Will the real bubble please stand up?

Say goodnight to the SUV bubble and the associated cheap gasoline consumption bubble.

The guy running GM needs to be thrown out. [Mulally at Ford came in from Boeing a couple of years ago and thus gets some slack.]

Wall Street Journal: Ford Stumble Signals Rising Risks.

Quotes:

Ford Motor Co.'s plan to return to profitability got run over by a truck.

The rise of gasoline prices toward $4 a gallon is causing a major shift in the U.S. auto industry that threatens to push the Big Three auto makers and some of their rivals to a new level of peril. In recent weeks, sales of pickup trucks and sport-utility vehicles -- already falling in recent years -- took an unexpectedly sharp tumble.

....

In a Thursday conference call, Chief Executive Alan Mulally said the industry has "reached a tipping point" and that the falling truck sales represent a long-term shift in the U.S. auto market, not a short-term dip.

"We saw real change in the industry demand for pickup trucks and SUVs in the first two weeks of May," Mr. Mulally said.

Leeb on the oil 'bubble'.

jacksonsun.com: Author, chief of investment firm weighs in on oil crisis.

Quotes:

Question: Is what we are seeing with oil prices a pricing bubble, or are high oil prices here to stay?

Answer: With the housing bubble, people were just building and building and building and eventually the supply overwhelmed the demand in the housing case. But here, where is the supply?

You've got oil prices rising dramatically, but there is almost no evidence of increased supply. I mean in the past couple of months we have had both Saudi Arabia and Russia, which are the two biggest oil producers in the world, announce not in so may worlds, but certainly imply, that they have very little room left to increase oil production even going into the future, and that is not what you see in a bubble.

Basically you are seeing the market respond in a very rational way. Oil supplies are limited, and that is a very serious situation.

....

This bubble talk is ridiculous.

IEA: Better rethink that Certified Pre-Owned H2.

MarketWatch: Report: IEA set to cut oil-supply forecast.

Quotes:

The Paris-based International Energy Agency is getting ready to issue a sharp downward revision of its oil-supply forecast, according to a published report.

A story in the online edition of the Wall Street Journal early Thursday reported IEA's forecast revision signals growing pessimism about whether oil companies can keep abreast of booming demand.

The Journal reported the IEA is attempting to assess the condition of the world's top 400 oil fields. Its findings won't be released until November, but it is clear that future crude supplies could be far tighter than previously thought, the report notes.

The IEA has predicted previously that supplies of crude and other liquid fuels will keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently, according to the report, which added that the agency now is concerned that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.

The decision to rigorously survey supply reflects an increasing fear within the agency and elsewhere that oil-producing regions aren't on track to meet future needs, according to the Journal.

The report quotes Fatih Birol, the IEA's chief economist and the leader of the study, as saying "the oil investments required may be much, much higher than what people assume. This is a dangerous situation."

Short covering rally?

This last move in oil does have the feel of a short covering rally. If so, it will be interesting to see where it settles out when it's over. $110 would be my guess for a floor, but that's a long way down. That price still makes oil companies a lot of money.

Bloomberg: Blame Wall Street for $135 Oil on Wrong-Way Betting.

Quotes:

Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.

The number of outstanding futures contracts, known as open interest, fell 8.1 percent in a week to 1.36 million at the same time that prices rose 2.6 percent, the data show. Falling open interest and rising prices are signs that traders are buying to exit so-called short positions that would profit if oil fell, and lose money as they rose.

Somebody's a little off here.

I'd guess the guy in the middle.


Bloomberg: Oil Rises Above $134 on U.S. Supply Drop, Bank Price Forecasts.

Quote:

``What we have here is a situation where essentially higher prices aren't generating any more supply,'' Paul Sankey, an analyst at Deutsche Bank Securities in New York said in an interview with Bloomberg radio. ``What we have to do is keep pricing the commodity higher until demand starts falling,'' which ``is around $150 a barrel.''

....

The price of oil should be ``somewhere between $35 and $65 a barrel,'' John Hofmeister, president of Shell Oil Co., the Houston-based subsidiary of Royal Dutch Shell, said at the hearing yesterday. Other executives said prices should be as much as $90 a barrel.

Financial Times: Shortage fears push oil futures near $140.

Quote:

Adam Sieminski, chief energy economist at Deutsche Bank, said: “The price is going to go up until governments that subsidise oil consumption in Asia and the Middle East can no longer afford it.”

Separating the men from the boys.

CNBC: $12 Gas and Rationing? Possible, Says Expert.

Quotes:

"The prices that we're paying at the pump today are, I think, going to be 'the good old days,' because others who watch this very closely forecast that we're going to be hitting $12 and $15 a gallon, and then, after that, when world oil production goes into decline, we're going to talk about rationing," Robert Hirsch, Management Information Services Senior Energy Advisor, said on CNBC's "Squawk Box." "In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we're not going to be able to get the fuel when we want it."

Hirsch argued that the maximum in world oil production has already been hit.

"The idea is that [world oil production] would hit a sharp peak and then drop off, and what's happened is, we've hit a plateau in world oil production, and that plateau has been ongoing since about the middle of 2004," he said.

