Blog: Spirit of Money, Financial Fluidity
by munificent

What If...?

What if the Oil is closer to be Gone than the estimated 10-15 years that the Saudi's estimate??Why aren't we prepared...Anyone from California remeber the 70's ~stagflation~ Odd even days for gas fillup?

Date:   8/29/2005 10:14:10 AM   ( 16 y ) ... viewed 1596 times

COMMENT: Hiding An Oil Panic In Plain Sight.

Dear A-Letter Reader:
The Saudis are the "central bank of oil," right? So how come this
central bank is scrounging for loose change under the couch cushions?

Earlier this month came news that Saudi Arabia hired five Rowan jack up
oil rigs for drilling offshore oil wells on a three year contract.
Those rigs are currently under contract in the Gulf of Mexico, so that
means Saudi Arabia outbid somebody to get those rigs ? and rig rates
have already run up to obscenely high levels ? 30% to 50% more than a
year ago.

Drilling for oil underwater is very expensive. You'd expect the Saudis
to be drilling out their cheapest oil first. Don't they have a freaking
desert full of this stuff? So why are they suddenly going whole hog
for underwater oil, and willing to pay a premium to do it?

Unless...maybe the Saudis don't have as much oil in their land-locked
fields as they say they do.

We already know that the Saudis have confessed that OPEC won't be able
to meet western oil demand in 10 to 15 years. I'm starting to think
they might come up short a lot sooner than that.

Are the Saudis lying? Well, at least it seems like they're not telling
the whole truth. What's more, I believe there's a whole lot our own US
government isn't telling us. I'll get to that in a moment. First, some
ugly facts...

? The world uses a BILLION barrels of oil every 12 days. Do we find a
billion barrels of oil every 12 days? NO! In fact, if everything goes
perfectly, we'll find just 30 million barrels of oil in the same time
period. If things go badly, we'll find less. Much less.

? The global depletion rate runs at least 5% a year, perhaps much higher
as once reliable sources of oil are in serious decline. Oil production
in Britain fell the steepest of any country last year, with production
in the once fabled North Sea falling by 10% (230,000 barrels per day)
last year...Production in Alaska's Prudhoe Bay has fallen 75% since its
peak in 1987..Iraq's oil production is still half of what it was before
the war...Mexico's production is declining so quickly it will have to
start importing oil in the next 10 years!

? The US Energy Information Agency has fallen in line with the
International Energy Agency and admits that oil demand will exceed
supply starting in the fourth quarter of this year. Total world demand
is expected to be 86.4 million barrels per day, according to the EIA,
while total world supply is expected to be 85.4 million barrels per day.
The EIA ups the ante by saying there will be a shortfall in the first
quarter of 2006 as well.

Despite all this, the White House insists that oil prices will go back
to $25 per barrel in a few years. Now here's the real disconnect: The
US government is quietly planning to add to its own existing oil
reserves at a furious pace.

Squirreled away in new US energy legislation is a directive to increase
the Strategic Petroleum Reserve from 700 million barrels (70 days'
supply of imports) to ONE BILLION BARRELS. They're adding to the SPR
when oil prices are sky-high. What are they afraid of?

A confidential source in the US Dept. of Energy gave me the scoop on
the addition to the SPR. This stunning new directive was placed inside
the 1,724 page Energy Policy Act of 2005 without any fanfare whatsoever
? it's hidden in plain sight. And the mainstream media is too busy
going to DC beltway cocktail parties to notice.

This 42% jump will put a floor under oil prices and much more. It's so
huge, the government doesn't even have a place to put it all ? yet. The
plan is to fill the SPR to capacity with a minimum of market disruption
or undue influence on the market, blah-blah. Right! If you're planning
to fill the SPR when oil is over $60 per barrel, you aren't planning
on getting that oil on the cheap.

I don't know what could motivate the Bush administration to do that.
But I do know that two former oil executives are now US president and
VP. They probably have access to raw data on America's oil fields ?
including depletion rates ? that the rest of us don't. Again, what are
they afraid of? I'm certainly not going to buy the "don't worry, be
happy," line peddled by the White House. One of the nice things about
being a Sovereign Individual is the awareness that you should be as
independent as possible from government entanglements, and that
includes buying their baloney.

Still, there are plenty of people still willing to push the government
line. An analyst recently quoted in a Bloomberg story tried to push the
idea that oil is still cheap, explaining: "A barrel of Starbucks latte
would cost you $1,500, compared to a barrel of crude, even at $66 a

Ri-i-i-i-i-ight! Just try running your car on that gallon of Starbucks,
buckaroo. Starbucks coffee is a luxury ? that's why they can get away
with charging so much for it. Is oil a luxury? Not right now. But it
might be down the road.

I believe we're careening toward a good ol' fashioned oil panic. I
believe the government knows a lot more than it's letting on. And I
believe anyone who doesn't invest for the coming energy emergency is
a bloody fool.

The time to take action is now. Today's energy crisis is transforming
the world ? from geopolitics to the financial markets to the gas pump to
the price of 75% of everything you consume on a daily basis.

That's why I've just created an in-depth Energy Crisis Report. I outline
the FOUR FORCES bearing down on energy dependent America, forces that
could wash over our economy like a tsunami. I lay out the six likely
consequences of the next oil shock. And you'll learn about ten energy
companies you may want to add to your portfolio immediately ? plus,
a widely held stock you should sell or avoid at all costs.

To receive the full text of my Energy Crisis Report click here now:

SEAN BRODRICK, Editorial Director
The Sovereign Society Ltd.

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