The En-Pro Blog

Two weeks ago, we entered a new chapter in the global economic crisis. After the announcement of the astronomic $1 trillion dollar U.S. bailout of Greece by the IMF and European Union, the initial stock market euphoria has turned into caution and unsettled fear.

Now Britain has their first coalition government in 70 years and will they be able to rein in their ballooning debt? Governments have been living beyond their means and drastic cuts are needed now to avoid defaults.

The markets are asking will it buy enough time for the Euro fiscal misfits to get their finances in order? Will they be able to pass enough belt tightening measures without massive riots and turmoil?

Can the people in the affected countries ratchet down to a beans on toast lifestyle after enjoying caviar benefits? Is this just a temporary financial bailout that will come back to haunt the euro/global markets in two or three years?

How much will these social and financial changes affect global energy demands?

All this uncertainty has significantly driven up the investor flock’s fear quotient and they are moving away from selected currencies and commodities and diving into the safe glitter of gold.

So, what exactly does it all mean? Find out what our analysts are saying in this week’s Energy Report. Send your email to info@en-pro.com to sign up.

By: Roger McKnight, Senior Petroleum Advisor

Did someone actually read and understand our rant in the Weekly Energy Report of April 23, 2010 a mere three weeks ago? To refresh your memory, we claimed that an $85/bbl crude oil price was in fact a crude joke and that the real-world pricing should be $73 to $75/bbl. Psychology101 says that when you’re right let them know it. Here goes. Crude on Thursday, April 29 closed at $85.17/bblwhileat the time of this report, Thursday, May6, crude closed at or near $77.11/bbl, which is suspiciously close to our ceiling of $75/bbl. So why the swing of over $8/bbl in one week? There are three reasons: the Gulf, the Euro and Supply Glut.

The Gulf: Prices spiked late last week in fear that the crude oil spill would interrupt supply of crude to the refinery complex. Let’s get this straight. The drilling platform was on fire so they poured millions of gallons of water on it to put it out but at the same time sank the entire platform. This allowed crude to flow from the sea bed at what they now claim is 5,000 barrels per day. (More on this in the coming weeks). They then tried to burn off the crude as it sloshed toward the distant shore line, as well as dumping dispersants to try to breakup the mess. Hind site suggests to me that putting out the fire was the first mistake. Once the speculators regained their sanity and realized that the refinery and pipeline infrastructure had not been compromised, prices of crude, gasoline and distillates began to retreat. How long will this spill go on? No one knows but let’s look on the bright side.

What possible bright sides could there be to the Gulf Coast Oil Spill? Find out in this week’s Energy Report. Sign up at info@en-pro.com.

By: Roger McKnight, Senior Petroleum Advisor