Those who argue that new technology and new types of energy will solve the problem aren't on solid ground, Hirsch suggested.

"There's no single thing that's going to solve this problem, because it's as massive as one can possibly imagine," he said.

Wall Street Journal: U.S. Military Launches Alternative-Fuel Push.

Quotes:

Some Pentagon officers have embraced planning around the "peak oil" theory, which holds that the world's oil production is about to plateau due to shrinking resources and limited investment in many of the most oil-rich regions of the Middle East. Earlier this year, they brought Houston investment banker Matthew Simmons to the Pentagon for a presentation on peak oil; he warned that under the theory, "energy security becomes an oxymoron."

MarketWatch: Crude futures top $130 a barrel.

Quotes:

The Bank of England on Wednesday became the latest to signal their fears, with the central bank saying in minutes of its last meeting that tight supplies rather than speculation is driving prices higher.

"According to the Bank's market contacts, speculative purchases did not seem to be the prime cause of the recent increases in the oil price," the central bank said, referring to the rise in oil prices during the month of April.

"More fundamental demand and supply factors had probably been at the root of its steep rise during recent months, and there remained considerable uncertainty about the oil price outlook," it said.


New York Times: The Cassandra of Oil Prices.

Quotes:

Mr. Murti falls into the camp of oil analysts who believe that supply is likely to remain tight because of geopolitical factors. These analysts predict higher prices because production is declining in non-OPEC countries like Britain, Norway and Mexico.

The analysts who predict lower prices say there are supplies of oil that the bullish analysts are missing. “This year will be a year in which supply will be put into the market by stealth by OPEC and by countries we call black-hole countries,” said Edward L. Morse, chief energy economist at Lehman Brothers. China is one example, he said.

But while oil and gas prices have been rising for a while now, Americans have only just begun to reduce gasoline consumption, so their efforts to conserve have not dragged down oil prices.

“The fact that the U.S. gasoline demand can be down and that the U.S. gasoline consumer is no longer driving world oil prices is a monumental event,” Mr. Murti says. He spends most of his time talking to money managers and analysts, many of whom keep asking him if oil prices will stay high if speculators abandon the market, and says he applauds investors for driving up oil prices, since that will spur investment in alternative sources of energy.

High prices, he says, “send a message to consumers that you should try your best to buy fuel-efficient cars or otherwise conserve on energy.” Washington should create tax incentives to encourage people to buy hybrid cars and develop more nuclear energy, he said.

Of course, if lawmakers heed his advice, oil analysts like him might one day be a thing of the past. That’s fine with Mr. Murti.

“The greatest thing in the world would be if in 15 years we no longer needed oil analysts,” he says.


MarketWatch: Oil of oy vey.

Quotes:

As a trader, I'm not as concerned with the ultimate destination as much as the path that we take to get there. I've generally avoided the energy space this year and focused my attention on the financials and select technology, taking what the market gave me while preserving capital and keeping my powder dry.

Toward the end of last week, I began building short-side exposure in the energy realm. Catching cusps is a dangerous proposition, whether it's grasping at a falling knife or getting in the way of parabolic frolic. It's a generally accepted trading axiom that money is made between the twenties and we should avoid the red zone whenever possible.

With that said, I share these thoughts with two caveats. First, I'm typically early, which is as damaging as being wrong if you're not there to cash in your chips. Second, while a seismic structural shift could occur at any time, my motivation is to simply capture a trade.

The bull case for energy is loud and proud as a function of the price action. There are supply constraints, emerging market needs, incremental demand from China (following the earthquake), pressure on the U.S. dollar (the price of socialization), unreliable alternative sources, psychology (furthered by a recent Goldman Sachs report) and perhaps the biggest risk, in my view, the potential for geopolitical tension in Iran.

On the other side of that ride, we have political agendas into the election, incessant (unconfirmed) chatter that margins on crude futures will be raised, faltering demand by an already strapped U.S. consumer and the unfortunate truth that all roads will ultimately lead to debt destruction through deflation.

....

Again, the single biggest caveat to the short energy thesis, in my view, is an uptick in Middle East acrimony.

As the market is a prescient beast, that unfortunate thought would certainly explain the incessant bid we've seen to date.

[I think he's wrong there. It's Chinese demand and the idea that we'll have another cold winter that I think is driving this relentless move upwards. But I've been thinking about reducing positions too, though not actual shorting. So much focus on oil smells of some kind of top.]

CNBC: Fast Money Final Trade.

Quotes:

"Short Hess."

CNBC: OPEC Oil Supply Rising in May: Petrologistics.

Quotes:

OPEC oil supply in May is expected to rise by 700,000 barrels per day (bpd), led by higher output from members including Nigeria and Saudi Arabia, an industry consultant said on Wednesday.

The increase comes during a month in which oil has soared to record highs and indicates OPEC is again pumping more than its supply limit after a strike in Nigeria lowered output and Saudi Arabia opted to pump more.

