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The Oil Shortage, and Other Fairy Tales

by: Philip Davis May 22, 2008 | about stocks: DBO / FSLR / USO    
Philip Davis

Philip Davis

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We all know the story of the Emperor’s New Clothes.

It’s the one where a con man convinces the foolish king that he has the finest suit in all the land when there is nothing there at all. Today was a day for exposing several scams. One we spoke about yesterday was Michael Masters’ testimony to the Senate on the great commodity scam. Also yesterday Friedman Billings Ramsey (FBR) moved into my camp and stripped First Solar (FSLR) down to a sell rating, sending that stock tumbling 7% today, passing our $285 target (so we covered). Another naked scam that came to fruition today was the artificial shortage created in this week’s oil inventory report, which I said would happen way back on April 18th, when the crooks at the NYMEX canceled all but 22M barrels that were scheduled for May Delivery, over 20M barrels below Cushing’s normal capacity.

Not only that, but the "experts" estimated we would have an inventory build this week, when clearly a massive shortage had been created. This led to a "disappointing" crude inventory report today and gave the NYMEX pump crew a chance to test $135 this evening.

These jokers were supported by the usual array of talking heads on CNBC, who are now known as the oil apologists network (as every anchor they have just spews industry talking points to anyone who might suggest this particular emperor is less than fully dressed). The new scam they have going is that they now have a series of guests whose talking point is that "oil prices are up because the world consumes 87M barrels of oil a day and produces only 85M barrels." This 2M barrel a day shortfall does indeed sound shocking until you realize that what’s really shocking is that it’s repeated on CNBC two or three times a day and not once does a "newsperson" point out that both OPEC and the Oil Companies (who are testifying under oath today) say this is patently untrue. Also, wouldn’t common sense suggest that if we were short 730M barrels a year that someone might have noticed it? This isn’t just a lie, it’s a massive fabrication aimed at inciting panic of a very profitable nature for energy traders and guests like the recently proclaimed "greenie," T Boone Pickens.

And how green is our T Boone? Not very, it seems. Bespoke Investment Group ran a list of Mr. Clean’s holdings and it turns out he’s actually up to his eyeballs in crude. That’s right, while Mr. T was on TV telling you he was short on oil he actually increase his holdings considerably and then spent a great deal of time "talking his book" and working with GS to drive oil up to their $140 short-term target. Here’s where T Boone is making his money:

Now I don’t have an issue with T Boone the investor - this is a brilliant portfolio and he’s done well for his clients - but for CNBC to give this man almost unlimited airtime and to present him as and "independent expert" on the energy markets is criminal! What happened to journalistic integrity? Also, name the energy bear on CNBC. Come on - surely there must be one - just a token player to give a contrary opinion against the nearly 24-hour pump-fest that makes up a typical day on the network. Are we in Russia? Is this Pravda? What the hell has happened to this country where this kind of crap is passed off as news?

And CNBC and their guests have such total disdain for us viewers that they think they can make up a HUGE lie like 2M barrels of oil PER DAY is being consumed over and above what is being produced, as if we are too stupid to calculate that that would work out to 730M barrels a year or a world-wide shortage of 14M barrels a week, yet this is the utter nonsense they need you to swallow in order to have you accept the fact that oil can be $130 a barrel for any reason other than manipulation and speculation.

Obviously, Mr. Pickens is a speculator, yet somehow the regulations that used to have guests on TV disclose their positions to you before they give their opinions have been thrown out the window and they don’t even bother to pretend to vet their guests anymore - just another example of how the government, through the simple act of lax enforcement, can allow the system to be perverted by market manipulators.

