Let me ask a question or two here. How easy is it to hide the rising cost of oil? It's not. It may however be somewhat easier to monkey around with "lower profile" commodity statistics. I know, I know, you're thinking here goes Gecko the paranoid again, but I can tell you that I've seen these stats manipulated before and I'm certain they will be again. However it is exceedingly difficult to get away with it when looking at energy because it's so damn high profile to the media.

The problem is, once you open the pandora's box of monkeying around with stats in order to "save the economy" from the ravages of Y2K, it's like heroin. You get hooked real quick and withdrawal is NOT a pretty site.

-petroleum-based energy costs increased 29.5% in 1999

And that my friends most certainly IS inflationary in a big way. I recently had a discussion with some friends in the biz regarding the apparant disconnect on oil and inflation. No one can seem to understand why all of a sudden no one gives a sh*t that oil prices, previously a huge harbinger of inflationary times, have reached Gulf War levels. I have an answer. It's called denial.

For educational and eye opening reasons only:

250--Higher energy prices push US inflation up 2.7% in 1999 Washington (Platt's)--14Jan2000/1018 am EST/1518 GMT A surge in energy prices in 1999 helped to push consumer inflation in the US up 2.7% in 1999, the biggest increase in three years, the Department of Labor said Friday. But outside energy and food, inflation rose just 1.9%, the smallest annual rise since 1.5% in 1965, the Labor report said, noting that the results suggest inflation remains under control. The energy index, which declined 8.8% in 1998, increased 13.4% in 1999. Following a 15.1% decline in 1998, petroleum-based energy costs increased 29.5% in 1999, its largest annual advance since a 35.4% increase in 1990, the report said. Charges for energy services rose 1.2% in 1999. For December, the CPI, a closely watched inflation gauge, was up 0.2%, mostly on higher pump and heating prices. --Platt's Global Alert-- [0250] [GM] [N] [QQ]

-- Gordon (g_gecko_69@hotmail.com), January 15, 2000

Answers

The Kook Institute of Advanced Common Sense agrees with your assessment Gord-O. That's one reason Kook Industries Ltd. has invested heavily in solar panel and wind genny stocks, with an anti inflationary side investment in lead (battery) stocks.

Most excellent post,

Energetic Kook

-- Y2Kook (Y2Kook@usa.net), January 15, 2000.

"No one can seem to understand why all of a sudden no one gives a sh*t that oil prices,"

Or interest rates.

Or PE, ptrice/book, price/rev, ROI, etc, etc.

It's a new economy, new paradigm, or some such thing. We don't use oil - this machine runs on pure enthusiasm.

-- Me (me@me.me), January 15, 2000.

If I recall, oil is used to for things other than fuel, for manufacturing plastic, drugs, chemicals, just to name a few things.

In essence, this affects the cost of goods sold. To please the stockholders and maintain profit margins, I doubt the companies incurring the increase in COGS will take the bite. The cost is passed on to the consumer, in most cases.

There are lightweight synthetic materials (ie plastic) that are stronger than metal; they are used in cars, toys, all sort of things. The oil upsurge has been recent.

If this isn't a spike and price levels don't go down, it will be interesting to see how this affects the price of other things that need oil for their manufacturing processes. Of course, they could look for areas to increase productivity (downsizing, alternative production methods, streamlining, etc.) to offset the increase.

-- Tim (pixmo@pixelquest.com), January 15, 2000.

I'm with you Gordo, how can the main CPI index exclude food and energy and people and investors buy into it? Eating and heating is crucial. Speaking of which, my HonneyBunny is waiting for me to drive out for breakfast with her. Gots to go.....

-- Downstreamer (downstream@bigfoot.com), January 15, 2000.

Gordon

BIG BIG inflation on the way as measured by commodity prices.

Historically inflation has been defined as an increase in the money supply. We have had high rates of monetary inflation for many many years. The FED has increased money supply by 70% annualized rate in Q4 1999. They cannot stop creating "new" money because the markets have become "political". We are definitely on the road to hyperinflation and you are right, oil will be the trigger.