All 13 OPEC members are expected to pump 32.4 million bpd this month compared with a revised 31.7 million bpd in April, Conrad Gerber of tanker tracker Petrologistics, told Reuters.

"There is a strong rebound in supply," Gerber said. "Iraq is having a good export performance and Nigeria is coming back up."

Pickens Wants to Move It, Move It to Natural Gas.

Sorry, I just couldn't resist.



CNBC: Pickens: Oil Going to $150, So Move to Gas.

Quotes:

"Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 million," he said. "It's just that simple. It doesn't have anything to do with the value of the dollar."

He expects the price of a barrel of oil to reach $150 this year, and he insists speculation has nothing to do with it.

....

Pickens says natural gas is the only American resource that can reduce oil imports. He claims the effective use of natural gas could reduce oil imports by 40 percent. He dismissed ethanol as an alternative. He added that what reduced demand there has been in the United States has immediately been picked up by China.

"The only way I see that oil doesn't continue to rise [is] if we had a global recession." he said. "That will happen at some point, but I don't see the Chinese stumbling until after the Olympics."

Give me liberty or give me windfall profit taxes.

I sort of admired Barack Obama when I first heard about him, but his idea about windfall profit taxes on oil companies is about the quickest legislative way to get to $200 oil that I can think of. If you want less investment in oil and natural gas production, vote for higher taxes on oil companies, and stand back and watch prices skyrocket. As mentioned below, things are already tight enough in the oil and gas business.

My guess is that John McCain will be the next president, but if Obama gets elected, I will be very interested to see what he does with this idea and what the consequences will be.

Reuters: Schlumberger sees threat to oil, gas output growth.

Quotes:

Less than 25 percent of worldwide reserves are open to private investment, he said, because many states are turning over their fields to government-controlled oil companies.

"This does not mean that (production) gains will not occur, but it does mean that they will take longer than if access had been more open," Gould said.

Schlumberger, the world's largest oilfield services company, and its peers have posted sharp revenue and earnings growth in recent years as energy companies increased spending, and Gould has predicted that trend will remain in place into the next decade.

Oil prices in the United States have jumped to record levels near $128 a barrel in recent days, and natural gas has surged to $11 per million British thermal unit.

For the energy producers, rising costs for raw materials such as steel have also help contributed to a 120 percent increase in exploration and production spending between 2004 and 2007, while the number of new wells drilled has risen by only 52 percent, he said.

High energy prices have also prompted governments around the globe to hike taxes and change investment terms to gain a greater share of producers' profits.

But added to the rising materials cost and the riskier nature of many new fields, "there is a real danger that this will cause underinvestment and simply exacerbate the problems," he said.

And what of McCain's gasoline tax holiday idea?

Newsweek: Should You Pay $6 Per Gallon?

Quotes:

Kloza goes a bit further, calling a gas-tax holiday "caca." "It represents pandering. You're not leveling with the American public," says Kloza. "All this talk of energy independence means nothing if you don't have energy discipline. When it comes to our gasoline consumption, we're the morbidly obese of the world. And like the person who weighs 350 pounds, we need to exercise more and consume less." To do that, though, first you have to look in the mirror and admit there's a problem—and it's not the price of gas.

Goldman Sachs: Fundamentals.

MarketWatch: Oil and gas producers lead London higher.

Quotes:

Goldman Sachs on Friday raised its forecast for the average price of West Texas Intermediate oil in the second half of 2008 by 32% to $141 a barrel from $107 a barrel.

"We believe that the market is not defying fundamentals but rather experiencing a structural re-pricing much like it did in 2004, searching for a new equilibrium against an uncertain long-term supply environment," the broker said.

Bloomberg: Goldman Raises Second-Half WTI Oil Forecast to $141.

Quotes:

``Supply constraints and a lack of scaleable substitutes are set to continue driving the long end of the oil curve higher,'' Goldman analysts including Peter Oppenheimer and Jeffrey Currie in London wrote in a report dated today.

....

The trend in the growth of oil supply has fallen to 1 percent per annum, compared with global economic growth of about 3.8 percent, today's Goldman report said. ``Given this imbalance, long-term oil prices will need to rise.''

....

The near-term oil market is being driven by ``long-dated'' prices, or the price of oil for delivery 5 years forward, Goldman said. While an increase in U.S. stockpiles and declining demand growth due to the global economic slowdown is creating ``near-term fundamental weakness,'' this is not causing lower prices, according to the bank.

``We do not expect these softer fundamentals to translate into spot price weakness given the strength in long-term prices,'' according to the report. ``We expect the bullish structural market to dominate the bearish cyclical weakness.''

Supply Constraints

Goldman said it was unlikely prices would eventually rise enough to justify large scale investment in alternative sources of fuel, thereby offsetting the discrepancy between supply and demand, because of resource protectionism which constrains supply growth.

Instead, an increase in long-term oil prices is required to suppress demand growth and bring it in line with supply growth, Goldman said. It forecasts the long-date oil price to rise 14 percent to $148 a barrel by early next year.

``Long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth,'' the bank said. ``Eventually a price will be reached which incentivizes significant conservation, new technologies and political solutions which will eventually cap the price rises.''