The really sick thing is that we are cast in the role of the people in this version of "The Emperor’s New Clothes." King Oil parades out into the crowd wearing nothing but a very expensive smile while all the court jesters on CNBC ooh and ah at the magnificence of the demand cycle, even though there are no fundamentals there at all! I will continue to play the role of the small boy in the crowd who points and laughs and says "But there’s nothing really there," as I did with housing two years ago, but until you start pointing with me, until the voices of reality drown out the sycophants in the mainstream media. the people of our kingdom will continue to be taxed to pay for the kings’ imaginary outfit, until we expose him for the naked fool that he is.

David Fry is joining the cause (thanks DB!) and points a fed-up finger at this atrocity; Michael Masters did a great job enlightening Congress on Tuesday; and the London Telegraph points out that not only does OPEC have a current production surplus of 2M barrels a day but that surplus will rise to 3.5M barels a day BY NEXT YEAR. Also, non-OPEC production is rising fast with a 1.5Mb gain in non-OPEC production coming down the pike next year. Of course there’s always the Iraqi wildcard as that country is still producing over 1Mbd less than they did before Bush decided to go on a WMD hunt over there.

Iraq, by the way, is no longer included as OPEC or non-OPEC production, a very clever way to hide 2.4Mbd of production by the energy apologists. Again, you can’t have a fake shortage without hiding a lot of facts!

Lehman’s latest report - Is it a Bubble? - says commodity index funds have exploded from $70bn (£36bn) to $235bn since early 2006. This includes $90bn of fresh money. Energy takes the lion’s share. Every $100m flow of investment money into oil lifts crude prices by 1.6pc, it said. "We see many of the ingredients for a classic asset bubble," said Edward Morse, Lehman’s oil expert.

We are hoping what we are seeing is a blow-off top to oil, but bubbles can go on far longer than you expect, even when everyone knows it’s a bubble as investor dollars have a peculiar momentum that is hard to stop. Institutional investors count on this, in fact as the general public is only just now getting into the oil speculating game. Just as your neighbor bought his first "spec house" for $1M and got stuck with it, that same neighbor is now jumping on the next sure thing and buying barrels of oil for the cheap, cheap price of $135 a barrel.

It would be nice if Congress would step in now, before another $1Tn in US household wealth is wiped out, but that would leave GS and T Boone holding the bag instead of all those widows and orphans you’ve been hearing about who are investing in energy futures through mutual funds and IRAs, driving that $90Bn of "fresh money" that Lehman is noting into the market. "Fresh money" is the term you use for the guy who comes in late to the poker game after you’ve wiped out the first round of suckers - very nice…

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This article has 53 comments:

  •  
    May 22 09:04 AM
    So what's the trade? Short USO & DBO? Long DUG?
    Reply
  •  
    May 22 09:17 AM
    Couldn't agree more, after this is all over we are going to look back and wonder how it ever got to this. It's as if the speculators and investment banks are creating a illusionary oil shortage on a global scale. When this is all said and down I hope the SEC comes down hard on GS and Boone like they did on the tech analysts and pumpers after the dot com bubble popped.
    Reply
  •  
    May 22 09:17 AM
    Yes, the OPEC production will rise as Saudi Arabia injects 6,000,000 million barrels of water a day into Gharwar to produce 5,000,000 barrels of oil, with an astonishing 35-55% water cut. As Gharwar declines into the same fail mode as Chanterelle and Saudi Production falls even more, OPEC production will rise. As every major field in the middle east continues to decline, production will rise.

    The only reason the Saudi production is as high as it is today is that the Royal family will pump every last barrel out of the ground in ten years in order to stay in power.

    Reply
  •  
    May 22 09:26 AM
    Great article, great read. I find it interesting that a lot of people will read this and then make a judgement likely that peak oil is untrue as a result. Regardless of opinion on that topic, the artificial creation of a panic on a finite resource in order to increase short term profit fits right in with the peak oil theory. If production is on its ever falling design the commodity will eventually devalue while supply falls (this because as it is in a continuous freefall we are forced to find other energy options), until sometime before the end it is virtually worthless as we have prepared for its expiration.

