yesterday underscores the “bubblicious-ness” (to paraphrase Fox’s Cody Willard) of the crude futures market. Power grafs:

What is even more interesting is the reason for this plunge. It is not so much due to increased supplies of crude as to decreased demand for the black stuff. This is indicative of a major change in lifestyles, personal and corporate.

Supplies of oil ebb and flow depending on the weather, strikes, terrorism and the like, so it's hard to tell if there has been any significant change. Demand is easier to track, and here the results are startling.

Take gasoline, the biggest use of oil in the U.S.. Instead of rising 1 or 2% a year as it usually does, gasoline use has been falling, year-over-year, for most of this year.

No mystery why: Americans have been reducing their driving for some time, with the year-to-year percentage decline in miles driven growing month by month.

In March, the yearly decline was a bit over 3%. That was the biggest drop in miles driven since 1942. May's drop of nearly 4% over last year was the most ever, according to the Transportation Department

What happened in 1942? Gasoline was rationed because of the wars in Europe and the Pacific. If this trend holds for any length of time, I say oil futures fall below $80.

The Middle East is a two tined fork, with the pointy bits being terrorism and petroleum extortion. By overthrowing the Taliban and Saddam Hussein then routing al Qaeda in Iraq, we’ve more or less handled the first pointy bit. Now we have to address petroleum usage and our addiction to oil from that region. Drilling here is a good start and I think we’ll see that start in earnest sooner rather than later. When combined with solar and nuclear, we should be in good shape. But we can not do one without the other. We must do both and quickly.

I guess we didn’t build the base yesterday

Oil futures closed below $122.50 yesterday for the first time in a long time. Oil prices are down overseas as of this writing (7:15 am EDT) and show no sign of stopping. The ruckus that Sen. John McCain (D-AZ) is raising about drilling offshore coupled with the feckless response from Sen. Barack Obama (D-IL) have combined to put pressure on crude futures. Combine that with contracting demand and we have a recipe for the price of oil cratering below $100 within the month. And it won’t come back.

Four buck gas has had the same psychological impact that the attack on the World Trade Center did in 2001 – it woke America up. The 9/11 attacks woke up Americans to dangers of terrorism and the policies of appeasement. Just a few months prior, terrorists attacked and nearly sank the USS Cole, a sovereign ship of the US Navy in a foreign port. In the earlier part of the century, that launched a war (“Remember the Maine”). The attack on the USS Cole was greeted with a shrug by most folks here. Times were good and nobody was concerned with what “those crazy Arabs” did “over there”. The September 11^th attacks woke up everyone to the real threat of what not addressing problems can morph into.

The same is true of environmentalism religiosity. The neo-pagan attitudes of wacko environmentalists have locked up domestic oil productions for decades. There really is no other explanation for their vehement opposition to oil exploration on the outer continental shelf and ANWR. ANWR is the size of South Carolina and to bring the oil out, we’d need to drill in a area the size of RDU international airport. The idea that we should keep the place as pristine as say, The Grand Canyon, beggars believe. The Grand Canyon is designed for tourists. Indeed, millions of people visit every year. The same can not be said for ANWR, which is on the remote edge of northern Alaska.

But that brings up a point I made earlier – four buck gas was traumatizing. People who drive large SUVs are the objects of pity, not scorn. The folly of driving three ton trucks as daily drivers is quickly underscored when a fill up costs nearly $100.

The American automotive industry noticed somewhat belatedly and is shuttering SUV production. Ford is actually building their European line here in what are soon to be former SUV factories. This is good, as a Ford Fiesta – roughly the same size as a Ford Focus here in the States – can get 60+ mpg when equipped with diesel and driven at highway speeds. A Saab 9-3 with a diesel also gets more than 60 mpg on the highway. Why these cars weren’t built / weren’t imported to The States is anybody’s guess. My would be that there was no demand.

Well there is now. And since SUV production has been curtailed, we won’t be seeing many more coming off the line. People will remember this price shock for years and years to come.

