Peak Oil - The Dawn Of A New Age

June 5th - 6th Update
Sold for Gain CPST $531
Sold for Loss
TGC - $285
Omni - $105
Total Gain - $141

Thursday and Friday were full of action from the start but the real story was oil's biggest single-day leap ever clearing $139 a barrel! This with the release of the nation's unemployment rate which at 5.5 percent in May was the biggest rise in 22 years. All this culminating to drive the Dow down nearly 400 points and raised the once-unthinkable prospect of $150 oil and even higher gas prices by the Fourth of July. Friday can only be described as a bloodbath and the only way the bleeding was going to stop was at the ringing of the bell.

As I have written for 5 years now in Geocrisis Peak Oil is real and is now gone mainstream being reported by CNN and others daily. Back when I first warned others about an impending shortage all I heard was laughter and people saying we would never see $100 a barrel. So what is Peak Oil for those who have never heard of it?

PEAK OIL

Peak oil theory states: that any finite resource, (including oil), will have a beginning, middle, and an end of production, ...and at some point it will reach a level of maximum output, a peak. So when half of all oil in the world is up, the price per barrel will begin to rise. The prices will steadily go up, with about 1,5 to 3 percent a year. But meanwhile, world demand for oil is on the rise, too. Currently, the entire world consumes about 75 million barrels a day -- or 25 billion barrels per year. But in ten years time, demand is expected to rise by more than two thirds, to 135 million barrels a day. Think India and China and you begin to see the picture.

In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US Oil production would occur in the late 1960's. Because of this he was derided and outcast by most in the industry until his theory proved spot on. He was the first to assert that oil discovery, and therefore production, would follow a bell shaped curve over its life. After his success in forecasting the US peak, this analysis became known as the Hubbert's Peak and was used to try and establish a global Peak. Below is a chart which you can see states that almost all Oil producing countries have actually reached peak. What you don't see on the chart is Saudi Arabia, Iraq or Iran....Uhmmmmm...no wonder all the recent interest.

This region has been on the minds of many for just this very reason for years. Ever see the ending of Three Days of The Condor with Robert Redford? Former National Security Adviser Zbigniew Brzezinski published a book entitled The Grand Chessboard: American Primacy And Its Geostrategic Imperatives in which he portrays the Eurasian landmass as the key to world power, and Central Asia with its vast oil reserves as the key to domination of Eurasia.

Zbigniew Brzezinski American strategist, professor and
former National Security Advisor to President Carter

He states that for the US to maintain its global primacy, it must prevent any possible adversary from controlling that region. So our National Security Policy has been reshaped for this very contingency. This blog is neither the time or the place to discuss the many ramifications but here are a few quotes to let marinate.

"Let's look at it simply. The most important difference between North Korea and Iraq is that economically, we just had no choice in Iraq. The country swims on a sea of oil."

US deputy defense secretary,
Paul Wolfowitz, in Singapore, 31 May-1 June, 2003

------------

... "by 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? ... While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies, even though companies are anxious for greater access there, progress continues to be slow."

Dick Cheney, then Halliburton CEO, 1999

In an analysis from the editors of Nightline of ABC News entitled “Spoils Of War In Iraq War, To The Victor Goes The Oil” it states,

"The fundamental issue is, the day after Saddam is removed, the Iraqi oil industry is open for grabs, and it will depend upon the government of Iraq to decide how it will dispense that resource," says oil consultant Rob Sobhani, a professor at Georgetown University in Washington. "Certainly, American companies would be in a very, very strong position to compete for the right."

"Once the fighting starts, you have to be involved or you are irrelevant," says Emerson. "And it's not just because of the Iraqi oil. It's because of the oil in the entire region. You want to be part of the postwar world in the Persian Gulf."

The Oil Corridor
And just look at all that Oil In Iran...
Uhmmmmmmm.............

The significance of the vast oil reserves of the Middle East cannot be understated. Besides the trillions of dollars to be had by multinational oil companies drooling over the prospect of taking over these vast oil reserves, there is also the impending economic disaster of peak oil to think about. Our economy is industrial oil based, and without a reliable source, would soon collapse as a result oil depletion. At current levels of US production, our oil reserves would last approximately ten years without an outside source. Iraq on the other hand has oil reserves that will last 526 years!

