Oil: Feed the Machine, America - You Have No Choice!

Oil plunged at the NYMEX open on big volume, down to $53.70 after a huge, surprise inventory build was (again) reported, and literally at 12:01 on the dot (the close of rational, European trading), they started to drive it back to $55.

It is beyond a joke how blatantly they manipulate this market, but when the Pumper-in-Chief comes on after the inventory report (did you ever notice he always comes on a Wednesday around 10-11?) to announce that he intends to purchase $41Bn worth of oil, you have to realize that there are forces at work here even more powerful than we may be able to stand up to!

Now I’m not Bush-bashing here, but I’ve found out why gold has gone up so much this week. Other countries think he’s a complete lunatic and they see this plan to build the SPR as a foreshadowing of a plan to attack Iran! I know that is not realistic (I hope), as it will take years to build the massive reserve that Bush and the oil companies envision, but it’s important to understand that other countries look at our leader the way we look at Chavez…

The people who are Bush-bashing are the ones reviewing his "radical" (no comment!) plan to use every acre of land in the United States for ethanol production. Let’s remember that ethanol, AFTER subsidies, costs $5 per gallon, so adding it to gas INCREASES the cost (before including the cost of the subsidies). So the gist of this plan is that you use more ethanol, which costs more than gasoline did at its peak, and the price of corn (not to mention all agricultural products) goes up like oil did, causing every meal you eat to be about 20% more expensive. What a clever solution!

Ethanol is A solution, not THE solution. Americans use 385M gallons of gasoline a day! You only get 19 gallons of gas out of a barrel of oil, so that’s 20M barrels a day going into your gas tank (yes, I know we use the other 23 gallons to make other things). The average American car gets a pathetic 20 mpg. Rather than try to ADD 20% ethanol to replace the oil and causing a strain on the agriculture industry, we COULD SIMPLY USE LESS OIL! Increasing the mileage requirements on cars to 30 mpg over the same 10-year period would save 7M barrels a day, more oil than China consumes in total!

Forget about the fact that increasing mileage requirements and cutting the use of oil by 30% would be the single biggest step we could take to combat global warming - the problem is that no one makes money by you consuming less oil!

• Farmers don’t make money.
• Oil companies get less money.
• Refiners make less money.
• U.S. auto companies would be killed by foreign companies who make 30 mpg vehicles already (as that is considered a gas-guzzler everywhere else in the world),
• Gas stations make less money.
• Credit card companies make less money.
• OPEC makes less money.
• Iran would have no spare money for nukes and terrorism which would cause defense contractors to make less money…

You get the idea; it’s never going to happen!

As the oil companies proved in California when they spent $150M to defeat proposition 87, they will do whatever it takes to keep you using oil. Remember it was T Boone Pickens and Bush Buddy, Bob Perry, who funded the "Swift Boat Veterans for Truth" in the last election.

So guzzle up, America - you may as well enjoy it because you have no choice. You will have gasoline rammed down your throat whether you really want to consume it or not, whether it makes sense for you and the planet or not. Remember what the President said: "If you don’t go shopping, then the terrorists win!" The poorest Americans spend the same average $1,500 a year on gas as you do (since this country spends almost nothing on public transportation) and another $1,500 to heat their homes and another $1,500 to power their television (probably not plasma) and no one in the energy complex wants to see 1/3 of that money become "discretionary income."

So join the Matrix, drink the Kool-Aid, feed the machine - you can see this week what a vast, powerful, unstoppable machine we have created and it’s not going to go down without a fight. "THEY" are already employing a "scorched earth" policy or, as the conservatives like to spin it "starving the beast" to make sure you have no alternatives to carbon-based fuels.

Comments

[lonie:]

Phil:

You have the most foresight and write the best articles on Seeking Alpha.

You forgot one thing ,which i forgive you , TAXES on fuel. No politician wants taxes reduced.

2007 Jan 25 05:40 PM

[Philip Davis:]

Thanks! That's a good one, I did forget taxes...

