The World’s biggest Oil Speculator Did you ever wonder who might be the world’s biggest energy speculator? Now let me see, might it be T. Boone Pickens?  Or perhaps it might be Prince Alaweed of Saudi Arabia. Maybe it is

The World’s biggest Oil Speculator!

Did you ever wonder who might be the world’s biggest energy speculator? Now let me see, might it be T. Boone Pickens?  Or perhaps it might be Prince Alaweed of Saudi Arabia. Maybe it is one of those big fund traders, you know, the ones that can allegedly control the price of oil on a whim. Well if that is what you think, you are wrong. Because the world’s biggest energy speculator right now is none other than our own President Obama. President Obama is speculating big time on energy and all he is risking is our lives, our fortunes and our sacred honor. Let us pray he doesn’t get stopped out.

What am I talking about? Am I talking about President Obama’s speech last night before a joint session of Congress? When he said his priorities are energy, health care and education and it all “begins with energy”. Where he will spend billions of dollars on doubling the nation's supply of renewable energy in the next three years at a time when traditional forms of energy are undergoing rough economic times. Is it because he is gambling big stakes that by making the “largest investment in basic research funding in American history” a gamble that the President hopes “that will spur not only new discoveries in energy, but breakthroughs in medicine, science, and technology.” Is he risking all this money and political capital because he really believes that “the country that harnesses the power of clean, renewable energy will lead the 21st century”?”

Well that is part of it. And of course they are noble goals I suppose. But what really bothers me is something that came out yesterday that got swept under the radar and that is the fact that President Obama wants to use our national security to speculate in the oil market. That’s right. You see Obama must believe that he is bigger and smarter than the oil market because the Obama administration will use oil that this nation owns in our Strategic Petroleum Reserve to speculate oil prices. Ok they did not say speculate they said to ‘tame prices” but is that not the same thing? The SPR was created to protect this country from a “severe supply disruption” and it was never intended to be used as a market manipulating tool. To try to use the SPR for what really comes down to political purposes is wrong and Obama really needs to rethink this. Not only is it is bad policy but a policy that will do more harm than good to the economy and ultimately the American people. Ian Talley of Dow Jones News wires reports that the Obama administration is prepared to tap the nation's Strategic Petroleum Reserve should prices become too burdensome on the economy.

“Burdensome on the economy” what does that mean? Who will make that decision, the public opinion polls?  The President? Does he have charts, is he a fundamentalist or a technician. Does he not realize that sometimes high oil prices are a reflection of a strong economy. If oil was released during the boom cycle of demand a few years ago the market would have gobbled up every barrel. Does the President think that he can manipulate the price of oil with our measly 702.8 million barrels of oil in the reserve and our measly proven oil reserves of 20.9 billion barrels when Saudi Arabia with their proven reserves of 266.8 billion barrels and all of OPEC has trouble manipulating price. If we add oil to the market to reduce prices, OPEC can cut and match us barrel for barrel until we are out of oil. If Obama is serious about using oil as a market manipulating tool he better start building three or four SPRs or the market will laugh in his face. Yet instead, Dow Jones reports that as expected, House lawmakers rejected Monday a funding proposal made by the Bush administration before Obama took office that would start an expansion project to double the size of 100,000 barrels a day SPR for months by forcing the administration to halt deliveries. Why do that if you are going to try to release oil to manipulate prices. It is like trying to trade futures with insufficient capital.

But it is more than that. It ruins the mystique of the SPR. The SPR acts as a deterrent to our foes that may dream of using oil as a weapon. Let’s face it, politicians are lousy traders. Remember when John Kerry though $35 a barrel was ridiculously high? Remember he said he would not put oil in the reserve until it would go under $30. Do you think that if John Kerry had the power to release oil from the reserve he would have stopped oil eventually marching towards $100? Not a chance. It would have just cost tax payers more money by being short in a rising market! Dow Jones reported that Sen. Jeff Bingaman, D-N.M., head of the Senate Energy and Natural Resources Committee, said that Congress needed to review SPR policy and many experts recommended both tapping the reserve to tame prices and build a products stockpile. Yet tapping the reserve to tame price might be like trying to throw water on a chemical fire. You might think it is the right thing to do but it could backfire. Dow Jones quoted Amy Myers Jaffe, an author of the Rice University report, told Congress last year that besides increasing supply to the market, releasing oil from the reserve would also force out some speculation in the futures market. But Amy might be wrong. It might or it might not! Maybe some speculators would buy that oil and hang onto it and sell it back to the government at a higher price!This is a slippery slope and something that should not be taken lightly.

At the same time the Department of Energy confirmed a story that was first reported by me in The Energy Report and first on the Fox Business Network and that is for the first time the Department of Energy is considering setting up emergency stockpiles of diesel and gasoline. The DOE said they are studying the option of a petroleum products stockpile, no decisions have been made. Dow Jones newswires reported that, “Phil Flynn, an energy analyst at Alaron, (hey I know that guy) said the benefits of a national products reserve were highlighted during the past several hurricane seasons when refineries were shut down. Major gasoline shortages forced the federal government to issue fuel quality waivers, increased reliance on imports and helped push prices over $4 a gallon."It would help the economy survive a major hurricane blast," Flynn said, adding that it would also buffer the competition for imports that was seen last year when China bid up diesel in its search to meet Olympics-generated demand. Flynn said that while the DOE is pushing to “site” any products stockpile in salt caverns along the Gulf Coast where existing crude reserves are stored - saying it would be the cheapest option - some lawmakers are lobbying for stockpiles in California and Massachusetts. "It may end up where the political power base is strongest," he said in a note to clients.” Dow goes on to say, “One of the weaknesses exposed during the 2006 Alaska supply disruption - when the country's largest oil field was shut down after a major pipeline leak - was there were fewer refining options for the West Coast than the rest of the lower 48 states.”

Bernanke bounced oil by assuring that our banks would survive and not be nationalized and the stocks rallied. Yet that rally is being restrained by more reports of soft demand. Bloomberg News Reported that Japan’s oil imports fell in January for a third month as sluggish industrial output and consumer spending slashed fuel demand. Bloomberg News says that Japan, the world’s third-biggest crude oil consumer, shipped in 18.69 million kiloliters, or about 3.79 million barrels a day, last month, down 8 percent from a year earlier, a finance ministry preliminary trade report released in Tokyo showed. Imports of liquefied natural gas dropped 0.8 percent in January to 5.9 million metric tons. At the same time they report  PetroChina Co. may delay the start of two refineries because of falling fuel and chemical demand, China Business News said, citing people it didn’t identify. The two plants are in Qinzhou city in Guangxi province and Dushanzi in Xinjiang, each with an annual processing capacity of 10 million metric tons, or 200,000 barrels a day, the newspaper said.

We are still selling rallies. Beware gas seasonal traders. Call for details. More and more business are calling me with hedging questions. Over the years we have helped businesses on the right track with their hedging needs. These hedges could be even more critical now in these trying economic times. If you want to call me we can set up an analysis of your business to meet your hedging needs and open your account. And as always see me each day on the Fox Business Network and call me at 800-935-6487 or email me at pflynn@alaron.com.     

Sell April crude oil at 4100 - stop 4360.  

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Sell April RBOB at 12700 - stop 13300.

Sell April natural gas at 500 - stop 540.