Now to any casual observer it cannot go unnoticed that in our war on terrorism since 9/11, we have gone after oil producing states or swing production states. Afghanistan, which is now interestingly, but not surprisingly headed by Hamid Karzai, Chairman of the Interim Administration for Afghanistan. Hamed Karzai was the main intermediary between the Mujahedin and the CIA who later became a top advisor to Unocal. It was Unocal who sought the development of an oil pipeline across Afghanistan to tap into the Caspian reserves. Is the picture getting any clearer?

Next on the list we have Saudi Arabia, Iraq and now Iran with geopolitical developments in West Africa, Venezuela, and Colombia. All areas where terrorism appears, exactly where the oil is or in the swing producing nations. Coincidental? Maybe, maybe not, though highly suspect for even the most skeptical.

So what does all this mean besides higher gas prices? It means that anyone who thinks that Oil or energy stocks are going anywhere but up in the long term needs to have there head examined. Which is why if your in the market right now after Fridays close, I hope your in energy stocks because Monday looks like a perfect set up for a Black Monday with the dollar falling, oil rising and Financial's collapsing. Which all means that recession is a fact. Of course for the bobble heads on the news to be saying that is looks like a recession is like telling those who have been knee deep in the water that it looks like there is a storm on the way. Really...??? Thanks for the Update CNBC!

So I am still long in my solars and even bought more on the lows Friday. CSUN is still in a great position with it being down 40% from its fifty-two week high of $19.23 and having posted revenues for the three months ended March 31, 2008 of $77.0 million, surging 32.3% from the first quarter in 2007.

Friday I also went ahead and purchased another Oil stock KOG as I wanted to be all energy with two exceptions MTL and RCH. But first KOG, as you can see this has had a tremendous run up with oil and I'll be in for a few dollars here.

BEXP looks like it is coiled to make a move on any news so were holding strong and looking for what looks like a promising next couple of weeks. With such a choppy market Swing trading becomes more difficult with all the volatility in the market and the day traders making good profits.

My one exception to energy stock was MTL. This is a monster short and long term play. I've been watching this for months and after the split have been waiting for the dip which occurred for me on Wednesday so I bought Thursday AM with a little over 5k. With a divi and such a gorgeous chart, I have to go long here.

Thursday I also picked up some shares of RCH which has some big contracts in Dubai and will ring the Nasdaq bell on June 12th. RCH has been perky with alot of recent interest so I'll bite and hang for a week or so to ride a wave.

Outside of those purchases I am holding about 7k in cash for what I hope to be some good buys come Monday if we see a sell off. I will be primed and ready secure in energy and cash ready to pounce!

Demand Destruction!

June 4 Update
Sold for Gain
CPST - $531
Sold for Loss
OMNI - $105
EEE - $56
TGC - 285
Total Gain - $85

Demand destruction was the buzz word of the day...but that might as well have been the description of my portfolios. With Oil fallen to it's lowest price in a month to $122.30 the oil sector took a few hits and my TGC play just went sideways for most of the day dipping back down to close at$1.33 down 7.56%. I got out at a small loss again in OMNI. In PM it was showing some really good action ...so I broke my rule and bought in PM only to watch it drop from the opening bell.

Repeat after me...Never by in PM...Never by in PM....Never by in PM. And yet there is always an exception and but this wasn't one of them. I have seen that it is best to buy in AH and then sell the hope of those in PM.

I also sold for another small loss with EEE needing to free up capital ans so I had to sell some CPST at the hod to offset the losses to net a gain on the day and overcome the BEXP fall that I still have. By doing so I freed up close to $10,000 so the net gain of even a little green was worth the sells. With CSUN and LDK not cooperating and BEXP looking more like an investment for the future, I needed something make moves with.

Of course JBLU is on it's way back up as expected but my tight stop took me out the other day but is is looking good so I placed in my Lion portfolio the other day.