Oil price: Speculators or fundamentals?

[Fundamentals = supply & demand.]

I'm with Jerry Castellini. Oil is at ~ $125 mainly because of the fundamentals. If it were primarily speculation driven, there would be a larger inventory build up, which we are not seeing.

CNBC: Market Mavens.

Boone Pickens from Milken.

Infectious Greed: Great T. Boone Pickens Interview from Milken.

Bizarro Headline of the Day.

Amidst all of the noise, it's easy to forget that the US continues to be one of the world's largest exporters. The strong dollar policy is paying off, and this may be the reason we're not in a full blown recession.

The Wall Street Journal: Container Shortage Frustrates U.S. Exporters.

Quotes:

Surging U.S. exports on a range of goods including corn, soybeans and frozen pork are hitting a bottleneck in the nation's overloaded ports, threatening to crimp profits for U.S. farmers and agricultural processors at a time when it is easier than ever for them to sell their goods abroad.

The problem can be traced to a shortage of once-plentiful shipping containers and other transportation equipment, along with a lack of space on outgoing ships. The shortage is affecting other industries, including exporters of manufactured goods and sellers of scrap metal and paper.

What's going on with oil?

Seeing CNBC with features on oil all throughout the day makes me nervous we may be at a short term top.

But what's going on with oil?

Everybody suddenly realized just how valuable it is.


CNBC: What's Going on With Oil?

For Hillary - Stand Down Margaret.

Written originally for a woman of a diametrically opposed political view, I'd like to dedicate this song to Hillary Clinton.

She may not be ready to give in, and her opponent Obama doesn't appear quite ready for prime time either, but Hillary is done, as I thought back in December she might be.

Goldman Sachs Gone Wild!

CNBC: Goldman: Natural Gas Crunch Possible This Winter.

Goldman Sachs: $100 oil reality, part 2: Has the super-spike end game begun?

[Otherwise known as the $150-200 Oil Report.]

He's back, too.

Eric Bolling used to be on CNBC's Fast Money until FoxNews gave him an offer he apparently couldn't refuse. (A big loss for Fast Money and maybe for Bolling too as litigation kept him offscreen for a while.) He's appearing on Fox now, but since nobody much watches... Anyway, he's now also writing a column on stock picks for TheStreet.com, and because of his long background in energy trading, he is well worth paying attention to.

In the below article, he suggests that oil may be about to back off a bit, giving refiners better margins and extra breathing room. On that basis, he recommends Tesoro and Chevron.

TheStreet.com: Bolling: Chevron, Tesoro Ready to Roll.

He's back.

The super spike is now moved from $105 to $200. Whoa boy. While U.S. demand is starting to actually fall, it's still rising in China and other places.

Bloomberg: Goldman's Murti Says Oil `Likely' to Reach $150-$200.

Quotes:

Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.

``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5

....

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.

....


``The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth'' is leading to higher prices, the analysts said. That could result in a ``sharp correction in oil demand,'' the Goldman analysts said. .

The tide turns, finally.

The New York Times: As Gas Costs Soar, Buyers Flock to Small Cars.

Quotes:

Soaring gas prices have turned the steady migration by Americans to smaller cars into a stampede.

In what industry analysts are calling a first, about one in five vehicles sold in the United States was a compact or subcompact car during April, based on monthly sales data released Thursday. Almost a decade ago, when sport utility vehicles were at their peak of popularity, only one in every eight vehicles sold was a small car.

The switch to smaller, more fuel-efficient vehicles has been building in recent years, but has accelerated recently with the advent of $3.50-a-gallon gas. At the same time, sales of pickup trucks and large sport utility vehicles have dropped sharply.

In another first, fuel-sipping four-cylinder engines surpassed six-cylinder models in popularity in April.

“It’s easily the most dramatic segment shift I have witnessed in the market in my 31 years here,” said George Pipas, chief sales analyst for the Ford Motor Company.

....

Previous spikes in sales of smaller cars were often a result of consumers trading down during tough economic conditions or gas-price increases. When the economy improved or fuel prices dropped again — as they did after the oil-price shocks in the 1970s eased — buyers invariably went back to bigger vehicles.

But with oil prices expected to remain high for years, auto industry executives are seeing a turning point.

“The era of the truck-based large S.U.V.’s is over,” said Michael Jackson, chief executive of AutoNation, the nation’s largest auto retailer.

....

But there are some indications that the trend toward smaller vehicles will reduce the nation’s fuel use. In California, motorists bought 4 percent less gasoline in January than they did the year before, a drop of more than 58 million gallons, according to the Oil Price Information Service.

“That is an incredible year-over-year drop,” said Tom Kloza, the organization’s chief oil analyst. “Some of it clearly has to do with changes in the vehicle fleet.”

....

Factor in the economic benefits of fuel-efficient engines, and small cars have not only become practical, but trendy as well.

“This shift appears to be a permanent situation,” said Jesse Toprak, chief industry analyst for the auto information Web site Edmunds.com. “These new products have become more fashionable, just like small, fuel-efficient cars are in Europe.”