-- Ishkabibble (ishman@home.com), January 15, 2000.

How about this. For instance, if we conspire to control the supply of say freeze dried pinto beans (by hoarding), the BATF would be bustin down our doors! But OPEC can conspire and constrict oil production and consequently jack up fuel prices, and nobody cries foul.

Greenspam injects massive liquidity into the system, and then frets about "perceived possibility of potential signs of maybe inflationary times". Hell, he's been fretting about inflation (especially if worker's wages grow) for as long as I can remember. He's been dead wrong for at least five years.

Let's face it, the powers that be are running the show. Big Oil, Big Banks, Big Agrobiz, PetroChems, Big Media, and ???(who am I forgetting) are protected by their shills in Washington. The carny show goes on, and what can we do?

-- phoneman (bcrefrig@excelonline.com), January 15, 2000.

...this machine runs on pure enthusiasm.

And WHEN (not IF) something happens to shake that enthusiasm, GET THE HELL OUTTA THE WAY, FAST!

You don't want to get trampled by THAT herd....

-- Dennis (djolson@pressenter.com), January 15, 2000.

You silly americans!! If oil prices go up 10% 20% 30%. Your big rich companies will send more of your jobs down here to Mexico!!! Yes we make $2.00 dollors a day. Yes your big companies will make more and yes, things will cost mucho mas. So what? You will make it back in the stock market!!!!

-- Juan Valdez (vgd38@hotmail.com), January 15, 2000.

Updated 11:56 AM ET January 14, 2000 By Myra P. Saefong, CBS MarketWatch

Soapbox: OPEC's role in the new year

(CBS.MW) -- OPEC and Y2K stockpiling have significantly affected U.S. crude supplies in recent months.

But what role will OPEC play this year and when will the effects of Y2K oil stockpiling begin to wind down?

Crude oil futures prices are now trading around $27 a barrel for the first time since November. They're up more than $1 since the start of the year, amid strong compliance this past year with cutbacks in oil production among the Organization of Petroleum Exporting Countries' (OPEC) members. See Futures Movers.

However, prices have recently been weighed down by the aftereffects of stockpiling among wholesalers and retailers, who feared that the year 2000 turn-over and the possible Y2K bug would disrupt worldwide supplies.

To find out more about what will affect prices in the near-term, CBS.MarketWatch.com spoke with Mark Bock, an economist who provides weekly commentary on U.S. oil inventories at the West Chester, Penn.- based Web site, the Dismal Scientist. The Web site's parent company, Dismal Sciences, offers economic research and consulting services through its RFA subsidiary.

Bock said OPEC members' compliance with the pledged cuts, which total 4.316 million barrels per day, have been unprecedented. However, he attributes the latest 1.7 million barrel rise in U.S. inventories to Y2K, as stockpilers returned their excess supplies to the market.

CBSMW: What was the reason for the recent rise in U.S. crude supplies?

Bock: Crude inventories rose slightly during the first week of 2000, which was expected by markets. They rose due to the fact that demand for petroleum products from wholesalers and retailers weakened during the first week of the year as they worked down supplies built up in anticipation of problems associated with the Y2K computer bug.

So before the end of the year, wholesalers and retailers kept increasing their stocks, so that's the secondary level of storage, and that doesn't get counted by the American Petroleum Institute or Energy Information Administration. The numbers that we talk about are at the primary storage level and that's at refineries.

So last week, the wholesalers and retailers began putting back these inventories they had accumulated seeing there were no Y2K glitches. They have all these excess inventories now [and] they've started to put those back on the market. Seeing wholesalers and retailers need less products from the refineries, that means refiners have reduced demand for crude oil. So that means their stockpiles built up. They didn't use it.

The fact that they weren't using as much oil in the first week, is evident from the fact that they reduced their production runs to just 85 percent, almost 86 percent of capacity, which was down almost 4 percent.

CBSMW: The AP reported eight consecutive weeks of falling U.S. supplies until this week -- was that mostly attributed to Y2K stockpiling?

Mark Bock: Yes.