As I stated ealier, Demand Destruction was the mantra of the day and for those who may not know what this is, I wrote about this back in 2003 concerning the peak oil scenario on Geocrisis when I was really into researching that perspective. But basically it means our growing economy consumes more oil each and the only way to offset this growth in oil demand is higher prices. As the supply of a resource decreases, the price goes up to reduce the demand to match. This is called demand destruction.

· From a report commissioned by the United States Department of Energy (USDOE):

a. "'the economic loss to the United States [due to oil production peaking] could be measured on a trillion-dollar scale...Expediency may require major changes to ... lengthy environmental reviews and lengthy public involvement'...the authors believe "20 years is enough time to limit damage from any peak. However, they point out that 'if mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction…'"

b. "…which would create a long period of significant economic hardship worldwide."

(a) excerpted from, "US Report Acknowledges Peak-Oil Threat," March 9, 2005, and (b) excerpted from ASPO's March Newsletter.

So alternative energy plays will be a sure thing for the long run and energy prices though dipping today in the long run will not stay low. With elections on the horizon we may very well see lower prices as per usual for this time and we may also have an October surprise, but nothing will stop the need for energy so I feel confident in both the Solars and the Oils for the long term. Besides, were just one event from a pipeline break or hurricane to set off oil again. No need to panic here.

But what you always want to follow the hot sectors and Tech seems to be hot right nw which is why I'm looking at ANADIGICS, or ANAD. I've been watching this since it was in the sixes, always saying I was getting in, only to buy something else. Big mistake that I may just rectify.



ANADIGICS is a provider of semiconductor solutions in the broadband wireless and wireline communications markets. The Company’s products include power amplifiers (PAs), tuner integrated circuits, active splitters, line amplifiers and other components, which can be sold individually or packaged as integrated radio frequency (RF) and front end modules. ANAD gapped up off of a first-quarter net profit of $3.93 million, or 7 cents a share, from a net loss of $1.16 million, or 2 cents a share, a year earlier. Since then it has been on fire and shows no let up. I'll be looking for the next dip as theres no need to chase but thought I would put this one on radar.

Another stock that I put in my portfoli at the Lion today was MTL and I will be looking at this tomoorw AM to put some money into after todays dip.

Mechel is a Russia-based integrated mining and steel company. It specializes in the production of coking and steam coal, iron ore, nickel and steel. Its business consists of two segments: Mining and Steel, comprising facilities in Russia, Romania and Lithuania. The Mining segment is engaged in the production and sale of coal, iron ore and nickel. The Steel segment is involved in the production and sale of semi-finished steel products, carbon and specialty long products, stainless flat products and value-added downstream metal products. In addition, Mechel OAO owns and operates two trade ports and a railway.

MTL just had a 3/1 stock split may 20th and what makes them unique is that they are the only Steel maker I know that mines there own ore, and coal with the added bonus of a rail transport. They are a one stop powerhouse that is a money machine. I think tomorrow if the funds have settled, I'm in for a long position here, especially if it touches that moving average around $50.

Still looking for better days where demand destruction is not the tome but the past. Still looking for some big gainers as I try to mange losses and hang tight on the solars. In time they will move even if and ANALyst wants to say LDK is overweight, I'll just double down for bigger profits later!

FANTASY ROYALE!!!!!!!!!!!

June 3 Update

Today was another spectacular day for ROYL which has played out like some fantasy gas play all traders dream about. Much like the PDO and MXC rocket rides, those who were in ROYL have cause to party tonight. As for me, my gas play was a nightmare when I had to sell QTWW to pay back some house money knowing it would go up today...and it did. Then when I was about to click a buy for ROYL on Monday I instead switched because CNBC which I always have playing in the background did a piece on BEXP and the positive wells at that very moment. So I chose BEXP thinking more news, more momo. Well the bobble heads at CNBC no longer play in the background after watching everyone else have the fun with ROYL as it popped off another 33%!! Just sick movement today. Check this chart out...and you thought yesterdays volume was huge...again I say HELLO!!