I noted V-SUV day, just over one year ago.

Boone Pickens on CNBC.

CNBC: Picken's Next Prediction.

Quotes:

"The biggest move will come in natural gas, not oil."

I'm with ya there, Boone.

Bloomberg: Pickens Says Oil Prices May Rise to $150 by Year End.

The scale of the problem.

Submitted by my friend Richard, and via fivecentnickel.com:

c|net Green Tech Blog: Can renewable energy make a dent in fossil fuels?

Quotes:

4.2 billion.

That's how many rooftops you'd have to cover with solar panels to displace a cubic mile of oil (CMO), a measure of energy consumption, according to Ripudaman Malhotra, who oversees research on fossil fuels at SRI International. The electricity captured in those hypothetical solar panels in a year (2.1 kilowatts each) would roughly equal the energy in a CMO. The world consumes a little over 1 CMO of oil a year right now and about 3 CMOs of energy from all sources.

Put another way, we'd need to equip 250,000 roofs a day with solar panels for the next 50 years to have enough photovoltaic infrastructure to provide the world with a CMO's worth of solar-generated electricity for a year. We're nowhere close to that pace.

But don't blame the solar industry. You'd also have to erect a 900-megawatt nuclear power plant every week for 50 years to get enough plants (2,500) to produce the same energy in a year to equal a CMO. Wind power? You need 3 million for a CMO, or 1,200 a week planted in the ground over the next 50 years. Demand for power also continues to escalate with economic development in the emerging world.

"In 30 years we will need six CMOs, so where are we going to get that?" Malhotra said. "I'm trying to communicate the scale of the problem."

The CMO is a figure you might begin to hear more as utilities and governments map out their renewable energy strategies. SRI's Hew Crane came up with the term as a way to normalize all the different measurements (kilowatt-hours, BTUs, million barrels of oil equivalents, cubic feet of gas, etc.) in the energy business.

It's also a big enough measure to suit the global energy market without saddling everyone with a train of zeros. Many of these stats and a far lengthier discussion of the issue will be found in a book coming from Oxford University Press by Crane, Malhotra, and Ed Kinderman called A Cubic Meter of Oil.

And judging by some of the stats Malhotra gave me, the book will alarm policy makers, environmentalists, and pretty much anyone else interested in weaning ourselves from fossil fuels.

....

If there's a bright spot here, it's that the world has a lot of fossil fuel, he claimed, so we won't be plunged into darkness yet. Oil reserves come to around 46 CMOs, while natural gas reserves total 42 CMOs. There are 121 CMOs of coal out there. These numbers all go up when difficult-to-extract energy such as tar sands are added.

"It's been 30 years of (oil) reserves for the last 50 years," he joked. "It's like your pantry. Do you look at it and say 'Oh, no. I'm going to run out of flour in two weeks'? You go out and buy more."

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

The only thing I would add, particularly to his parting comments:

At what price?

Prisoners of the Sun II.

Investor's Business Daily: See Gore, See Spot.

Quotes:

A former NASA astronaut says the same solar phenomenon that doomed Napoleon's army may soon stop Al Gore's march to glory cold. Prepare for the big chill.

Napoleon's retreat from Moscow is a legendary military disaster. While historians and military buffs note the toll the Russian winter took on La Grande Armee, few if any appreciate the role solar activity, or the lack of it, played in one of the great military reversals in history.

Geophysicist Phil Chapman, the first Australian to become a NASA astronaut, and who served as mission specialist on the Apollo 14 lunar mission, writes in the Down Under newspaper the Australian that "the rout of Napoleon's Grand Army from Moscow was at least partly due to the lack of sunspots."

This is more than a historical footnote. The same pattern of solar activity that doomed Napoleon is occurring as we speak.

The sun goes through a series of 11-year cycles in which sunspots fluctuate in both number and intensity, greatly influencing Earth's climate and weather. The end of each cycle is called a solar minimum, where sunspot activity is at a low point. Activity usually picks up after that as each new cycle begins.

As Chapman notes, the most recent minimum occurred in March 2007. Sunspot activity should have increased shortly after that but sunspot activity has remained at a virtual standstill.

If you log on to www.spaceweather.com, you will see a current picture of the sun from the U.S. Solar and Heliospheric Observatory (SOHO) with but a single tiny sunspot, dubbed number 992. The previous time a cycle was delayed like this, according to Chapman, was during what was called the Dalton Minimum, a particularly cold period that lasted several decades starting in 1790. "Northern winters became ferocious," he says.

The success of Napoleon's march was not in the stars, at least not in the one closest to the Earth.

This has been a winter of record cold and record snowfalls. The four major agencies tracking Earth's temperature, including NASA's Goddard Institute, report the earth cooled 0.7C in 2007, the fastest decline in the age of instrumentation, putting us back to where the Earth was in 1930.

It snowed in Baghdad for the first time in centuries, and Chapman says "the extent of Antarctic sea ice . . . was the greatest on record since James Cook discovered the place in 1770."

