Oct

3

When oil began to rise in 1999 I liked to think of it as a form of efficient "emerging markets tax" for stability and growth directed at regions that need it the most. Think of Putin of Russia running with oil at $10, or the Royal Family of Saudi Arabia under such a dire scenario.

Sixty dollar oil is a moderate price to pay for the benefits of having these regions busy building a better infrastructure, improving their political system, and buying Western goods — materials, corporate advice, entertainment, iPods. Moreover, it's a tax that doesn't need any political approval process or that risks getting dissipated in the distribution process.

Recently, however, just as the US economy seems to be slowing, oil has decided that emerging markets have had enough of a boost, and it's now time to give something back to the Western consumers. Let's keep the Champagne on ice, but everything seems to come in handy just when needed through some form of higher-order mechanism!

Jeff Baatenberg adds:

I can see peak worldwide oil production in the rearview mirror. December 2005 will be peak month, May 2005 being the only other month to reach 85 mbd. Q1 2006 will be peak quarter. Year to date 2006 is slightly ahead of 2005, but 2006 has a steep treadmill to run to maintain the lead. December 2006 will certainly lag December 2005, possibly dropping the ball in the clutch and handing the peak oil title to 2005. Natural decline rates mean you can forget about 2007 or any other year taking the crown away. So 35 years after U.S. oil production peaked and entered permanent decline the world is following suit. Meanwhile the air slowly being let out of the credit bubble. The Pollyannas and the Abelprecs ridicule each other. Yet when credit expands, the optimists are right; but when credit contracts the doom and gloomers are right. With a big public homebuilder slashing prices 30% plus appliances, fiat currency protection looks very good at this point. Seems owning a piece of North America's largest hydrocarbon deposit might be worth looking into. By chance it is located in the world's most friendly business jurisdiction. This young man looks north, way north.

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