Friday, February 09, 2007

More On Peak Oil

Dear HAC:

Interesting developments are afoot.

On Thursday, Feb. 1, Matthew Simmons, a well-known investment banker in oil, appeared on Bloomberg financial and stated that peak oil had occurred - and that we'd be hearing as much about peak oil over the next two years as we're presently hearing about global warming.

Notice, too, that corn - used to produce ethanol for fuel - is up. So much so that the price of tortillas in Mexico are up about 400%. Last week there was a news item that some 75,000 Mexican nationals were protesting the increased costs.

I think it would be wise for us to prepare for significantly higher food prices here in the U.S.

Also, in the Wall Street Journal, a news item came across that the Cantarell oil field is in sharp decline. Mexico gets about 38% of their national budget from PEMEX - and the revenues are down. Expect them to go down more.

Notice, too, that OPEC (Saudi Arabia, Iran, etc.) are scaling back production. Some believe (but cannot prove) that the big fields in the Middle East have also peaked.

What does this mean? Purely in my opinion, and with lots of caveats, I believe we should expect:

1) Much higher fuel prices over the next few years.

2) Significantly higher prices for food, especially meats (due to the use of corn as food for cattle, chickens, and hogs).

3) A growing flood of illegal immigrants from Mexico and points south

4) Possibly increased political instability in Mexico

My conclusion? This is a really good time to get to know one's neighbors.

-Claudius

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