CBSMW: When will the effects of the Y2K stockpiling begin to wear off?

Bock: I would think before the end of January you'll see that. It may even come sooner.

CBSMW: What has affected inventories in the past year? Would you mainly attribute 1999's fall in crude oil supplies to OPEC's pledge to reduce global supplies, or were there other significant factors involved?

Bock: Really, OPEC was the most significant thing. OPEC and some non- OPEC producers agreed back in March to take almost 5 million barrels of oil a day off the market.

U.S. demand has been strong this past year. GDP has grown strongly. (See Dismal's analysis on GDP.) Gasoline demand has been very high. There's less supply out there and demand has grown and that's pushed down inventories.

CBSMW: Do you believe OPEC will still play a big role in capping supplies this year?

Bock: Yes, I do. There's talk now that's affecting prices recently. Oil ministers from Saudi Arabia and Venezuela have met and there are rumors that they're talking about extending the current [oil production] cutbacks which are set to expire March. They're talking about extending those at least until through the end of June.

The reason for that is the second quarter tends to be a period of weak demand traditionally because the winter heating season winds down and the summer driving season hasn't quite begun during that time. So if they were to end the cuts in March, they would be expanding output at time when demand traditionally falls. So they'll probably keep them into effect through at least June and now there's even talk that they may extend through the end of the year.

Basically, OPEC is happy with the prices that they're getting right now. I think they want to see prices in the range of $25 to $27 a barrel and if they can keep it there, they'll be happy with that. At the moment, there's no real pressure for them to increase production. So I think this coming year, they'll still play a big role.

They've reached unprecedented levels with their cutbacks. I think that'll continue, maybe not as high over the next few months, but I think they're still going to keep pretty high compliance rights also.

CBSMW: Crude hit a high of $27.12 on Thursday, Jan. 13. Do you believe this will prompt more oil producers to cheat on production cuts?

Bock: That's why OPEC has to try to keep prices in the $25 to $27 a barrel range. The further they get above that level, the more incentive there is for members to increase their production and to cheat on the existing quotas.

The other thing they have to be careful about at that level is that they're going to start attracting non-OPEC oil. The higher the price goes, oil-producing nations around the world that might have slightly higher costs that had to reduce production last year when oil got down to almost $10 a barrel, they're going to start producing again and that'll put downward pressure on prices. OPEC will then feel the need to expand their output to keep their market share.

CBSMW: Do you think the market is already pricing in an extension to OPEC's production cuts, even though its final decision won't come until the March meeting?

Bock: I think that's a good assumption.

If you look at what happened this past year leading up to their announcement toward the end of [last] March where they said they'll reduce production by almost 5 million barrels, you'll see that two weeks before their meeting, prices really shot up. Once the announcement came out, everyone had expected it and it had already been priced in and that probably is what you're seeing here.

CBSMW: The pledge to cut back on oil production was implemented because of a surplus in world supplies. Does this worldwide surplus in oil still exist, even after OPEC's efforts over the past year?

Bock: It's definitely being drawn down quite a bit. There may be almost a 2 million barrel deficit in the first quarter of this year.

So if it's not down already, it certainly will be as the winter heating season continues.

-- Uncle Bob (UNCLB0B@AOL.COM), January 15, 2000.

OPEC's role in the new year will be the same as it has been in past years, to ensure that OPEC members get the highest price possible for their oil, period. That's what a cartel is and does.

That being said, there is a key emergent difference in the last year, and that is SOLIDARITY. OPEC has not cheated and they have held the cartel together. I think they finally figured it out folks. If they hold together, AND DON"T CHEAT, they CAN rule the price of oil.

Not incidentally, they were taught this lesson by sloppy procedures in 97-98 that lost them billions and billions of dollars due to cheating and overproduction. My guess is that this lead to the influence of the younger and perhaps smarter members of the cartel becomming hard and organized like the OPEC of old.

