Thursday, April 24, 2008


My friend, Bob, won the prize today for the best comment. He posted a link to the lame suggestion by the corn belt Senator Grassy. Here is the comment and link.

The only discouraging thing for me is what i hear coming out of politicians mouths.

With the latest this lame quote from Iowa's Sen. Chuck Grassley, just one example.

I have said that it is morally wrong for us to put scarce food supplies into car engines. Grassley says it is equally wrong for the Chinese to eat meat! The crazy part is that, since we gain zero net fuel with ethanol, our fuel cost are not benefiting from ethanol but our policy really does cause some people to starve to death.

By the way, the Senior Economist at S&P forecast oil at $91 per barrel by year end. He follows the forecast by saying he could be off plus or minus $50 per barrel. He makes me feel better about my misses. It is natural to notice the plus side of his forecast at $141 per barrel. Of course, you might expect that I was quick to notice the minus side. I don't if he really means it but the low side of his forecast is $41. His forecast is based on the fact that the US economy is in a recession. I still do not believe that we are technically in a recession but, in any event, the slow down should lead to lower oil prices. The numbers from Germany this morning show that Europe could fall into a recession. As my friend Lamar mentioned, we might see a rolling recession similar to what happened in the early 80's. By the time Europe is in recession, the US will be in a strong recovery. China is standing on the brakes (bank reserves at a record 16%) but, so far, the strong double digit growth continues.

I have mentioned a number of oil and natural gas fields that will come on line this year and the next. Since, the Thunder Horse mega project is not due to produce until the the end of 2008, I don't believe I have mentioned it. With only 9 months to go, this massive project in the Gulf of Mexico is growing in importance. It will initially produce 250,000 barrels per day. Folks that is only 30 million dollars worth per day and only $11 billion worth a year. At full production, it will do four times as much. Now don't tell me there is not incentive to drill deep. The sad fact continues to be that the estimates of reserves along the east and west coast make Thunder Horse look like down right puny.

Many thanks for the other comments. It seems that the price of fuel is the big drag right now.