So far this year, SOHO has detected just three sunspots, including number 992, which appeared on Monday. One was found in January and lasted only two days. Another appeared earlier this month but vanished within 24 hours. There should be more, many more. At its peak, the sun should look like a teenager's face before the prom.

Kenneth Tapping, a solar researcher and project director for Canada's National Research Council, oversees the operation of a 60-year-old radio telescope that he calls a "stethoscope for the sun."

Tapping reports no change in the sun's magnetic field so far this cycle and warns that if the sun remains quiet for another year or two, it may indicate another repeat of that period of drastic cooling of the Earth, bringing massive snowfall and severe weather to the Northern Hemisphere.

Chapman says the temperate climate we now enjoy is the exception, not the rule. We are currently in an interglacial period, the Holocene. "Under normal conditions," he says, "most of North America and Europe (is) buried under about 1.5 kilometers of ice."


Prisoners of the Sun I.

An hour with Boone Pickens.

Okay, technically 51:29, but who's counting.. Mr. Pickens talks about oil & energy, but he covers other topics too, and he's a pretty funny guy.

A geologist, a savy, seen-it-all businessman, a decent American, he's warning us about our energy situation, and we seem (so far) not to be listening.

Bloomberg: Boone Pickens Expects Oil Prices to Continue to Rise.

Be Bullish.

WSJ: Crude, Heating Oil, Gas All End at Record Highs.

Quotes:

Buyers also found inspiration in global demand. China imported 1.66 million tons of diesel from January through March, the General Administration of Customs reported Tuesday, a sevenfold increase from the 230,000 tons imported in the same period last year.


Yahoo Tech Ticker: High Oil Prices? You Ain't Seen Nothing Yet.

Yahoo Tech Ticker: 6 Ways to Profit from 'Peak Oil'.

Quotes:

Earlier, Charles Maxwell, senior energy analyst at Weeden & Co., made the case that "peak oil" theory is real and inevitable, and that $300 oil is coming in the next decade. While a frightening prospect with major societal implications, it's also one with significant potential for profit.

When investing in energy for the long run, it's best to avoid the major oil companies like Exxon Mobil, Chevron, and ConocoPhillips, Maxwell says. There's a reason these firms are cutting back on exploration even as oil prices and demand are rising: Facing both geological and geopolitical obstacles, they cannot find reserves big enough to move the production needle.

Instead, Maxwell recommends a basket of companies with "long-lived reserves," including Brazil's Petrobras and Canadian tar sands plays such as Encana and Canadian Natural Resources. Unlike the majors, these firms will be able to maintain and even increase production into the next decade, and thus able to take advantage of the expected sharp rise in oil prices.

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

Technically, he recommends PBR, LUKOY, SU, ECA, CNQ, NXY in the above video.

Prisoners of the Sun.

First, kudos to anybody that caught that "Land of Black Gold" and "Prisoners of the Sun" are both Tintin adventures. Considering the limited audience here, and the obscure reference that makes.. probably nobody. Oh well. Spielberg's making a picture, or apparently three.

We are all (myself included) pretty sold on the theory of global warming by now. Humans are producing increasing carbon dioxide.. greenhouse gas.. climate warms, etc.

But, in an irony that will probably not be lost on history even if it has so far been lost on contemporary journalists, the year after Al Gore wins the Nobel Prize for his work on climate change [not a big fan personally of Al Gore, bit a wind bag if you ask me.. I digress], there came basically out of nowhere a good, old fashioned cold and snowy winter for North America and parts of Asia. Which by the way, caused us to burn a lot of natural gas and heating oil, and is, in my opinion, responsible for the strength in oil prices this year (and natural gas too).

Obviously, one season does not a trend make, but it appears there is another variable involved in our climate, one that is generally right in front of our eyes and which we seem to have left out of the global temperature equation altogether:

The sun, and it's associated cycles.

I need to do more research on this topic, but it's possible we have here what Micheal Steinhardt would refer to as a variant perception.

And, um, if there is truth to the below theory, it could be a big one.


The Bellingham Herald: Sun’s shift could mean global chill.

Quotes:

Fluctuations in solar radiation could mean colder weather in the decades ahead, despite all the talk about global warming, retired Western Washington University geologist Don Easterbrook said Tuesday.

Easterbrook is convinced that the threat of global warming from mankind’s carbon dioxide pollution is overblown.

In a campus lecture, he cited centuries of climate data in an effort to convince a somewhat skeptical audience that carbon dioxide’s impact on climate is being much exaggerated by former U.S. Vice President Al Gore and by scientists who appear to have won the debate over global warming.

“Despite all you hear about the debate being over, the debate is just starting,” Easterbrook said.

30-YEAR TREND

Easterbrook doesn’t deny that the Earth’s climate has been warming slowly since about 1980. But he argued that this warming trend fits a longstanding pattern of warming and cooling cycles that last roughly 30 years. Sunspot activity and other solar changes appear to explain the 30-year cycles, he said.

If that pattern persists, the earth could now be close to the next 30-year cooling cycle, Easterbrook said.

