<p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">There was an awful lot of oil talk over the weekend. Much of it with the boring feel of stuff said many times before, like King Abdullah blaming these prices on the &ldquo;selfishness&rdquo; of the futures markets. He may have a point about traders pushing prices too high but there&rsquo;s a lot of greed to go around.</font></p><font face="Times New Roman" size="3">&nbsp;</font> <p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">So here it is by the numbers from the Wall Street Journal, Houston Chronicle and the BBC:</font></p><font face="Times New Roman" size="3">&nbsp;</font><span style="font-size: 10pt; font-family: Verdana">By August the Saudis said their output will rise to 9.7 million barrels a day, up from 9.5 million a day.</span><span style="font-size: 10pt; font-family: Verdana">&nbsp;</span> <p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">But for now, there&rsquo;s bad news about supplies:</font></p><font face="Times New Roman" size="3">&nbsp;</font><span style="font-size: 10pt; font-family: Verdana">Attacks on Nigerian oil production facilities onshore, and more alarmingly offshore, have cut production by 20 percent onshore and 10 percent offshore.</span><span style="font-size: 10pt; font-family: Verdana">&nbsp;</span> <p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">Rising demand means much higher prices, though it may be factored into the market already.</font></p><span style="font-size: 10pt; font-family: Verdana">&nbsp;</span><span style="font-size: 10pt; font-family: Verdana">For every 1 percent rise in demand, crude oil rises 20 percent according to U.S. Energy Secretary Samuel Bodman</span><span style="font-size: 10pt; font-family: Verdana">For the year the International Energy Agency is predicting demand up 800,000 barrels a day, nearly 1 percent.</span><font face="Times New Roman" size="3">&nbsp;</font> <p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">Ultimately much of this run-up goes back to the idea that oil production is close to its peak, if it has not done so. A move the Saudis may help answer that question.</font></p><span style="font-size: 10pt"><font face="Times New Roman">&nbsp;</font></span><span style="font-size: 10pt; font-family: Verdana">Saudi Arabia</span><span style="font-size: 10pt; font-family: Verdana"> also promised an aggressive campaign to push its overall output capability to as much as 15 million barrels a day by 2018 from around 11.4 million. To reach its higher goal the Saudi&rsquo;s are expected to up their spending on maintaining and adding production from more than $60 billion now to nearly $130 billion.</span><font face="Times New Roman" size="3">&nbsp;</font> <p style="margin: 0in 0in 0pt" class="MsoNormal"><font face="Times New Roman" size="3">The bottom line: oil prices were up again&nbsp;Monday.</font></p>

<span style="font-size: 10pt; font-family: Verdana">Well it&rsquo;s official, we&rsquo;re being shocked.</span><span style="font-size: 10pt; font-family: Verdana">In the midst of a ho-hum AP energy story &ndash; another record a few pennies short of $141 a barrel<span>&nbsp; </span>&ndash; the head of the International Energy Agency announced the world is feeling its &ldquo;third oil price shock.&rdquo;</span> <p style="margin: 12pt 0in" class="MsoNormal"><span style="font-size: 10pt; font-family: Verdana"><a href="http://www.chron.com/disp/story.mpl/headline/biz/5865186.html"><font color="#800080">http://www.chron.com/disp/story.mpl/headline/biz/5865186.html</font></a></span></p><span style="font-size: 10pt; font-family: Verdana">Numbers 1 and 2 were in 1973 with the Arab oil embargo and 1979 with the revolution in Iran. </span><span style="font-size: 10pt; font-family: Verdana">To put that in perspective, in 1973 Richard Nixon was president and the number 1 hit was </span><span style="font-size: 9pt; color: black; font-family: Verdana">Tie A Yellow Ribbon 'Round The Ole Oak Tree by Tony Orlando and Dawn. In 1979 we had Jimmy Carter and . My Sharona &ndash; the version <span>&nbsp;</span>by The Knack. &ndash; followed by an awful lot of disco</span><span style="font-size: 9pt; color: black; font-family: Verdana">In both cases the shocks hit when inflation was a worry, the economy was sluggish and there was a recession ahead &ndash; hitting in 1974 and 1991. I&rsquo;m still hoping next year will be better but there&rsquo;s so many signs, big and little, that this is far from over that I fear this shock will be with us for a while.</span><span style="font-size: 9pt; color: black; font-family: Verdana">Do you think talk that matter doesn&rsquo;t matter as much as it used to is true, or is that wishful thinking and an actual recession is ahead?</span>