The age of the SUV is dead. Long live the SUV.

We appear to be skidding sideways

Prices for crude appears to be skidding sideways, trapped in a narrow trading range. Whether this is the $122.50 base awaits to be seen. Still, there does appear to be support here. Maybe it will hold or maybe it won't.

Oil appears to building a base at $122.50

Oil futures are up a bit as of this posting -- nearly $3.00 a barrel. NOt sure it will hold, but we'll see.

There's an old adage: amateurs open the market and pros close it. We'll see if this the start of something or another dead cat bounce.

I'll let somebody else say it

From the AP via Yahoo:

More concerns that crude's run-up over the past year has pushed prices to unsustainable levels fed Tuesday's decline. The U.S. Transportation Department said Monday that U.S. drivers logged 9.6 billion fewer vehicle miles in May -- or 3.7 percent -- compared to the same period last year, the biggest drop ever for the historically busy summer driving month.

And demand for oil in the U.S. -- the world's thirstiest consumer -- continues to fall, dropping by 891,000 barrels per day in May compared the same month a year ago, the Energy Department's Energy Information Administration said Monday.

"We're seeing both statistical and anecdotal evidence of a very rapidly weakening demand picture," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

The declines accelerated after oil briefly dipped below $122, a key resistance level that triggered technical selling by computers programmed to dump oil contracts once prices fall under a certain threshold.

"Once we break through $120, we could easily slide through to $100," said Darin Newsom, senior analyst at DTN in Omaha.

Sound familiar? If we don't build a base at this level, there is nothing to stop oil from dropping to $100.

Michael Barone agrees with me

One of the reason I started blogging to begin with is that I sometime have the ability to see around corners and by blogging I could document my prescience. Last Friday, I made an observation that would clearly establish me as a True Master of the Obvious: $4 a gallon gas made a "tectonic shift" in public perception about energy in general and oil in specific.

Now, here comes no less than Michael Barone two days later saying essentially the same thing in The National Review Online. The Lede:

Sometimes public opinion doesn’t flow smoothly; it shifts sharply when a tipping point is reached. Case in point: gas prices. Three-dollar-per-gallon gas didn’t change anybody’s mind about energy issues. Four-dollar-per-gallon gas did. Evidently, the experience of paying more than $50 for a tankful gets people thinking we should stop worrying so much about global warming and the environmental dangers of oil wells on the outer continental shelf and in Alaska. Drill now! Nuke the caribou!

It's nice to be right.

Oil drops again

We're about to test the $122 barrier for crude futures, having settled at $123 and some change on Friday. Like I said last week, if it doesn't and build a base here, there's nothing to stop it until it hits $98 a barrel.

This is all demand driven and demand is contracting all over the world. Two major points from Bloomberg underscore this:

U.S. fuel demand averaged 19.9 million barrels a day last week, the lowest since January 2007, the Energy Department reported on July 23. U.S. gasoline consumption fell 3.3 percent from a year ago, the 13th consecutive weekly decline, a MasterCard Inc. report on July 22 showed.

and:

Japanese oil imports fell for the first time in nine months, the government said yesterday. South Korea consumed less fuel for the eighth straight month in June, state-run Korea National Oil Corp. said on July 22. The U.S., Japan and South Korea are the world's first, second and fifth biggest oil importers, according to the U.S. Energy Department.

The Saudis (and Russians and Venezuelans) can pump all they want but they are reaching a point where they can't sell it. And with more America field coming online soon, we may see an American automotove renaissance, albeit with smaller cars.

Alan Reynolds over at The Cato Institute brings sound logic to the table. Money quote:

When the price of anything gets unbearably high, it discourages demand. The resulting drop in sales, in turn, causes inventories to pile up and the price to come down. That has proven true of overpriced houses - and it will likewise prove true of overpriced oil.

He's right, you know.