He noted that the 2007-08 winter set records for cold and snow in many parts of the globe. According to the data he displayed, the Earth’s temperature hit a peak in 1998 and has been steady or slightly cooler since then.

“One cold winter doesn’t mean much of anything,” he said. “A 10-year trend is interesting.”

He contended that warming periods appear to match periods of sunspot activity, which currently is at a low point.

Easterbrook noted that astrophysicists have been expecting that activity to begin increasing soon, but so far it has not.

Prolonged periods of low activity could lead to a dramatic cooling such as occurred in Europe during the so-called “Little Ice Age,” a term loosely used to describe cooler weather in the 14th to 19th centuries, Easterbrook said.

....

If the warming trend of the past 30 years really is reversing, it won’t take too long to become apparent.

“In three years we’ll at least know the direction we are headed,” Easterbrook said. “If we are one degree warmer in 2010 than we were in 2005, I will appear here and eat my words.”

While Easterbrook is skeptical about the risks from carbon dioxide, he said he strongly supports efforts to curb air pollution.

“There are a lot of things being put in the atmosphere right now that are way more dangerous than (carbon dioxide,)” he said.

But Easterbrook is far more worried about global population growth.

At present growth rates, the world would add another 3 billion people by 2050, putting enormous strains on supplies of food, water and other resources.

“Nobody is talking about it,” he said. “Nobody is doing anything about it, and it’s happening.”


The Australian: Climate facts to warm to.

Quotes:

"Is the Earth still warming?"

She replied: "No, actually, there has been cooling, if you take 1998 as your point of reference. If you take 2002 as your point of reference, then temperatures have plateaued. This is certainly not what you'd expect if carbon dioxide is driving temperature because carbon dioxide levels have been increasing but temperatures have actually been coming down over the last 10 years."

Duffy: "Is this a matter of any controversy?"

Marohasy: "Actually, no. The head of the IPCC (Intergovernmental Panel on Climate Change) has actually acknowledged it. He talks about the apparent plateau in temperatures so far this century. So he recognises that in this century, over the past eight years, temperatures have plateaued ... This is not what you'd expect, as I said, because if carbon dioxide is driving temperature then you'd expect that, given carbon dioxide levels have been continuing to increase, temperatures should be going up ... So (it's) very unexpected, not something that's being discussed. It should be being discussed, though, because it's very significant."

NASA: Long Range Solar Forecast.

Quotes:

The Sun's Great Conveyor Belt has slowed to a record-low crawl, according to research by NASA solar physicist David Hathaway. "It's off the bottom of the charts," he says. "This has important repercussions for future solar activity."

The Great Conveyor Belt is a massive circulating current of fire (hot plasma) within the Sun. It has two branches, north and south, each taking about 40 years to perform one complete circuit. Researchers believe the turning of the belt controls the sunspot cycle, and that's why the slowdown is important.

"Normally, the conveyor belt moves about 1 meter per second—walking pace," says Hathaway. "That's how it has been since the late 19th century." In recent years, however, the belt has decelerated to 0.75 m/s in the north and 0.35 m/s in the south. "We've never seen speeds so low."

According to theory and observation, the speed of the belt foretells the intensity of sunspot activity ~20 years in the future. A slow belt means lower solar activity; a fast belt means stronger activity. The reasons for this are explained in the Science@NASA story Solar Storm Warning.

"The slowdown we see now means that Solar Cycle 25, peaking around the year 2022, could be one of the weakest in centuries," says Hathaway.

You can read an update on solar activity here:

AARL: The K7RA Solar Update.

And view current sunspots here (none currently):

NASA: Sunspots.

Theory details:

Space and Science Research Center: The RC Theory.

I haven't read these two books yet, but I plan to:

Amazon: The Chilling Stars. A Cosmic View on Climate Change.

Amazon: Unstoppable Global Warming (Every 1,500 Years).

[Disclosure: If you buy the books via those links, I get a commission from Amazon. Just so you know..]

Charles Nenner: Energy Mania Coming.

Charles Nenner predicting an energy and emerging markets mania to come, sees energy as one place to be for a couple of years.

CNBC: Oracle of Eyes.

P.S. Coming?

P.P.S. How did they keep Joe Kernen quiet in this piece?

Help, Svetlana, stop this crazy thing!

Russia, which was able to outproduce Saudi Arabia for a couple of years there, may be on the oil production treadmill now too.

Reuters: Russian March oil output falls again, exports recover.

Quotes:

Russia failed to grow its oil output for a third month in a row in March and closed the first quarter with a one percent production decline year-on-year, confirming gloomy outlook by analysts for the whole of 2008.

Energy Ministry data showed on Wednesday March oil production edged down to 9.76 million barrels per day from 9.79 million bpd in February, and well below the post Soviet high of 9.93 million bpd reached in October last year.

In absolute figures, March production was over 5 million barrels - the size of five large tankers - down from October.

Since October, oil production in Russia has been balancing between decline and stagnation, prompting many analysts to revise down their oil production forecasts for 2008.

Play that funky music white boy.

My prediction: Until we get this energy mess addressed, stocks as represented by the whole market/indexes aren't going to do anything worth writing a Page One Wall Street Journal article about.

