OPEC WARNS WITH A PRICE BACKLASH

OPEC (Oil Producing & Exporting Countries), a consortium of countries in the Middle East, Asia, Africa and Venezuela that control 40% of the world's oil supply have stated, out of an act of medieval mentality and childish bickering, that if a large shift is planned out of the petroleum fuel sources by the industrial nations then they will re-evaluate their investments which could lead to a prices 'going through the roof'. A warning! A reaction. Concern and fear. But do not fear, I think they are bluffing. In any case, they are being quite stupid. China, India, the Pacific Rim and other developing companies will keep demand on the up. The alternative fuels are decades from even something like 20% of the market. And by that time the market will be much bigger. If anything, an OPEC act of retaliation will only strengthen the resolve and create more political will to prioritize a larger shift out of petroleum based fuels. OPEC should instead work with the manufacturers and innovators. Do more R & D. Work on making the fuel more potent and cheaper. Make it compete. Play the good game. A spike in the price of gas and other commodities will be very harmful to consumers and economies in the short run. However, it justifies bigger investments in the alternative fuel projects.

OPEC WARNING ON BIO FUELS

I TOLD YOU SO (AS DID HALF THE WORLD)

It can be a brief uplifting experience to see one's predictions come true. That is until you discover that so did half the world's. If you are predicting that the price of some commodity or stock is going to go up or down and so it happened then its likely that half the world was right about it and the other half wrong. Unless you belong to that elitist club of contrarians that shine as rare as the sun does in the city of London. In the world of gas prices these days that ray of sunshine would be even more scarce. Most people knew that gas prices at the pump would rise. To what level? And if they will break $4/gallon in the high-cost-of-living markets is the real game. I think with the Nat'l average this week around $3.15 there really isn't much of a danger over all but some spots in California and trudging perilously close to the psychologically sensitive $4 mark.

Ever since I found my interest in this domain I have been watching the relationship between Gas prices and Crude Oil futures which is quoted in $ per barrell and is the international benchmark for the market price of petroleum. Now, that's whole sale and not the retail that we face everyday. And after wholesale it breaks out into a lot of different types of fuels the largest of which would be the one that ends up in our cars. I have watched countless TV clips of newscaster and energy pundits hacking out the relationship between crude oil and gas at the pump and nothing anyone has ever said really sticks to mind. The relationship is not without its sense of complexity and perplex and why shouldn't it be. We are talking about two different things. Because crude oil encompasses more than just what we see at the pumps and there other elements between raw material and finished product namely refining the relationship is put in myopia. However, crude oil has stayed at or around $65. The high end of the $65 - $45 range I predicted in December of 2006. Which means the range is off and will likely bust. Still I am impressed that it held there for quite some time. Understand that suppliers like Venezuela, Russia and the OPEC block co-ordinate to regulate supply and price.

Also understand that does demand at the pump have a real direct relationship with the price of crude oil? Let's say the sales of HEVs that do 40+ MPG went up to 5 million units per year. Well its not quite that simple. To get a perspective of why that necessarily doesn't change things a whole lot read my blog entry TO LIVE AND TO LEARN. But, as no one can really predict the future, this can still have a profound impact. The production of Nickel Hydride batteries, Ion Lithium batteries and Hydrogen fuel cells will get more efficient. And the level of fossil fuels these production processes consume will lessen. The use of these technologies over the combustion engine may even have a consumption advantage vis-a-vis crude oil. We do know that things will change in the future. At some point, these factors will bear enough, I hope, to impact the price of crude oil lower. Crude oil can already take a few hints:

PRIUS AND CAMRY HYBRID SALES SOAR IN MARCH
TESLA TO PROVIDE BATTERY PACKS TO TH!NK
NEW US ALT. FUEL STATIONS DIRECTORY HAS 2,200 LISTINGS
DUBAI INTRODUCING HYBRID TAXIS

I would still like to make an optimistic and perhaps more contrarian short term prediction. That Crude Oil futures will dip below $60 at least once in 2007 despite a vast and thorough effort by supplying nations to control supply and also refining still under developed.

To be continued..............