    I enjoy how this article points out exactly what you would want to do if you needed to maximize the profit from a dwindling resource, cause a supply panic before it starts truely running out!
    Reply
  •  
    May 22 09:36 AM
    "all the court jesters on CNBC ooh and ah at the magnificence of the demand cycle, even though there are no fundamentals there at all!" -- hilarious, and sad, and so true! Great article. I didn't know Iraqi oil prod'n isn't counted -- fascinating. What's that, petty cash for Dick Cheney?
    Reply
  •  
    May 22 09:41 AM
    Excellent article. Excellent comments!
    Reply
  •  
    May 22 09:47 AM
    The secret to my success has been to never follow the advice of analysts. I'm amazed the downgrade had such an effect on FSLR yesterday especially considering that while downgrading the stock they had the upgrade the price target from $150 to $200. Basically this shows the lack of credibility the company has. If they had kept their opinions up to date the stock would've had a higher price target to begin with which they could've later lowered. Personally I haven't changed my price target in 18 months. When it was $30 I put on a $400 price target based on earnings potential + inherent value. seekingalpha.com/autho...
    Reply
  •  
    May 22 10:23 AM
    It seems to me that Big Business' driving up of prices based on false premises is going to hurt them eventually. I noticed until Spring 2008 that when oil prices started to drive down the stock market indexes of other goods, they would lower the oil prices until the effect was lessoned. This is not happening anymore. I am thinking that now they want to make as much money before January 2009 when we will have a newly sworn in Democratic President, as well as a dominant Democratic Congress and House. They know this spells Big Trouble--so they are just trying to make as much as they can before that happens.
    Reply
  •  
    May 22 10:25 AM
    come on. The OPEC will say they have "enough" production outputs until the last day of their oil exportation. How can you be a commodity trader just by reading those "fairy tale" reports from the likes of IEA? Was it ever right on oil price for once?
    Reply
  •  
    May 22 10:30 AM
    Not excellent, o-u-t-s-t-a-n-d-i-n-g article! This is one more proof that FUD is always a best seller.

    We live in a world of lies and it can be a challenging task to filter out the truth. Thanks for your help in doing that.
    Reply
  •  
    May 22 10:37 AM
    JMSTANLE: as much as I want change and the Republican president to go, I'm still betting McCain will be our next commander in chief.

    More of the same for at least another 4 years. I agree that the election year has a great influence on economic 'manipulation'. Not that McCain will change much of that. Are we still talking about the 18c gas tax moratorium? Pathetic, isn't it? But, get used to McCain, as the Democrats are blowing this one.
    Reply
  •  
    May 22 10:54 AM
    YunkYard et al - Please no more politics on SA. I'm getting sick of people posting their political manifestos and "It's all Bush's fault I lost my money" junk. Comment on the article please.

    Anyways - Awesome article! Great summary too...made me chuckle a little bit, because I'm the one standing by the poker table laughing at the fresh money morons sitting down about to be swindled. The news outlets are just sucking up viewership with this no more oil/ gas at $7/Gal by August B.S. I'm a believer in peak oil theory, but the short term run-up is just sickening.
    Reply
  •  
    May 22 11:02 AM
    The idea that the media and central gov't would lie to the constituency is nothing new. But the article fails to point out simple market tendencies. That being markets trade on FUTURE predictions not the present. There may or may not be shortage now but the longer term oil futures contracts out to 2016 are gaining 10 points in spurts. Peak Oil is not hype, there has not been a production increase in 3 years. There are no oil fields of any size found in many many years. You have 2 thousand dollar cars being built in India for peasants to drive. Demand is going up, and supply simply will not keep up.

    Markets will react, over react, and correct huge but the uptrend for oil prices will not reverse. The dollar is in the final stages of its decline and the nation is 10 of trillions of dollars in debt without any manufacturing base and corrupt financial system, being governed by lawyers who have zero idea of fundamentals or science.