On a side note, ever notice how white (and generally older) the Peak Oil establishment is? Sheesh. [Okay, some exceptions, but generally..] This mostly has to do with them being older oil types, I know.

Next prediction: Peak oil ain't gaining real traction until we pull in some hot chicks.

And maybe we need a band.. [My suspicion is that most people hear the lyrics of Sheryl Crowe's song as suggesting gasoline will be FREE, whee!, rather than understanding the message.] I digress.

Oh, if and hopefully when we realistically address the energy issue (way, and I mean, -WAY- simpler said than done), the market will rock, I predict.

WSJ: Stocks Tarnished By 'Lost Decade', U.S. Shares in Longest Funk Since 1970s;
Credit Crunch Could Prolong Weakness.

Quotes:

Over the past 200 years, the stock market's steady upward march occasionally has been disrupted for long stretches, most recently during the Great Depression and the inflation-plagued 1970s. The current market turmoil suggests that we may be in another lost decade.

The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.


CNBC: Pickens: Oil Going to Remain Above $100 a Barrel.

Quotes:

Pickens thinks it's a mistake to follow daily price changes too closely.

"I can't play day trades, whether it's down one day, up the next, the volatility just eats my lunch," he said. "I've got to make a far-out play and stick with it."

....

Pickens says he's bullish on natural gas as well as oil, and he has a portfolio to prove it.

"My...picks for natural gas would be Cheaspeake Energy Corp [CHK], XTO Energy Inc [XTO], Sandridge Energy Inc [SD], and, if you're going to play the natural-gas fueling deal, you'd go to Clean Energy Fuels Corp [CLNE], on the Nasdaq," he said. "If you're going to play oil, on the domestics, I would say that Continental Resources [CLR], and Denbury Resources Inc [DNR] are the two best, plus Suncor Energy Inc [SU] the Canadian oil-sands one. Those are all in my portfolio."

CNBC: T. Boone’s Energy Plan.

CNBC: Oil Firms 'In Liquidation,' Says 'Peak Oil' Advocate.

Quotes:

All major oil firms, he said, are "overlooking the fact that they are actually in liquidation, their production has been in decline for several years [and] no matter how much money they intend to spend, they just can’t get ahead of their [production] decline curves. And their proven reserves are shrinking very rapidly.”

WSJ: Saudis' Big Gas Supply Looks Like It Is a Mirage.

Quotes:

Saudi Arabia's boast that its southern desert region contains vast reserves of natural gas is facing growing skepticism, amid a string of exploration setbacks by international oil companies operating there.

The kingdom had hoped that gas in the Rub al Khali, a vast desert that translates into English as the Empty Quarter, would be a key source of fuel for its booming economy. If the region turns out to be as empty as its name implies, Saudi Arabia runs the risk of a gas-supply crunch within the next decade at today's rate of demand.

Bernanke Begins (2008).

Genre: Drama / Crime / Thriller

Tagline: It's not who he replaces but what he does that defines him.

Plot Outline:

Gotham is in crisis. The citizenry has lost confidence, the market's in a panic, home-less are everywhere, and the city's headlines are dominated by news of Bears running wild. Heck, it's gotten so bad, even The Joker's moved out!

Where's Batman? Can he save the day?


Cast:

Ben Bernanke -- Batman

Hank Paulson -- Robin

Jim Rogers -- The Joker

Ben Stein -- Himself



Okay, all kidding aside, I think we're seeing a moment where the Fed gains some traction, Ben Bernanke gains the market's confidence, the US financial authority reboot gets a little breathing room, and some of the dollar bears/market bears/gold bugs reign in their horns [and maybe it's time to go short gold, the euro, or the yen for a while].

The difficulties aren't over, but the relative bottom may be in.

For that price, I'd have &^%$#@ bought Bear Stearns.

I was thinking I'd be buying Goldman Sachs this week, instead I'll be buying JPMorgan.

I'm not a fan of the financials (actually I hate 'em), it may not even be the bottom, and it's probably going to be a while before the smoke clears, but you have to admire this trade that Jamie Dimon just made.

How amazing is it that they kicked this guy out of Citibank? Makes me want to short Citi for good measure.

Bloomberg: JPMorgan Buys Bear Stearns for $2 a Share After Clients Flee.

In energy we trust. Everybody else pays cash.

Almost time to buy Goldman Sachs, I think.

CNBC: Bear Stearns Gets Funding to Restore Confidence.

Quotes:

Bear Stearns received a secured loan facility from JPMorgan Chase as part of steps it is taking to shore up the market's confidence in its operations.

JPMorgan Chase will provide a secured loan facility for an initial period of up to 28 days allowing Bear Stearns to access liquidity as needed.

The Fed, through its discount window, will provide non-recourse, back-to-back financing to JPMorgan Chase, the commercial bank said. JPMorgan said it does not believe this transaction exposes its shareholders to any material risk.

"Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity," said Alan Schwartz, president and chief executive in Bear Stearns, in a written statement. "We have tried to confront and dispel these rumors and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."