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Stock Ideas Investors Daily Edge Strategic Oil Reserves Bring the Oil into port
Stock Ideas Investors Daily Edge Strategic Oil Reserves Bring the Oil into port 
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| Strategic Oil Reserves Bring the Oil into port |
| Monday, 21 July 2008 | ||||||||||
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I was watching the movie Blood Diamond the other night and it got me to thinking, what if there is a real conspiracy to monopolize oil. For those of you that may not have seen the movie, there is a diamond trading company, Van De Kaap Corporation, and they buy up as many diamonds as possible and lock them away in vaults in order to maintain the impression of rarity. This isn’t the main theme of the movie, but it was this sub-plot that caused me to ponder the oil market. I know I am comparing fantasy (a movie) and reality. But just let your mind slip into fiction mode for a while. Is it really all that far fetched of an idea? Let’s see, the biggest oil producing countries seem to be in constant conflict. Much like the biggest diamond producing countries. Let’s look at the names on the list. The biggest producer is Saudi Arabia. We have fairly good relations with Saudi Arabia, but things can get tumultuous at times and it is still in the Middle East where tensions run high all the time, or at least as long as I can remember. Number two on the list is Russia. Our former cold war enemy produces almost 10 million barrels of oil per day. The country has grown more stable over the past few years. The U.S. is number three on the list, but we may be our own worst enemy. Number four on the list is Iran, yeah the country that we are currently in dispute with about nuclear weapons and testing. While Iran’s production is less than half of what Saudi Arabia’s is, as tight as supply is right now, every little bit matters. Number five on the list is Mexico. Of all the names on the list, this is the U.S.’s closest ally. Number six on the list is China. They need all the oil they can get right now for their own demand. The benefit to the rest of the world is that at least they are producing a fair amount and aren’t draining the rest of the world. The U.S. is the biggest drainer.
Looking down the list, Venezuela comes in at number 10. President Hugo Chavez revels in his country's place on this list and he uses it to his advantage. Is there a leader around the world that thumbs his nose at the U.S. more than Chavez does? Kim Jong Il tries, but I would have to give the title to Chavez. So we have a mixture of friends and foes on the list. But many of the friendly countries have to deal with adversity on a daily basis, just based on their geographic location. Going beyond the top ten, you see countries like Nigeria, Libya and Iraq. Three more countries in dangerous environments, politically unstable or foes of the U.S. What About Strategic Oil Reserves?Looking beyond the geo-political issue, let’s talk about the Strategic Oil Reserve. The U.S. has the world’s largest reserve with over 700 million barrels stored. This is a record high for the reserve and I have to ask why at a time of near record oil prices (last week’s decline helped considerably) are we holding such a huge reserve? Shouldn’t we be using this oil to bring down the costs to consumers? How about selling some of it on the open market and paying off some of the massive debt this country has?Call me crazy, but hording oil while prices are high seems like the exact opposite of sound economic policy. We should build reserves during low price periods and use it during high price periods. Doesn’t this make more sense than what we are doing now? Rumors wasn’t able to find this information anywhere reliable, but I have read accounts of full oil tankers being anchored in various spots around the world waiting to bring the oil into port when it looks like oil is peaking in price. This way the owners of the oil can get the maximum price. Could this be considered the vault with the precious diamonds? How long can you hold off on bringing the oil into port? If this is the case, this is the equivalent of price fixing and if it can be proven, the guilty parties should be punished to the max. The world, not just the U.S., is bordering on an economic crisis and much of the fault lies with hugely inflated oil prices. Good luck and good trading, Rick P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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