    In other words you had better start learning to provide more for yourselves. This experiment of a HUGE central gov't providing all and taxing the base has been tried before, and it has always failed. Anyone that advocates this gov't for anything at all is either a fool or a liar.

    Good Day
    Reply
  •  
    May 22 11:19 AM
    Hurray, I am not crazy!!! I have been telling people this story for about 6 weeks and everyone gets this glazed over look like I am speaking mandarin chinese. Great article!

    If you want to stick it to oil, convert to E85, it costs about $400 and the perfomance is better. Your MPG will drop, but here in Colorado, E85 is $2.35/gal so that more than compensates for the mileage. Stick it to them anyway you can.
    Reply
  •  
    May 22 11:36 AM
    How many of you who have posted (including the Phil Davis) actually are involved in the business of finding new oil reserves? I am guessing none based on the comments. I know many of you would like to think this is a big conspiracy with Dubbya, Big Oil & speculators driving the price, but at the end of the day this is all about science. How many of you have even seen a decline plot for an oil well? oil field ? or basin? Who can name the last billion barrel field found? Who can name the most successful plays world wide currrently being developed & how much resource that is bringing to the market? Do you know the significance of why Saudi Aramco is hiring every frac engineer they can from around the entire world? If you can't answer these questions, then I would say you need to educate yourself on the science of oil production. You can convince yourself this is some big conspiracy, but good investing in this business (for the long term) is about doing good science.
    Reply
  •  
    May 22 11:45 AM
    While oil prices may be growing beyond their fundamentals, this runup is great news for alternative sources of energy and their companion technologies. Over time the relative scarcity of "cheap" oil would force us to develop and market alternate forms of power to run our economy, anyway.

    However, I also believe we should be exploring for more oil and gas domestically at the same time as a safety valve to bolster our economy and possibly avoid unnecessary armed conflicts in the future. It appears now the price of oil will have to go significantly higher for that to happen.
    Reply
  •  
    May 22 11:51 AM
    Once again the naive, late to the party, small investor is going to take it in the shorts. S&L debacle, junk bonds, dot com bubble, housing bust and now oil. In America, oil prices are shooting up in no small part due to the dollars incessant free fall (blame whoever you want), but I suspect it's Wall Streets reprehensible greed, that's really fueling the fire. Once again were seeing the vacuous talking heads being played flawlessly by the Street. The news is awash with supply & demand side disinformation. Try to find an "analyst" downgrading oil. Is anyone questioning oils recent run-up in relation to the market axiom; "excess profits lead to ruinous competition"?
    Or are the "oil experts" (most holding significant positions), simply revealing the presence of a startling new market paradigm "Peak Oil"?

    While many bemoan the environmental restraints put on domestic drilling, is there anyone who'd question the fact that every other nation in the world is busy turning their closet upside down, in a frantic search for new fossil fuels?

    We continue to live in the US of Amnesia. During the Tech Bubble. every pig was sure to fly, every new issue a winner, every analyst a buyer. IRA's, 401ks...fuel for the fire. What about housing, "can't go down", "every hard working American should own their own home". Don't think that the Street's securitization of home loans propelled the proliferation of substandard paper and ensuing prices? Bundled, graded and peddled worldwide as "AAA" paper, thank you!
    Reply
  •  
    May 22 11:52 AM
    I foresee a likely move to $150 on Crude Oil, then a major pullback (possibly around August or as the Election nears) to the $100 level, and maybe as low as $75, mostly due to speculation coming out of the market. Other factors such as Beijing Olympics and coming Presidential Election may contribute to correction. Article on seekingalpha here: seekingalpha.com/artic...
    Reply
  •  
    May 22 11:59 AM
    You have a good point Paulk. In a way, this greedfest hurting the U.S. economy and threatening it to propel it over a cliff may just bring us the energy independence policy the U.S. needs to start on NOW, before true shortages begin occur within a decade or two.
    Reply
  •  
    May 22 12:24 PM
    Oil is different because there is a long-term supply/demand problem. No doubt about it. I will tell you why:
    theinvestingspeculator...
    Reply
  •  
    May 22 12:27 PM
    User 197833: Apparently you're the only one with a brain here. Yes, we are seeing price increases due to speculation. However, that is only short term. Long term, the price is high due to a billion potential new drivers in India and China. All the while, the fields are declining and the really big finds are just not there. Wake up America 'cause the next 10-20 years are going to be very painful.
    Reply
  •  
    May 22 12:37 PM

