Maniac Tuesday

Another crazy day. Our indications were for a bright trading day but like it had to be -- the world markets were weak (actually weak is an understatement considering europe and us have tanked) and that led to a sell off everywhere. The oil pot is just boiling and does not intend stopping. Does this make our economy weaker? Well the govt bails us out -- but in the process diverts tons of money from elsewhere to support keeping oil prices in control -- and just scr*w's the economy out of shape. The oil is 129 $+ ? where does all this take us? -- well in deep deep trouble.
See there is a old theory about oil production and demand -- that is called Peak Oil

The explanation on Wiki is as given below:

Peak oil is the point in time when the maximum rate of global petroleum production is reached, after which the rate of production enters its terminal decline. If global consumption is not mitigated before the peak, an energy crisis may develop because the availability of conventional oil will drop and prices will rise, perhaps dramatically as they are doing now. M. King Hubbert first used the theory in 1956 to accurately predict that United States oil production would peak between 1965 and 1970. His logistic model, now called Hubbert peak theory, has since been used to predict the peak petroleum production of many other countries, and has also proved useful in other limited-resource production-domains. According to the Hubbert model, the production rate of a limited resource will follow a roughly symmetrical bell-shaped curve based on the limits of exploitability and market pressures.

Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, believe the high dependence of most modern industrial transport, agricultural and industrial systems on the relative low cost and high availability of oil will cause the post-peak production decline and possible severe increases in the price of oil to have negative implications for the global economy. Although predictions as to what exactly these negative effects will be vary greatly, "a growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day."

If political and economic change only occur in reaction to high prices and shortages rather than in reaction to the threat of a peak, then the degree of economic damage to importing countries will largely depend on how rapidly oil imports decline post-peak. The Export Land Model shows that the amount of oil available internationally drops much more quickly than production in exporting countries because the exporting countries maintain an internal growth in demand. Shortfalls in production (and therefore supply) would cause extreme price inflation, unless demand is mitigated with planned conservation measures and use of alternatives, which would need to be implemented 20 years before the peak.

Optimistic estimations of peak production forecast a peak will happen in the 2020s or 2030s and assume major investments in alternatives will occur before a crisis. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used.

Pessimistic predictions of future oil production operate on the thesis that the peak has already occurred or will occur shortly and, as proactive mitigation may no longer be an option, predict a global depression, perhaps even initiating a chain reaction of the various feedback mechanisms in the global market which might stimulate a collapse of global industrial civilization. In early 2008 there are signs that a possible recession will be made worse by rising oil prices.

This is the genisis of the oil problem and mind you there are alternative sources of energy that have been developed -- but the nations that have developed those are waiting for the right amount of panic in the world before they will declare such alternatives and make another tons of money.

Meanwhile -- if the oil continues to skyrocket -- be prepared for bad -bad times to come - till ofcourse the alternative sources of energy are declared and competitively priced -- and economically available.

Psst .... that is why I am so bullish about Reliance Petro

Cheema