Model Portfolio timbo56:SSOF1

I have for quite some time now predicted sharply higher petroleum prices. But even for me this last run up is unexpected and even a bit frightening. Take a look at this link: http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/table1.txt.
Page down to near the bottom, to see the inventories of petroleum and petroleum product in the United States. Crude oil is down by 5 million barrels from last week, and total inventories are down by 3.5% from last year. Granted, these statistics are far from pinpoint accurate, but to have declined by 3.5% during a year in which petroleum prices went steadily upward is very disconcerting. It shows that this price run-up has not been caused by speculation but rather by fundamental market forces. It also brings up the question of when this will end. What price is high enough. In the New York Times this morning there is a front page article entitled, "Airlines' Cuts Making Cities No-Fly Zones" by Micheline Maynard. It's also on-line at http://www.nytimes.com/2008/05/21/business/21air.html?_r=1&hp&oref=slogin.
Take a look at the table of number of commercial flights from major airports in January '08 vs. January '07. It is clear that airlines have cut back on the number of flights pretty dramatically. As the headline indicates, many (nearly 30) airports have entirely lost commercial service. We must be avoiding petroleum use by cutting back on the number of flights, BUT IT'S NOT ENOUGH!!!!! Perhaps American Airlines' new scheme to charge for even a single item of checked luggage will do the trick, and start inventories rising again. But it's hard to know how much will be enough.
On the other hand commercial aviation is booming, in Dubai, that is. And it's booming in Qatar, Riyadh, Shanghai and Mumbai.

We have to start thinking about how we can arrange things in this country so that we use substantially, that is substantially less petroleum. The SUV must become smaller and less powerful. Airline flights must be replaced by train and bus rides. Cities must become more compact, reducing the amount of driving necessary.

This is the result of our success in proselytizing for the Free Enterprise System. We convinced China, Vietnam and Russia to join is in the free market quest for prosperity. But now they can compete with us for the world's resources. Could we have it any other way, and yet be a moral people?? "Really, although we don't choose communism ourselves, we think it is a great fit for you (smirk, smirk)." I don't think so. We all knew the world would some day run out of petroleum. Now we just have to learn to live with it a little earlier than we otherwise would have.

In the meantime, imagine the United States using less petroleum, and think about how it will be different. Then invest accordingly. The future is arriving a little sooner than expected.