<p><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">There&rsquo;s a real ring to the phrase one trillion dollars</font></font></font></span><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">That appears to be what OPEC countries are likely to bring in this year by exporting oil. The fact rated a passing mention in a story in <a href="http://www.rigzone.com/news/article.asp?a_id=63999">Rigzone </a>reporting the group said it took in $730 billion in 2007.</font></font></font></span></p><p><span style="color: #003366"></span><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">Last year&rsquo;s total is looking low now. For this year, it&rsquo;s bringing in 50 percent more than last year, so the year end total could easily pass $1 trillion. That total would be 95 billion past a trillion, but with rising prices that might even be low.</font></font></font></span><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">So what else is costing us a trillion? Well in April it was widely reported that the International Monetary Fund estimated the cost of the credit crisis would be around $1 trillion. <span>&nbsp;</span>Given the rising writeoffs since, including today&rsquo;s talk of government plans to rescue the mortgage giants, Freddie Mac and Fannie Mae, that&rsquo;s also could be on the low side.</font></font></font></span><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">All of that made me think; didn&rsquo;t Dr. Evil demand $1 trillion dollars in ransom in the first Austin powers movie?</font></font></font></span> </p><p style="line-height: 14.25pt"><span style="color: #003366"><font size="3"><font face="Times New Roman"><font color="#000000">Well maybe. This site called <a href="http://semanticcompositions.typepad.com/index/2006/03/what_did_dr_evi.html">Semantic Compositions</a> analyzed the meaning of the statement and concluded he was asking for more than $1 trillion when he said:</font></font></font></span></p><blockquote><span style="font-size: 10pt; font-family: Verdana">Dr. Evil: &quot;Okay then. We hold the world ransom for.....One hundred..BILLION DOLLARS!!&quot; </span></blockquote><p><font face="Times New Roman" size="3">The thinking is that outside the United States, a billion is a million, million dollars, and Dr. Evil is British, living in 1969&nbsp;and greedy beyond comprehension, <span>&nbsp;</span>so in current dollars that could be far higher than $1 trillion and ensure that: </font></p><blockquote><span style="font-size: 10pt; font-family: Verdana">There would have been no choice but for everyone to agree that he now owned the world, and we were all his slaves.</span></blockquote><p><font face="Times New Roman" size="3">The impact of oil consumers paying OPEC more than a trillion remains to be seen, though the markets recent reaction to rising oil prices and rising losses in the credit markets, suggests its, well, evil.</font></p><p><font face="Times New Roman" size="3">Do is there any benefit to seeking parallels between Dr. Evil and the organization that does not want to be referred to as a cartel, or is it time for this week to end?</font></p><font face="Times New Roman" size="3">&nbsp;</font>

<p>&nbsp;<span style="mso-ansi-language: EN">&nbsp;</span></p> <p style="MARGIN: 1.15pt 0in"><span style="mso-ansi-language: EN"><span style="font-size: medium; font-family: times new roman;">Last weekend's OPEC meeting didn't change much, but did produce a new rule of thumb - when oil drops below $75 a barrel a lot of oil exploration projects become an endangered specicies.</span></span></p> <p style="MARGIN: 1.15pt 0in"><span style="mso-ansi-language: EN"><span style="font-size: medium; font-family: times new roman;">&nbsp;</span></span></p> <p style="MARGIN: 1.15pt 0in"><span style="font-family: times new roman;"><span style="font-size: medium;"><span style="mso-ansi-language: EN">That number was thrown out&nbsp;by the </span>Saudi Oil Minister Ali al-Naimi at the groups meeting in Cairo. He call $t5 a barrel a "fair price" and the one needed to keep the more expensive new exploration projects capable to adding to world supplies on track.