As to oil stocks and Y2K cratering the market, sad to say, but Billy and Billy should have gotten together and urged some serious stockpiling of oil during the run-up to Y2K. That would have lead to some overhang re-creation. Unfortunately, they were to busy making sure you sheeple didn't protect yourselves to much. Therefore, no one in the industry was willing to over-stock for Y2K. My prediction that freight rates would fly up in the months before Y2K dramatically were somewhat off. They did tighten quite a bit, but not near as much as I thought they would. This meant to me that oil cos were NOT stockpiling for Y2K. They should have. It would have helped dampen the current oil price shock.

Supply and demand. Unfortunatley the greatest nation on god's green earth is short supply and long demand.

No way around it, these guys got their sh*t together in the past year.

-- Gordon (g_gecko_69@hotmail.com), January 15, 2000.

Since the Federally-calculated CPI is now calculated without the two most important items for every person in this country - food and energy - Klintoon and Greedspin can claim the lowest inflation in thirty-five years. And since no other index is widely reported the public believes what they hear: "Yes, we have no inflation. We have no inflation today."

But the sheeple do wonder where all their money is going when they go to the grocery store and the gas station. But when they get home Dan Blather is telling them they don't have any inflation. And they look forward to their next inflation-adjusted pay raise so they can have a few more bucks to put into Bubble.com for their retirement fund.

Meanwhile Greedspin and Klintoon must be sh*tting bricks because they do have access to the real numbers showing the actual consumer inflation rate food and fuel included, plus the projections for the rest of the year, too. Even if the market stays in one piece these two clowns have set themselves up make the Carter Administration look great.

They've lied, decieved, spun and manipulated things to keep the economy roaring along in the face of Y2K concerns. Now they're roaring along and the patches and facades they put on to hide the faults in the economy are falling off.

Milne's words are true; "Won't be long now.", just like his analogy of the "Flaming death train to Hell". The economy is a passenger train full of sheeple all bleating in glee at how fast the train is going, or how high the prices of Bubble.com are.

But the train crew, Klintoon and Greedspin, decided that to go faster they needed to drop the things that could slow the train down. So the brakes and engine safety devices were removed and sure enough the train immediately picked up speed.

The sheeple bleated louder in greedy glee and Klintoon and Greedspin smiled to each other as they pulled the throttle open wider, past the where the safety stop used to be. But the engine is starting to show a little strain and smoke is coming from places it shouldn't. But the sheeple are bleating they want to go faster, faster and Klintoon and Greedspin pull the throttle open one more notch.

Now there's a small fire underneath the hood and a mile up ahead there's a boulder on the tracks, but the sheeple are bleating that they want to go faster, faster and Klintoon and Greedspin will oblige them.

False Consumer Price Index figures, energy prices up nearly one third, anecdotal reports of food prices up as much as one hundred percent on some items, Bubble.com going stratospheric without anything more substantial than *enthusiasm* to fuel it.

Won't be long now, for sure. Put cotton or your fingers in your ears and hide the eyes of your children, folks. You don't want to lose your hearing when this crash occurs and small children shouldn't see such things.

WW

-- Wildweasel (vtmldm@epix.net), January 15, 2000.

For those of you who are still wavering about the purchase of solar panels, I based my decision on the answers to two questions:

1. Has the price of electricity ever gone down?

2. Why did BP (British Petroleum) go into the solar business a few years ago?)

Don't base your decision on today's electricity prices. You don't have to buy a complete, whole-house set-up. You can start with a couple of panels, an invertor, charge controller and a few batteries and add to them as you can afford it.

-- Old Git (anon@spamproblems.com), January 15, 2000.

The CPI also does not include local taxes and it probably does not include rent and the the increased cost of housing. It is amazing. The people earning less that $30,000 per year are struggling, have less money left over after essential expenses and wonder where it went. No inflation or under 2 per cent inflation does not pass the laugh test. Even Curly can see that the inflation is there. The funny part is that inflation will be obvious big time just in time for the elections and poor ALGORE will lose a substantial portion of his voters because of it. The Democrats would have trouble managing a dog pound much less the economy.

-- Moe (Moe@3stooges.gom), January 15, 2000.