    Yes, virtually every other nation in the world is madly searching for new oil and gas supplies (including Cuba off the Florida coast!). The good news is they're finding it all over the place, the bad news is it's expensive.

    Of course, since 70% of the earth's surface is covered by water and more remote land areas have never been explored, it stands to reason there are tremendous amounts of energy yet undiscovered.

    "Peak" oil and gas doesn't refer to the total amount, just the easily found and recoverable "cheap" stuff. Indeed, there's growing evidence that petroleum products aren't fossil fuels at all, but naturally occurring substances in the earth's crust.

    The problem is cost. And that's the problem with all non-petroleum based forms of energy, as well. The marketplace will eventually sort all this out, but simply from an economic and security standpoint, we need to have a growing supply of domestically owned and produced oil and gas in the mix.




    Reply
  •  
    May 22 12:43 PM
    Okay, maybe it's time for the "it has to be a bubble" crowd to have their moment in the sun. Surely there is a speculative element to today's oil prices, and it is entirely possible that the ultra short term future of crude prices is down. But it is obvious that few here have studied the industry in depth. Only one commenter here even mentions the inexorable bulldog of decline, a fact of life in the production of oil & gas which seems to have escaped the writer of the article as well. Folks, it's not as if you have a well and it keeps producing at a certain rate over its lifetime. Nominal industry-wide decline rates of 6% (much higher in some of the giant fields such as Cantarell) mean that if we are producing 85 million bpd today, next year we must bring on 5.1 million bpd of new production simply to stay even. This is why estimates of excess OPEC capacity, even if true, don't change the long term picture. It's good that people have learned something from the tech bubble, but the uninformed assumption that energy is tech all over again is unfortunate. Go light on those shorts if you want to stay alive.
    Reply
  •  
    May 22 01:41 PM
    Yes the price of oil will probably drop to $75 a barrel in the next 4 years. But after that it will make a slow steady climb. How high? Who knows. Depends upon solar, wind, more efficient cars and homes. It's really a crapshoot to predict.
    Reply
  •  
    May 22 01:59 PM
    great article. keep hammering the morons at CNBC, the business network for the simple-minded. i quit watching it a year ago and switched to bloomberg.
    Reply
  •  
    May 22 02:02 PM
    A lot of people disagree about this I guess. I don't doubt that there are speculators in the market. But are they really speculating on oil? No - oil futures and companies. There's a big difference. The hunt brothers bought up all the silver - that's the actual silver - and put it in a warehouse. Who is buying up the actual oil? Who is manipulating the actual spot price of real oil today in Cushing? If that's a free and liquid market, which I believe it is (does anyone disagree?) then who's manipulating that?

    Because if real spot oil prices today are the true unmanipulated price, then futures prices all make sense. Doesn't mean they are right in their bets, perhaps those futures will lose money - but they aren't ridiculous.

