In this week's report:

Canada and US energy security?

Net Energy.

1 million plug-in cars in 5 years?

Washington [State] should scrap biofuels mandate.

Seattle Times – Opinion (June 25^th) "The state must rescind its myriad laws requiring public and private use of biofuels. These laws force use of crop-based biofuels — the only biofuels available for mass consumption. Hoping and waiting for so-called "second generation" biofuels is denying the global devastation biofuels are wreaking now." Now let's see if we have any leadership in Olympia. Trying to maintain business as usual with biofuels is a fundamentally flawed approach. Thanks Duff.

Now consider what the geniuses in the other Washington have cooked up.

Washington, D.C. – "Biofuels producers would be shielded from emissions rules that could restrict the industry's growth under a congressional agreement intended to smooth House passage of legislation addressing global warming. The deal, designed to win over rural Democrats, would require the government to spend five years studying the Environmental Protection Agency's biofuels regulations, and then give the U.S. Department of Agriculture a veto over the final rules." Is there any hope? The Department of Agriculture should have a veto over the EPA on emissions? Does that mean the EPA should determine the level of farm subsidies? This would certainly give new meaning to the idea of checks and balances in government.

I guess that old saying is right; we have the best government money can buy!

Just think if they had stuck to the plan.

Time (June 22^nd) "…Floridians voted in 2000 to build a high-speed bullet-train service between Miami, Tampa and Orlando. By 2004, however, then-governor Jeb Bush, who had insisted the estimated $6 billion cost would in reality top $20 billion, had persuaded Florida voters to drop the idea." Yea, I guess it was a silly idea???

Too bad we don't have a bunch of highly skilled workers in the transportation industry in need of jobs that we could put to work on a project like this.

Gee, now here is a surprise. A government plan wasn't quite as advertised.

NEW YORK (CNNMoney.com) – "If you think the new "Cash for Clunkers" law is going to help you buy a new car, you're probably wrong. As it's written, the law will benefit few car shoppers and those who might actually benefit from it probably shouldn't be buying a new car to begin with." It appears as though if you have a $500 dollar SUV to trade in you win. Otherwise good luck on the cash.

Link to this week's Master Resource Report 2009-06-26

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control

In this week's report:

Boeing's view of the future of air travel.

A look at a graph from the BP Statistical Review.

So what is Ug99?

More on Hydrogen Fuel Cells.

US gasoline consumption year-over-year.

On Wednesday the IEA released its weekly petroleum report comparing this year's demand against year ago levels. The results should drive home just how dependent this country is on gasoline.

The four week average came in just 3 tenth of a percent below year ago levels. The more volatile one week demand showed a 1 percent increase over year ago levels. The country is in the worst recession in 80 years and gasoline consumption remains stuck at around 9 million barrels per day. What level of economic down turn would it take to really knock gasoline consumption down 3 or 4 million barrels per day? Let's hope we don't get chance to find out the answer.

In the mass market news we keep hearing how consumption is down. Yet for over six months this report has been making the point that gasoline consumption is not down. Instead gasoline consumption is moving back towards the highest levels seen during the last four and half years at nearly 9.4 million barrels per day. If the focus is only on headline oil prices and surplus crude oil the nation will lose sight of its dependence on this single critical product, gasoline.

Diesel fuel on the other hand continues to languish over 13% below last year's level. This continues to be a clear indicator that industrial and commercial demand has yet to rebound.

The charts for both gasoline and diesel from the EIA report are on page 5 of this week's Master Resource Report.

If you thought the rising price of gasoline and the recession would impact SUV sale check this out. There are shortages of SUV's & light trucks reported.

"We're very short of Expeditions and [Lincoln] Navigators," said Randall Reed, owner of Prestige Ford-Lincoln-Mercury in Garland and Park Cities Ford-Lincoln-Mercury in Dallas. "We have been selling record numbers of [crossover] Flexes because of it, I think." Ok, granted this is from the Dallas Morning News which means we are not reading about this happening in a Prius land like San Francisco. It still illustrate that the American public has a long ways to go in understanding where it is headed. Any wonder gas consumption is up over a year ago?

Throw in the "Cash for Clunkers Plan" (which is a clunker itself) and there could be a spike in SUV sales. Maybe as James Kunstler latest blog posting says we are "To Stupid To Survive".

Pacific Basin coal demand appears to have turned up.

Reuters (June 17^th) "Producers and traders say the agreed price between South Korean utilities and Chinese miners reinforce the view that the Asian thermal coal market has turned around and that prices are unlikely to fall back to the near two-year low below $60 struck in April this year." There is more in this week's report on Chinese coal use.

Link to this week's Master Resource Report 2009-06-19

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report:

Driving a hydrogen fuel-cell car.

Gasoline consumption is down 1% year-over-year.

A world with 3 billion cars?

Water Footprint?

Oil's price and inflation?