Gordo, "Unfortunatley the greatest nation on god's green earth is short supply and long demand." That's the first time Canada has been mentioned in this thread, do you have a supporting link?

-- Paranoia Will (Destroy_Y@BlackCopters.com), January 15, 2000.

You're right again Gordon.

Unhappily, it looks like we have another clear example of an equation that is out of balance. Where a+b=c but when you add 'a' and 'b' the sum is not equal to 'c'.

Of course with the right amount of hypnotism and spin the eager beavers will greedily buy more undervalued Internet stocks.

-- snooze button (alarmclock_2000@yahoo.com), January 15, 2000.

Paranoia Will - you have it round the wrong way :>} - Canada long resources - short demand...just not enough of us to cover this fertile landmass. Other than that, the US is our best customer - long demand, and it is obvious that Gordon was correct (must have been subconscious desire) about the "greatest nation".....except for high taxes, infernal cold, too much snow, lying politicians, expensive medicare, hockey games every night, and that everyone and his dog wants to move here to the refugee paradise.

-- Laurane (familyties@rttinc.com), January 15, 2000.

Interesting, never thought of Canucks being long anything but underwear?

But you're right on one thing, they are long resources, which brings up another point. As you may (or may not, i follow these things quite closely) recall, the Canucks were shutting in a shitload of production when the price plunged on their investments two years ago. The domestic markets were plunged into negative margins and many smaller oil producers simpley went out of business while Bill Klintoon whistled all the way to the bank. When the Saudis et al. wanted to do something about the oil glut Klintoon told them to "let the market decide the price". Well what's good for the goose,,,,is good for the gander. It is my supposition that the Saudi's are intent upon demonstrating to the world their dominance of crude oil as a resource. What impact this will ultimately have is yet to be seen, but I am certain that the exceedingly low price of oil also played a role in fueling our tremendous economic bubble.

I am equally certain that market forces are moving to meet the demand created by the Saudi's efforts. In other words un-economic oil is now being sought after to fill this gap, unfortunately it will take at least a year or probably three in order for the gaps to be fully filled by new sources.

Until then, we will languish with high oil prices.

-- Gordon (g_gecko_69@hotmail.com), January 15, 2000.

g.g.- You are right about the wells being shut in in Alberta when the prices hit bottom....when drilling was down to 10% of the high figures of previous years. But now just about every functioning well is pumping in Central Alberta where it is economically profitable, and the harder-to-get-at wells in the far North we expect will come back on line and approvals have been given for heavy oil upgrader expansions.

In Coleville Sask. there is a whole field of heavy oil near my husband's old homestead, which was almost shut down.....literally hundreds of tanks next to jacks which were stationary last year - very eerie. Much more expensive to process this type of product. Will check if they are back pumping when we phone - that might be an indication of optimism.

-- Laurane (familyties@rttinc.com), January 15, 2000.

To the doubters:

First when information like this comes before us we compare Saturday's information and compare against Monday's stock market close. This is of course silly. An economy as big as the US doesn't ever turn on a dime, and never has. The foundation is chipped and hacked at until the top turns, or the bad news becomes so redundant that people stop reacting to it. Inflation is already showing up at the grocery store and the gas station. The .gov can hide behind the drop in electronics only so long. The drop will be like waves as the market starts taking out consumers that take's the market further down, that cuts jobs... . Think how many jobs have been cut during this expansion, why will the cuts not be WORSE during a slowdown with the added burden of no quick jobs to jump into.

-- Squid (ItsDark@down.here), January 16, 2000.

THE ECONOMIST magazine in England reckons the USA ***TRUE*** rate is wait for it

wait for it...

30%

Yes that's thirty, three zero per cent!

(Oil has gone up 29% recently...)

-- Andy (2000EOD@prodigy.net), January 16, 2000.

Wait'll Joe Sixpack figures that out and then looks at this year's "inflation adjusted" payraise. Even the USA's miserable education system has left Joe smart enough to figure screw job that out.

WW

-- Wildweasel (vtmldm@epix.net), January 16, 2000.