Friday, June 17, 2005 - OPEC Lifts Quota But Urges Increase In Refining Power - OPEC Lifts Quota But Urges Increase In Refining Power


What a turn around? Thirty years ago, OPEC had power. Now they push a string. OPEC is pumping crude at high levels while begging for more world wide refining capacity. Meanwhile the "energy" in energy is going in other directions.

LNG importation to the US has doubled in two years. Coal production is at all time highs. Canada is digging tar sand at record levels. Electric powered vehicles are the rage. The recent strength in the US Dollar has "exported" higher oil costs to other countries world wide. Nuclear power plants are under construction in various parts of the world and are in the planning stages in the US. Repeal of depression era laws will increase the production of electricity and lower the cost. Drilling in ANWR will be allowed and the caribou will still mate. Time of day electricity pricing will increase large scale production at fuel efficient sites.

Crude is back near the peak price but supplies are good. The senate is loading up its version of the energy bill with poorly conceived non-market and inefficient incentives and non funded mandates to require a 10% level of renewable fuel. The situation is like the fellow who had ice cream and pie on the table but demanded that his wife bake a chocolate cake. There really was no need to waste the ice cream and pie but this man was in control of his house. Had he enjoyed the ice cream and cake and thanked his wife for it, she would have been happy to bake a chocolate cake for the next feast.

Consumers must hope and it is a safe bet that the conference committee will eliminate some of the more ridiculous provisions. We don't need the US congress to force high cost alternatives upon consumers. California and other states have already demonstrated how misguided such policies are. The "corn" states offer swing votes and are thus politically powerful. Thus it does not matter how many pesticides must be used to grow corn or how much top soil is depleted, the final bill will probably subsidize corn oil. Compromise is ugly but democracy is beautiful!

The bottom line is that oil stocks have made a major run. I am not a buyer of oil stocks at today's prices. A mini cycle economic cycle has started. Even consumer cyclical such as GM and F are making a run. The BULL IS LOOSE! RIDE IT COWBOY! The Dow and S&P are near break-out levels.

Summers are traditionally long and slow in regard to stock markets. There is traditionally talk all summer about a summer rally but big money really does "sale in May and go away". However, in case you have not noticed, the market is in BIG RALLY MODE. Large stocks, mid cap stocks and small stocks are participating. Right now those who are sitting out while agonizing over which stocks to buy are making a big mistake. The key to making money in this market is to invest in the market. Huge amounts of money are being lost as it sits suffocating under low yields in money market style accounts.