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The Looming Energy Crisis And Its Effect On Gold
John Tyler, The Infognome
We have a huge looming disaster in the horizon, the coming energy crisis. The rate at which new oil is being discovered is not enough to prevent us from hitting a brick wall in the near distant future. Discovery reached its peak stage in the 1960's so despite all the claims and all the fancy new equipment , we have not been able to exceed the discovery rate of the 60's. We are consuming 4 barrels of oil for every one we find right now.

Looking at the above chart one can see very easily that discovery peaked in the 1930's and production peaked in the 1970's after which it has been nothing but a down hill battle for the USA.

So the US is now between a hard place and rock there is very little in terms of exploration that can be done in the US, we have to depend on all our oil needs from the outside world. And with china emerging as an industrial power the needs for oil are growing at an exponential rate. Something will have to give sooner than later.

"The oil-drilling rig count over the last 12 years has reached bottom. This is not because of low oil price. The oil companies are not going to keep rigs employed to drill dry holes. They know it but are unable ... to admit it. The great merger mania is nothing more than a scaling down of a dying industry in recognition that 90% of global conventional oil has already been found." - Goldman Sachs, Energy Weekly, August 11, 1999

Conclusion

As oil prices rise inflation starts to become noticeable, the average American only understands inflation when he sees the basic things that he pays for increase in price rapidly, when gas at the pump costs 5 dollars a gallon and milk 4 dollars a gallon he will snap out of his daze. The net effect is that this is all very very bullish for Gold and silver bullion. So make sure when someone asks the soon to become proverbial question "Got Gold". Your answer is "Your dam right I do" and not "what Gold isn't it supposed to be ancient relic"

The Infognome's Thoughts (www.infognome.com)

First Of all I would like to state that I support Sol's conclusion, the net effect of this energy crisis is that Gold and Silver bullion will see a tremendous rise in their values, however it would not hurt to have a little of black Gold Stocks to.

The old "black gold" is slippery, dirty, and getting harder to find. A crisis is the result of poor preparation and planning meeting the unforeseen. We have a grand opportunity here to avoid a crisis, and turn any energy crisis into an opportunity. You can go out campaigning for energy efficiency, convert to solar power and ride a bike, but none of these will prevent the inevitable rise of energy prices, and you'll get lung cancer from breathing diesel fumes.

I would like to make a few comments on the weekly spot chart of Nymex light crude. There is a broad converging triangle, and a breakout on the upside suggests a move to $48 a barrel. Remember that this is in $US terms, so a fall in the $US exchange rate makes this target look realistic.

Note that with each cyclic pull back, there is a higher bottom. This suggests a gradual increase in demand, and thus an upside break is more likely.

One can look at global reserves and inventory, but oil is a geopolitical commodity like gold. Certainties don't exist, speculation is rife, and we are totally dependent on it.

There are numerous ways that we can prepare, other than servicing the pushbike and storing away some cans of petrol.

In The Highlander Trading Club, we are accumulating oil & gas stocks when they are oversold, as well as looking at the support sector, driller's etc. One interesting play is Boots & Coots (WEL) that acts as a natural hedge against terrorists striking this sector. They used to call Red Adair (the man with the asbestos underwear) when a well blew. www.redadair.com/thriller.html They now call Boots and Coots. They are a minnow, but are developing a preventative maintenance program.

There will be opportunities in biofuels. Diesel equivalents made from canola oil runs cleaner and more efficiently than deiseline. Consider businesses involved in solar cells and generating wind farms. Look for companies that have large rock oil reserves.

Whatever you do, don't try discovering oil yourself. The problems only start then. The autobiography of Dr.Armand Hammer makes fascinating reading. Why not check out his FBI files? http://foia.fbi.gov/hammerop.htm .It's only a mere 658 pages.

He was a man who made money extracting religious relics from under the nose of the Bolsheviks, and then broke the monopoly on lead pencil making that had been held secret for generations within an isolated European town. However his greatest challenge came with his oil adventures. Discovering oil, and a lot of it, was no great deal then. The problem was what to do with it as the majors had a noose hold on transport, refining and distribution. Things like this don't change!

Bottom line this energy crisis will be extremely positive for Gold and Silver Bullion so make sure you have some.

John Tyler, aka The Infognome
Promising never to go out and explore for oil, except in the markets.


TACTICAL INVESTOR
www.tacticalinvestor.com

December 11, 2003

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