Dead cat bounce

Despite yesterday's dead cat bounce, I see no reversal in the downward trend for oil futures prices. Yesterday $1+ increase came on the heels of horrible jobless numbers. The just released durable goods numbers came as a complete surprise to those who think we're spiraling down into recession (clue: we're not). Housing is still going to suck for sellers in the short term although this is quickly turning into a buyer's paradise.

But back to oil. Ford's decision to build their European line here in The States in what will become former SUV factories will offer the American car-driving public the opportunity to purchase cars that get 60+ mpg.

No, really.

Ford already manufactures vehicles for the European market that get 65 mpg -- the Ford Fiesta with a 1.8 liter turbo diesel. GM sells 9-3 Saabs in Europe with a 1.9 liter turbo diesel that are rated at 62 mpg highway. Once those vehicle start hitting the market, oil demand in The States will drop, further depressing the prices of crude futures. As more production comes online in the Bakken field, supply will increase, causing oil to sink further.

All this is good. Methinks $4 per gallon petrol caused a tectonic shift in American consumer attitudes. The age of the SUV is over and greening of America will begin in earnest. But don't think for one minute that we'll become a nation of bicycle riding vegans. We'll just be better at squeezing energy out of resources than everybody else now that it's fashionable.

From The Times of London

Barack Obama's (D-IL) anti-messiah blowback has started in earnest, with Gerald Baker the first to weigh in. It's funny and literate Here's a piece:

And it came to pass, in the eighth year of the reign of the evil Bush the Younger (The Ignorant), when the whole land from the Arabian desert to the shores of the Great Lakes had been laid barren, that a Child appeared in the wilderness.

The Child was blessed in looks and intellect. Scion of a simple family, offspring of a miraculous union, grandson of a typical white person and an African peasant. And yea, as he grew, the Child walked in the path of righteousness, with only the occasional detour into the odd weed and a little blow.

When he was twelve years old, they found him in the temple in the City of Chicago, arguing the finer points of community organisation with the Prophet Jeremiah and the Elders. And the Elders were astonished at what they heard and said among themselves: “Verily, who is this Child that he opens our hearts and minds to the audacity of hope?”

Read the whole thing here.

Oil down again

Despite yesterday's dead cat bounce, as of this posting, oil futures continue to decline. Next stop $122. If it fails to build a base at that level, there is nothing to stop it before it hits $100.

Oil down again

I guess the Iranians have nothing left up their collective sleeves. Today close under $129 may be significant as there some folks (me included) predicting a bigger sell off next week.

Oil under $130

As of right now(apx. 2:30 EDT), oil futures are down under $130. Osama Bin Laden once said he wanted oil at $144 a barrel.

Theory: If Iran does something crazy before tomorrow's NYMex opening, does it mean that Osama Bin Laden is in Iran?

My guess is yes, something will happen overnight to roil the markets.

Oil down again

It's down more that 5 bucks as of this writing (11 am EDT).

Prediction

If oil can't build a base around $130 and starts selling in the $120s, watch the Iranians panic and either:
a) do something crazy to create "turmoil in the region", which may NOT work this time; and if it doesn't, then
b) dump their 15 VLCCs worth of their sour crude on the markets.

Then watch the price of oil crater they panic sell. It will be beautiful.

Greetings to a fellow Burl

The staff and management of Davespeak would like to welcome back our intrepid European correspondent Sgt. Ralph after a long hiatus. We are happy to view his smiling mug and look forward to hearing his observations on the other side of the pond.

Three Burltown cheers for his return.

Prediction

The Iranians will time their next crazy stunt to take advantage of the MSM newscycle. Bet on late Friday afternoon Tehran time / early morning Eastern Daylight time. That will insure that the MSM report whatever the Tehran government want it to report and with any clarifications / debunkings happening over the weekend, when America is otherwise engaged.

Iran, Oil Prices and The Bomb

The basic premise of this blog is and has always been that money is always the bottom line. It is as true today as it was when I started it all those years ago.