2007 Jan 25 05:44 PM

[DirtSimple:]

I scan "Seeking Alpha" for legitimate investing opinion and thought. I find this to be neither. If I need a fix of Bush Bashing, I just go to the main stream Drive BY Media for about 10 seconds. Sorry to see it here too.
Ray Racine

2007 Jan 27 11:16 AM

[cynic69:]

What a great blog! I think I know what may be a fly in dub's ointment. According to Hubbert's Peak, oil is going to start getting a lot scarcer (and more expensive). When it gets to about $90 a barrel its going to throw the world into recession (and chaos). At that point owning an automatic weapon will be more important than having your tank full. God save us.

2007 Jan 27 10:08 PM

[Philip Davis:]

Say are you the same Greg Pinelli who also attacked Eddy Elfenbein when he pointed out crude was falling on 1/5 with this comment:

Greg Pinelli wrote on Fri Jan 5th @ 9:13 pm
"Is this kind of comment or analysis supposed to be helpful? All of us have things to do..if weather is your best shot then stop clogging this site...First, this is OLD news...then, it hardly gives us a basis for analyzing the future...."

Or maybe it was you who criticized Dan Cary that day when he said the energy markets were turning bearish (as crude was dropping towards $55) and some guy with your name said:

Greg Pinelli wrote on Fri Jan 5th @ 10:33 pm
"When I hear things such as the "fundamentals are bearish" it's hard to imagine the speaker understands what bearish..or fundamentals mean. There has been a very temporary blue sky period for oil supply...a period of perfect weather, subdued geopolitical threat, and few wanting to focus on the very poor oil/gas supply fundamentals..Those real "fundamentals" speak to reserves being used 3 times faster than discoveries are made...and a group of suppliers ready, willing and able to stiff their contractual partners or disrupt chains of supply for an indefinite period."

Or perhaps you're the Greg Pinelli who Criticized David Taylor (3 times!) on Dec 14th when he said crude prices may still fall (then at $64):

Greg Pinelli wrote on Thu Dec 14th @ 3:45 pm
"11 milion barrels a month is...give or take...about 3% of monthly imports ...hardly a "marked" decline given that Nov-March is not exactly the peak driving season. There are other strong drivers of the oil (oil equivalent) price besides US demand. Those days are forever over...as is $40 oil. "Punters" who think that price is a coming attraction had better get ready to look at some very ugly losses.
The last couple of months will be looked at by Spring as having been a quiet, eye of the storm period where the unsuspecting and over optimistic were lulled into putting their investment heads on the block. Oil will be well over $70 by April...and if there are ANY geopolitical surprises look for $85."

You were motivated enough to follow that one up a week later with:

Greg Pinelli wrote on Wed Dec 20th @ 10:01 pm
"Well Andrew...It's Dec 20th and still no defence of your column...a poorly analyzed piece of fluff so your picture..I think..might hit some investment blog..somewhere...Plea... Alpha Readers...don't follow this nonsense...you WILL lose money hand over Andrew...."

Perhaps it was you that said of Kur Wulff's 1/17 analysis of Gazprom where you said:

Greg Pinelli wrote on Wed Jan 17th @ 11:07 pm
"This is precisely the kind of irresponsible and shoddy recommendation that needs to be challenged..Why would you invest in Gazprom when you could invest in any number of honest companies in market respectful countries that one day Russia will be begging to help them develop the assets they have grossly mismanaged or ignored???"

While I admire your attempts to put your fingers (and toes it seems) into as many holes in the dyke as possible, the end of that story is the boy drowned when all the surplus oil flooded the market and he was dragged under by the weight of his own positions.

======================...

Raciner - as to Bush bashing, I really have tried to be nice to him since he blew the last elections and ended a decade of Republican rule while scoring lower approval rating than Nixon... but then he goes and does something like this and I just get so annoyed!

Anyway, I apologize and I will try not to be mean to Bush for the next 23 months, especially as he just pulled a coup and took over the government while we weren't looking:

pressesc.com/011698108...