Financial Times (June 11^th) "Short-term inflation expectations are tightly linked to moves in the oil price. When oil peaked last July, US inflation-linked bonds were priced for inflation of 2.76 per cent on average over the next two years. By December, when oil hit bottom, the bond market expected deflation over the next two years, at an average of 6.95 per cent per year." (There is a good video interview with John Authers along with the article.)

So what happens to inflation expectations when the market finally comes to grips with a future permanently facing Peak Oil? It probably would be safe to say that the yield of 3.99% on the 10 year U.S. Treasury bond at last Wednesday's auction won't look so good. Eventually long-term, not just short-term inflation expectations will become tightly linked to moves in the oil price.

If you have ever tried to find those famous "hen's teeth" you have a sense of what it is like trying to find a bond manager that understands the risks from Peak Oil. While there are some in the equity markets who are beginning to get a handle on Peak Oil, in the bond market it is a waste land of understanding.

Supply and demand are going in opposite directions!

Financial Times (June 11^th) "The rich countries' energy watchdog on Thursday noted the first signs of a true recovery in oil demand, saying the recent oil price rally was at least partially underpinned by improved market fundamentals." Now wait a minute, we have a major problem here. For months the IEA has been telling the world that the financial crisis has resulted in a substantial delay in new supply over the next several years. Now they are saying demand is turning around. Could they have come up with a worst possible scenario?

OPEC may not have to wait very long for triple digit oil to raise production.

Bloomberg (June 10^th) "OPEC, the supplier of 40 percent of the world's oil, will only consider increasing output when the price of crude rises to $100 a barrel, according to Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah." OPEC may not have as long to wait as many think given that oil prices would need to rise $30/barrel (less than 50%) in the next 6 months to be at $100 by the end of the year. They have already risen over 100% or $37/barrel since the lows earlier this year.

The 2009 BP Statistical Review is out and global proven reserves are down for the first time since 1998.

"Global proved oil reserves in 2008 fell by 3 billion barrels to 1,258 billion barrels, with an R/P ratio of 42 years. Declines in Russia, Norway, China and other countries offset increases in Vietnam, India and Egypt." Note the declines are in the major producers while the increases are in minor players.

Link to this week's Master Resource Report 2009-06-12

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.

In this week's report:

Japan and Peak Oil?

Biomass to electricity.

Ocean Acidification.

Seattle's Sail Transport Company.

Jeff Rubin interview:

"When you spend more on fuel than food, an economic contraction will follow"

FT.com (June 3^rd) FT: What do you think the oil price rise to now $68 will mean for economic recovery?

JR: I think we'll see a return to triple digit prices very early into an economic recovery, probably within 12 months of that recovery being under way, and I guess the issue is going to be: will the return to triple digit oil prices lead us right back into recession? Because I think triple-digit oil prices have played a much larger role in the global recession than it's yet been given credit for.

If that is the case, will a future rendezvous with triple digit oil lead to a similar result?

Never forget the "Prime Directive" -- Do Not Predict Price!

Bloomberg (June 4^th) "As the financial crisis eases, an energy shortage lies ahead," Goldman analysts Jeffrey Currie in London and David Greely in New York wrote in a research report e-mailed today. The bank set a 12-month price target of $90 a barrel, up from $70, and introduced a forecast of $95 for the end of 2010."

The guys at Goldman just can't help themselves. However, this prediction does help to put into perspective the incredibly optimistic one in the EIA's "International Energy Outlook 2009" released last week. The Outlook predicted a 44% increase in global demand and amazingly "…the price of light sweet crude oil in the United States (in real 2007 dollars) rises from $61 per barrel in 2009 to $110 per barrel in 2015 and $130 per barrel in 2030."

So demand is going to rise 44% and price will only go up to $110 in 2015 and to $130 in 2030? The one big key here is that it is in 2007 dollars. By 2030 at only 2% inflation that will be well over $200 in nominal terms. Is anyone willing to bet on only 2% inflation in energy prices over the next 20 plus years? There is no scarcity premium in these forecasts. Therefore they are as likely to be of the same value as the ones made by the EIA in the past; None!

ST. PETERSBURG, Russia (Dow Jones, June 5^th) "The price of oil may hit $150 or $200 a barrel by the middle of the next decade if oil companies don't invest enough, Tony Hayward, chief executive of BP PLC (BP) said Friday."

Don't focus on price predictions; they will always be wrong. Instead consider this point from the Goldman report from the FT.com/energysource. "…interestingly, the note talks about the 'unrecognised energy crisis' and concludes that underlying demand must fall in the OECD countries if the BRICs are to maintain their growth."

Link to this week's Master Resource Report 2009-06-05

Disclaimer

This publication is dedicated to the education of readers and is an information service only. While the editor is licensed to offer investments and investment advice, the information provided herein is not to be construed as an offer to buy or sell securities of any kind, is the opinion of the author and not endorsed by KMS Financial Services, Inc. It is possible at this or some subsequent date, the editor and/or affiliated parties may own, buy or sell securities discussed in this newsletter, or based upon information provided in the newsletter, or contrary to information provided in this newsletter. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. We make every effort to provide timely information, but cannot guarantee specific delivery times due to factors beyond our control.