    I know I sound like I'm on one side, but I'd love for someone to show me how the actual spot price today is manipulated.
    Reply
  •  
    May 22 03:38 PM
    Long term is for losers! In the long term, the Cubs will win a World Series! What does it say when even the oil BULLS acknowledge that there is 'some' speculation in the market, and that oil 'may' correct to $75? By my math, that is a 40%+ correction! Am I supposed to ride that out because oil 'may' be higher than today ten years from now?
    Reply
  •  
    May 22 04:03 PM
    USER 68127: I am not advocating you buy oil that may fall 40%. My point is that the high prices of today are at least somewhat real and that we have a real shortage (if affordability is a concern). Many on this board act as if oil is just pouring out of the ground but somehow, it is manipulated to be more expensive than it should be. By the way, if you had bought oil back in 1998, you would have made a fortune. Long term is the only way to invest....
    Reply
  •  
    May 22 04:27 PM
    Due to the political policies adopted by our government, oil may go alot hgher than the oil markets would take it themselves without such additional upward pressure on prices. As a result, we may well see oil at $200 (...that would correlate to about $7 per gallon at the pump) before we see it under $100 again.

    As always, however, trying to predict governmental actions is difficult, and can be dangerous to your pocketbook. Just ask any number of investors who've been burned by government policies in any number of industries in the past.

    I would have thought the Congress would have relented on domestic oil and gas exploration (...and a host of other energy related issues like permitting nuclear reactors, refinery and pipeline regulations, importing sugar based ethanol, etc.) by now, but none of that has happened.

    Without some news to support a pullback in prices, it looks like the sky's the limit for oil futures. And, no, taxing the oil companies and having the politicians spend the money on their pet projects won't help, either. Nor will suing OPEC... those types of ridiculous and ineffective policies would only take prices even higher.
    Reply
  •  
    May 22 05:46 PM
    ALLIED SCIENCE, INCORPORATED
    P.O. Box 2629, 4161 Mary Lou Street, Pahrump, Nevada 89041
    alliedscience.org Telephone: 775-727-0866 E-mail: grhudlow@yahoo.com


    Form Project Summary

    Project Name:


    General Introduction:
    Grant Hudlow FOUNDER,CEO
    One person can make a difference, has been the driving philosophy for the life of Grant Hudlow. It was this mind set that led to the birth of Allied Science, Incorporated in 1989. Now, nearly two decades later, with a financial commitments base exceeding $7.5 billion, Allied Science, Incorporated carries it’s message of wholesome, values- oriented products across the United States, Canada, and Europe.
    “When we reach people, if we can sell a product, great, but we are first and foremost about spreading our message, “ says Mr. Hudlow. “We want people to know that their is an alternative to the sex, violence and profanity that is in so many homes today.”
    Mr. Hudlow attended California Institute of Technology and the University of Nevada at Reno
    Before spending 13 months on the Korean DMZ, then an industrial turn around expert with Procter & Gamble, Stewart Warner, Fuller Paint and Fairchild Semiconductor.
    Mr. Hudlow left big business to create Allied Science, Incorporated after realizing the need for uplifting, wholesome discussions that carry a positive messages. “I knew this was something I had to do,” Mr. Hudlow says. Creating Allied Science, Incorporated was more of an important work decision than a business one.”
    Mr. Hudlow has since named the chemistry to make this new industry possible, led the design engineering, sold $7,500,000,000 in orders for factories and sold $7,000,000 in orders for the products from the factories around the world. Armed with the belief of his convictions, he has grown Allied Science, Incorporated from a dream to a major international corporation with more than 200 alliances.
    Mr. Hudlow enjoys assisting young people in ther entrepreneurial aspirations as well as working with and training school teachers and other professionals. His professional accomplishments and community service have been recognized by local churches and local civic organizations.
    Mr. Hudlow has two children and one grandchild.
    A little know fact about Mr. Hudlow is his love numbers and statistics. Retired CEO S.B. Devlin says, “No one sees through a problem faster than Grant. He’s a true statistical genius.”

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    has valuable engineering and construction contacts. He has hands on management and business experience with Fluor Daniels, Brown & Root and others

    Dr. Chuck Baroch,PhD Chemical Engineering, is a retired CEO with Babcock and Wilcox.