</span></span></p> <p style="MARGIN: 1.15pt 0in"><span style="font-family: times new roman;"><span style="font-size: medium;">&nbsp;<span style="mso-ansi-language: EN">&nbsp;</span></span></span></p> <p style="MARGIN: 1.15pt 0in"><span style="mso-ansi-language: EN"><span style="font-size: medium; font-family: times new roman;">At least that's how I translate what he was talking about from the meeting </span><a href="http://www.upstreamonline.com/live/article167401.ece"><span style="font-size: medium; font-family: times new roman;">coverage</span></a><span style="font-size: medium; font-family: times new roman;">. There aren't a lot of examples of project falling by the wayside. Oil companies are generally loath to discuss the prospects that have soured with lower prices. But here are some recent reports highlighting the pain at around $50 per barrel:</span></span></p> <p style="MARGIN: 1.15pt 0in">&nbsp;</p> <ul> <li> <div style="MARGIN: 1.15pt 0in 1.15pt 0.5in"><span style="mso-ansi-language: EN">Saudi Aramco has dropped a project to redevelop its Damman oilfield with industry sources quoted by <a href="http://www.upstreamonline.com/live/article167392.ece">Upstream</a> saying the </span>claiming state-run Saudi Aramco has canned the project because of cost fears. The $1 billion-plus project was to pump 75,000 barrels per day of crude and 100 million cubic feet per day of gas, sources said.</div> </li> <li> <div style="MARGIN: 1.15pt 0in 1.15pt 0.5in">Alexander Kaplan, vice-president of TNK-BP, told a <a href="http://www.upstreamonline.com/live/article167222.ece">news</a> conference the company was working on an assumption that oil prices would stick at around $60-$70 per barrel next year. Production could suffer seriously if prices fall below 50, he said. We have deposits which are under the threat of closure because every tonne of oil produced generates a loss."</div> </li> <li> <div style="MARGIN: 1.15pt 0in 1.15pt 0.5in">This <a href="http://www.upstreamonline.com/live/article167051.ece">story</a> from Upstream pointed out that the prices near $50 has prompted numerous companies with projects to produce oil in the Canadian oil sands to defer and rethink their plans for new projects and expansions</div> </li> <li> <div style="MARGIN: 1.15pt 0in 1.15pt 0.5in">Callon Petroleum Co. <a href="http://www.energycurrent.com/?id=2&amp;storyid=14553&amp;email=1">said</a> it would suspend development of the Entrada field on Garden Banks Block 782 in the deep waters of the U.S. Gulf of Mexico blaming higher than expected costs and lower oil and gas prices for the decision.</div> </li> </ul> <p style="MARGIN: 1.15pt 0in"><span style="font-size: medium; font-family: times new roman;">A lot of companies are still likely revising their budgets as their cash flow projects shrink. I think </span><a href="http://www.upstreamonline.com/live/article167416.ece"><span style="font-size: medium; font-family: times new roman;">this</span></a><span style="font-size: medium; font-family: times new roman;"> comment might be telling about life among many independent oil and gas companies.</span></p> <p style="MARGIN: 1.15pt 0in">&nbsp;</p> <p style="MARGIN: 1.15pt 0in 1.15pt 0.5in">Irish explorer Island Oil &amp; Gas said it would focus on asset sales to finance business growth while targeting quick returns from field rehabilitation projects and low-entry, high reward plays capable of attracting major international players.</p> <p style="MARGIN: 1.15pt 0in 1.15pt 0.5in">"The simple fact is that with banks virtually unable to lend and institutional investors being hit very hard, management teams have to be both creative and aggressive to survive," said chief executive Paul Griffiths.</p> <p style="MARGIN: 1.15pt 0in 1.15pt 0.5in">&nbsp;</p> <p style="MARGIN: 1.15pt 0in"><span style="font-size: medium; font-family: times new roman;">That sounds what it's like to live below that $75 price margin. No one asked if these projects would come back to live at $75--a 50 percent price increase from where oil has been lately -- or if the higher oil prices would hurt an already sick economy.</span></p> <p style="MARGIN: 1.15pt 0in"><span style="mso-spacerun: yes"></span></p> <p style="MARGIN: 1.15pt 0in"><span style="mso-spacerun: yes"><span style="font-size: medium; font-family: times new roman;">But is $75 a good rule of thumb or&nbsp;just wishful thinking for OPEC?</span></span></p>