Bullish Picture for Energy Once Economy Picks Up


"Placing a chokehold on U.S. domestic energy suppliers will only increase the import of foreign energy."

The Obama Administration is sowing the seeds for the next major bullish move to $150+ oil and overall higher energy prices by imposing an excise tax on U.S. gas and oil companies. Placing a chokehold on U.S. domestic energy suppliers will only increase the import of foreign energy. This proposed excise tax will discourage U.S. production and pull funds from the companies trying to reduce our reliance on foreign oil. And for what? Some wind farms and solar panels? The money used for these alternative energy sources will only fractionally decrease our dependence on imported energy. The lack of investment in oil/gas will come back to bite the U.S. The energy markets are a bear in the short term, but this plan paints a very bullish picture once the economy is back on track.

The four-day "USO roll" came and went without making a headline. Surprising? No. Once a front runner is exposed and brought upon regulatory eyes, it quietly leaves and moves onto the next market. Yesterday, OPEC decided to leave output unchanged leaving the door wide open for a test of the lows.

The weekly DOE numbers showed net U.S. supplies of crude oil rose to an all-time high. Look for DTO to form a trading range between $170 and $220. A break out of this zone will indicate a larger move is imminent.

The best thing holders of DXO can hope for is for OPEC to turn off the crude spigots. If they don't, DXO is going to slowly drown in crude oil. Reports out of Vienna will be watched this weekend to see if OPEC will throw a lifeline to oil, and thus DXO.

AT&T (T) announced a $565 million deployment of 15,000 natural gas vehicles over the next 10 years - the largest corporate commitment to clean energy to date. This is a very supportive development for the long term. In the short term, however, we see no change.

The equity markets finally enjoyed a rally this week and XLE had a healthy bounce from four year lows.

According to Dr. John Topper of the IEA's Clean Coal Center, the world's dependence on coal for more than 40% of its power needs is not showing any signs of decreasing. If anything, consumption is poised to increase over the next two decades.

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