Today (15 Jul 08), the price of a barrel of oil fell below $140. The last time this happened, the Iranians started shooting off missiles and frightening the women and children. Almost immediately, the price shot back over $140 a barrel. I’ll come back to this shortly.

Iran wants into the Country Club of being a nuclear power. They said so loudly and publicly. They announce to the world that they are only interested in pursuing nuclear power for peaceful ends – they need more electricity like everybody else. They also declare that it isn’t anyone else’s business that they have a nuclear power plant or three. And they’ll do whatever it takes to get into The Club.

But joining The Club requires more than simple desire. It requires brainpower and vast sums of cash. Brainpower is needed since nobody in The Club will sell you the goods turnkey. You must build your own. Entrance to the front door of The Club is earned, not purchased. And cash is needed because the aspiring member has to build a significant infrastructure to support the enterprise. Trial and error cost plenty.

The Iranians need dough, massive amounts of dough. Iran currently suffers under the weight of economic sanctions levied by the world because they are “State Sponsors of Terrorism”, whatever that means. Currently, Iran’s unemployment rate hovers around 10%. Their inflation rate is around 26%. Both numbers are not good. To combat that – and make sure the government stay in power – they need gigantic infusions of foreign cash. And they have only one way to get it: oil. And yes, they have lots of oil. With prices at $140 + per barrel, they have just enough dough to prop up their otherwise sagging economy and built nuclear infrastructure.

To that end, the Iranian government has leased as many as 15 VLCCs – very large crude carriers – supertankers if you will – to store their oil. They don’t have a strategic petroleum reserve (because those cost money to build). By pumping almost 5 months worth of supply unto these tankers, they can effectively constrain the world’s supply of crude, without having to stop pumping. To stop pumping would signal the world that something is up. So, they lease the VLCCs instead and make up some cockamamie story as to why they need to do that.

Viola! The price of oil doubles since Jan 07. The Democratically controlled Congress is guaranteed to not do anything to increase supply – no drilling in ANWR or off shore – so there is no possibility of popping the bubble. So Oil goes up and up. The Iranians are happy, or as happy as they ever get.

But not today. The price of oil is down because demand is dropping, As goes demand, so goes the price. So you can bet that the Iranian government will do something crazy this week to get the price of oil up where it supports its teetering economy and builds that ticket into The Club. But there’s a problem, the last crazy stunt they pulled was just that: a stunt. The high flying technology they demonstrated had nothing to do with missiles and everything to do with Photoshop™.

I’m starting to think of Iran as less of a 7^th Century Theocracy and more like a modern day Persian Empire wannabe. In order to gain respect, they have to be members of The Club. After all, aren’t those pesky Jews members of The Club? How can the supposedly superior Persian Culture be second best in the neighborhood to those Zionist Crusaders?

Note to Mahmoud: the servant’s entrance to The Club in around back and the lawn mower is in the shed. The front door isn’t for bullies or thugs or wannabes. The price of your oil is about to crater because we’ve figured out your game.

5 points to those who guessed where this picture was taken. Send me an e-mail to ralphlion2002@yahoo.com to see if you're right. I'll answer each e-mail I receive.

I guess the question to ask is "Where's Dave"? I can honestly say I don't know. We haven't been in contact for some time now. He's been busy growing a business while I have been busy growing a new "post-military" skill set. That is one in which I am not pursuing a career using the skills that I learned in the military. I think there will be plenty average-ness to fill the ranks of the Government personnel system without adding my attitude to the pile. Besides, no one "axed" me to join that "supposibly" lofty institution. Just kidding. When I'm ready to milk the system I'll jump in with both feet. Until then I'm okay with the morons weeding themselves out of the real work force along with our politicians...neither of whom have a real job. It's the falibility of people that requires them to be led because at heart we vacillate about being couch potatoes or genius businessmen. (I owe that thought to Alan Greenspan, b-t-w). Anyway, Dave - if you get this, shoot me an e-mail. All the rest, send me some ideas to chat about.