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    Gary Smith is a highly regarded Chemical and Petrochemical Engineer with quality contacts and broad work experience. His experience ranges from blending his own gasoline for resale to employment with major chemical companies such as Dow, Dupont and Union Carbide. Mr. Smith has a BS and MS in Chemical Engineering from the Georgia Institute of Technology. Mr. Smith assists with the engineering and construction of the total project and with the management of the complex.

    Lawrence G. Erskine, President Bionomics International,Inc., enjoys a solid management and marketing reputation in the USA, China, Japan, Singapore, New Zealand and Australia. Mr. Erskine owns and operates a Hazelnut business in the state of Oregon and ships finished (value added) Hazelnut products around the world. He imports and exports equipment. Mr. Erskine spent 10 years in management with General Foods Corp. He attended the University of Oregon, obtained a BA in marketing from Northeastern University and attended an accelerated MBA (equivalent) course from Harvard University, via General Foods Corp.

    Al Avolicino coupled his education in art with his management and leadership skills to become marketing and advertising manager for some of the largest companies in the U.S. Mr. Avolicino will devote his time to establishing contracts with waste generators and creating the necessary educational campaigns. He will hire and train the marketing and sales people. Mr. Avolicino has enjoyed management positions with such companies as General Foods Corp., Servatron,Inc. and Farmer Brothers,Inc.

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    Elko City Council, Phenol brokers all around the world, Economic developers all around the world, BISNIS, USDOC, USDA, US EX-IM Bank, University of Nebraska, Lincoln, UNLV, UNR

    3. Funding Request:
    $70,000,000 to buy $100,000,000,000 of coal on the surface (that can be mined for $.85 a ton) plus $100,000,000 to build, debug and operate a factory that makes $2,000,000 a day by converting coal to 100,000 barrels a day of gasoline and diesel that sells for $.55 a gallon wholesale.

    Term:
    First tranche: $170,000,000 (to buy the coal $70,000,000; to get environmental permits $7,000,000 engineering fee: to buy the equipment $32,500,000; to build the plant $25,000,000 labor and $15,000,000 contractors fee; to debug $8,200,000; operating cost to profitability $12,300,000.

    Community Impact:
    Allied Science will bring 1000 new jobs initially; A $50,000,000 annual payroll; A chemical engineering lab to the local community college; Computers to local children; And money for local infrastructure as needed. In a nutshell, Allied Science, Inc. serves the community by contributing a significant portion ( which has been factored into the base product cost and does not affect returns) of the revenues generated from the factory going to support local charities, help fund community City and State Public Services, as well as supporting biotech and medical research organizations.

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    With the allied Science,Inc. facilities, there is NO burning, therefore NO smoke stacks. NO smoke stack means No air pollution. The residuals are distilled water, which is evaporated, and an ash which is stored and conditioned for one year and is used as a non-toxic powder to strengthen roads, make 19,000 lbs. concrete, and for strengthening wallboard.

    Specific Performance:
    From funding, Three months to buy the coal ; Two months to get environmental permits ; Three months to buy the equipment ; Six months to build the plant; Two months to debug ; Three months to profitability.

    Exit Strategy:
    At end of nineteen months after funding, Allied Science, Incorporated will contractually begin to return 150% of the amount funded for each project. Allied Science, Inc. expects to complete this process within two years of receiving funding.

    Supporting Documents:
    15 pages of supporting documents are available on request as an attachment as needed.

    10. Letter of Introduction from Bank available at later date.
    Reply
  •  
    May 22 11:38 PM
    sophisse...

    "I know I sound like I'm on one side, but I'd love for someone to show me how the actual spot price today is manipulated."

    i am not one who believes that either spot or futures prices of oil are being manipulated. i don't believe in conspircies in large, liquid markets but for one instance i'm aware of....which is the hunt brothers attempt to corner the silver market in the late 70s. they failed and it nearly broke them. it can happen but it's rare.

    i do believe that irrational pricing can occur through speculation. that is not to say there is no demand for the underlying asset at inflated prices....of course there is...didn't PT barnum say there is a sucker born every minute? but it was the speculative mania that drove the pricing...not underlying demand.

    look at a 10 year stock price chart on CMGI...once the darling of the internet world...and you'll understand.
    Reply
  •  
    May 23 01:02 AM
    I've seen 4 definitions of peak oil on here and I just want to clarify what exactly it is.