2007 Jan 28 01:47 AM

[Saul Sterman:]

Phil,

Don’t forget that President Bush is your President too. I’m not saying that you can’t disagree with him or argue a point. Just keep in mind that if we Americans don’t show respect for our elected leaders then why should the rest of the world do so?

I actually thought that in this article you were more revering (in your own way) in comparison with your previous critiques. Apparently most readers are not aware of what a Phil Davis Admonition (PDA) sounds like.

For the love of Moshe, Jesus, Muhammad and Cheesecake – SHOW SOME RESPECT!

irregulartimes.com/che...

Saul

Readers,

PDA also stands for; put down anyone, piss Davis (off) a-lot, primate delinquent approach, etc. Choose your side of the coin, Phil can take it.:)

(This is a ‘no-reply’ comment)

SA editors,
If you’re not chuckling, then delete this one.

2007 Jan 28 06:11 AM

[Philip Davis:]

Thanks Saul - and no, I'm not replying to you so don't worry!

I have lots of respect for political leaders but not all politicians are leaders. You put me in a bad spot because I just promised Raciner I would be nice so I'm not going to talk about Bush other than to say that you have to be a "Blue-stater" to understand how dumbfounded we are that he IS our President (AGAIN!). Having gone through the Nixon years, I can respect the office but not the man - had he stepped down first, Spiro Agnew would have been labeled POTUS while under indictment... At some point you have to have the right not to blindly wave the flag at anyone who jumps into the chair! (see no Bush bashing!).

Do Americans hate Iranians becuse of their table manners or is it because of their chosen representative? When there is little cultural integration, people tend to judge a people on what they know about their leaders. Did American citizens change from being admired (or at least tolerated) in the 80s and 90s to reviled as a people in the 2000s becuase we forgot to brush our teeth or becuse we allowed our country to be taken down a path that has garnered the resentment of half the planet?

"All that is necessary, for evil to triumph is for good men to do nothing." And that's a quote, I'm not saying Bush is evil per se, but I'm sure many a toxic regime has risen as intellectuals such as yourself debated the merits of respecting the process as that process inexorably ground them into dust!

For the love of "Moshe, Jesus, Muhammad and Cheesecake" I do have to say something when my own country's policies seem to eschew "turn the other cheek" and "love thy neighbor" in favor of some the most warlike passages of the Koran:

"Slay them wherever you find them...Idolatry is worse than carnage...Fight against them until idolatry is no more and God's religion reigns supreme." (Surah 2:190-)

"Fighting is obligatory for you, much as you dislike it." (Surah 2:216)

"Seek out your enemies relentlessly." (Surah 4:103-)

"...make war on the leaders of unbelief...Make war on them: God will chastise them at your hands and humble them. He will grant you victory over them..." (Surah 9:12-)

"Prophet make war on the unbelievers and the hypocrites and deal rigorously with them. Hell shall be their home." (Surah 9:73)

I shall not stand by and do nothing while acts are being commited in my name that I object to. It is the duty of the citizens of a democracy to stand and fight for what they believe in. The pendulum is swinging back fast, the left side of this country is energized in a way I haven't seen since the 70s and a change is coming - I would suggest you plan your long-term investments accordingly!

www.crooksandliars.com.../

Have a good weekend,

- Phil

2007 Jan 28 02:03 PM

[Saul Sterman:]

Hey buddy,

I was going to write: PDA also stands for; put down anyone (Whitaker’s wake), piss Davis (off) a-lot (my favorite!) and primate delinquent approach (Pinelli’s preach)!

I chickened out after having visions of Gale hunting me down with her automatic!

So you like cheesecake – huh!
- Saul

2007 Jan 28 04:11 PM

[Philip Davis:]

Cheesecake for sure!

In fact we're waiting for an entry on CAKE but, next time you're in town I'll join you for a slice at the Brooklyn Diner!

- Phil

2007 Jan 28 06:48 PM