So did I get in during PM? Or did I get in at all....? Oh no....all my money is tied up in Solar and BEXP......which was more like a nightmare than the fantasy ROYL rocket ride. So at then end of the day, sick of missing ROYL and a little upset having to sell QTWW... I went ahead and got crazy and now I have $5000 worth of TGC which looked real strong and I've made money on before. I tried selling it AH for a quick turn, got a nibble of 285 shares at 1.57 so tomorrow looks real good for a morning profit....and I need a psychological victory at this point to turn the tide. Though no real losses...theres been no real gains...and BEXP is just sitting idle as people party tonight off of ROYL profits. This should be a CROWN ROYAL night, instead it's a beer and nuts night. Peanut anyone?

A word of caution though, ROYL has had a huge run up and was strong into yesterdays close and was strong in both AH and PM today which was a clear buy for those who actually had money. With this much run up, I may just pull a short trigger as I almost did today with LEH..which I will be watching closely as well. Not looking good for Lehman Brothers.

As you can see TGC has some real breakout momo here and so I'm going to try and make up the ROYL miss with a breakout play in TGC. If this breaks 1.65....lookout. BPG is back on my radar so I'll be looking to unload EEE and reduce by half my position on one of the solars looking for a dip in something interesting... I just have no patience but I will hold for a few days to let the stock catch up...BEXP ..are you listening..?

Oh and by the way, did you see JBLU turn back up with a 4.06 AH? I put a tight stop in JBLU and am out, but still see upside here with all that buying the other night in AH.
So lets se what tomorrow brings and see if we can't put some wind back in these sails and catch a decent wave.

The Royle Plays!

June 2 Update
Sold for Gain QTWW - $140
Sold for Loss JBLU - $75
Total Gain - $65

Today I found out that I won 2nd place in the Lion Portfolio Contest with a prize of a $100 gift certificate to Amazon. So the day started out pretty good and I was hoping to translate that to some good plays on the day.

It was another day where Oil and alternative energy plays were the big winners with oil moving abit higher but still below $130. Of course I don't need to tell you that with the national average of a gallon of gas near $4.00!!

There was also the Biotech plays with meeting of the American Society of Clinical Oncology in Chicago where reports of a cancer Vaccine made by Avant (AVAN) appears to have developed a possible break through in treating brain cancer by enlisting the help of the body's immune system. News sent the shares soaring up 28.34% to 17.98.

So today I had two choices to make with house money having most of my money tied up in the solar stocks LDK and CSUN. Two stock plays stood out - ROYL and BEXP. BEXP had good news on two wells and was up in AM as was ROYL. Having played ROYL in the past, I decided to play BEXP...WRONG!!!!!!!!!!!

Royl had a riduclous day and just ripped it up by soaring 43% to $8.30 and then adding 9.64% in the AH to $9.10. .. The choices we make.... just check out this chart!

I instead opted for BEXP which also had a good day on strong volume and was up 14.62% but down off it's highs which were over 18.00 twice in the day. My entry point could (should) have been better as I'm just about flat on the day. With strong volume we should be in good shape tomorrow, especially if Oil decides to move upward. And besides, isn't that a pretty chart!

Jet Blue didn't get any bounce and my stop loss order kicked in and I went heavy into BEXP with that money and the house money. The plan was to burn a daytrade trip in and out but with the pullback in BEXP I had to unload my QTWW to keep from using the margin money. I really didn't want to sell QTWW as it was up 9.05% with a strong close but didn't have much of a choice.

CSUN got some good news today when it was reported that Credit Suisse disclosed it had a 15.7% stake or 37 million shares in CSUN up from 2%. This sent the stock higher so were holding here with a target of $15 along with LDK.

My favorite little stock CPST broke thru $4 today in PM to ended the day up 3.99% at $3.91 with earnings coming up and a 2 million dollar order. I just can't say enough about this little stock...Love it..Love it...Love it. Gonna keep it till we hit $10. I'm in no hurry with this one, as you have to also invest and not just trade and this qualifies as an investment for me.

We'll see what tomorrow brings but it looks like at this point all my money is tied up. If EEE decides to get perky and bust a move, I may unload as I'm looking for it to hit 2.50. This week has been frustrating with no big gainers, but have managed to keep from losing as well, which though a wash and disappointing, not a real concern....just antsy for some ripping action on a hot stock. Still trying to learn one of my three axioms...Patience..Patience... Patience! :-)