    "Peak oil" is a hypothesis that states that oil production will rise until half of the reserves are depleted. Once that happens, production will decline commensurate with the increase. Nothing more, nothing less.

    Peak oil has nothing to do with:
    1. Speculation in oil futures
    2. "Cheap" or easy oil.
    3. Oil demand fundamentals.
    4. The coming end of the world that Matt Simmons, Hirsch, Boone Pickens, and others state.


    Plain and simple this is a gigantic bubble created by the same forces that the tech and housing bubble had:

    Three major things clearly have supplied the gasoline for this fire (no pun intended).
    1. Negative Real Interest Rates
    2. Lax regulation: Regardless of what you think about the fundamentals of oil prices, peak oil, etc., the lack of knowledge that the CFTC has is very clear. They have zero data on ICE trading, and we have had at least 5 major scandals with respect to energy trading in the last 6 years. If these markets were transparent, I would be ok with the rise in prices. But they're not.

    If you don't think commodity prices in general have been manipulated, go ask any farmer about their experiences with trying to hedge their food production on the futures markets in the past year. Remember that for the last 80 YEARS until the past 12 months these markets did not have these problems.

    3. Creation of new investment products to attract investors into arenas that they weren't in previously.

    Since I haven't yet given up CNBC, let me walk you through a typical exchange on oil.

    Oil Analyst: "The world is producing 2 million barrels/day less than it is consuming. We are out of oil. Oil will go to $150 and the airlines will go bankrupt."
    Greasy Haired CNBC goon: "So how do we play this?"
    Oil Analyst: "Well, not to worry, we've just created a new ETF that you as a lucky investor can buy. For every dollar crude goes up, the ETF goes up 10x."
    CNBC Goon: "But what if oil goes down?"
    Oil Analyst: "It never will, except for a small correction. Any dips are a buying opportunity. There's no end in sight. Oil will sell for $25,000 a barrel in 2015 and the fed will cut the interest rate to 0%."
    CNBC Goon: "Wow, I'm convinced that there's no speculation in the market."

    Speculation does not mean that the prices are being manipulated by any one person or entity. Rather it is a herd mentality where people chase high returns b/c their friends/neighbors/comp... had them from the same investment.

    Sophisse: Did you know that Goldman Sachs,Morgan Stanley, and other hedge funds actually trade/distribute the commodity as well as gamble in the futures markets? See below for details. I'll let you all draw the conclusions.

    business.timesonline.c...
    online.wsj.com/public/...
    online.wsj.com/article...
    www.commoditytrader.co...
    Reply
  •  
    May 23 01:52 AM
    As I finished my post, I just came across a perfect example of the phony stats that CNBC uses to prop up oil prices.

    John Kilduff, of MF Global, is VP of Risk Management for their oil trading team. He is one of CNBC's regular contributors.

    In the Australian Herald Sun he is quoted as saying:

    "John Kilduff, analyst at MF Global, said the world is consuming 87 million barrels per day of oil while producing only 82.6 million barrels."

    www.news.com.au/herald...

    Using these stats, if we did this for say, since the beginning of the year, and the US absorbed 25% of this inventory decline since it consumes 25% of the world oil, we should have depleted our oil inventories in the US by 300 million barrels and would have. If you look at the EIA numbers, we didn't do that. The IEA numbers don't confirm this either.

    Regardless of the oil fundamentals, these "experts" need to be taken to the woodshed when they "educate" us with flat out inaccurate information.
    Reply