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Oil Spikes Above $70

Written by Luke Burgess
Posted August 29, 2005

Dear Wealth Daily reader:

Schaefer's Prediction Fulfilled

Mike has requested an emergency meeting of the Wealth Daily brain trust. We'll meet at his gentlemen's ranch in Wyoming this Wednesday to discuss the apparent crisis in energy.

Mike has constructed an oil shock insurance portfolio to protect your investments against a "super spike" scenario.

It was last winter that Mike recognized an ominous technical pattern in crude known as a head-and-shoulders formation. The technical pattern was calling for a move to $65 by the end of the summer... then a move to $71.

Oil $65 was reached in early August... and crude reached $70.80 this morning.

Mike thinks the next big price milestone in oil will be $105 with an eventual price spike to $150 a barrel maybe as soon as next year.

The Oil Shock Insurance Portfolio will be a combination of safe investment hedges in gold as well as massive reserve plays in oil and natural gas.

As Hurricane Katrina has demonstrated, the oil market is skating on thin ice. The slightest disruption in production is likely to cause pain and misery throughout the globe. Those who foresee the coming panic as oil spikes and gasoline prices head to $4 a gallon and beyond will prosper.

Those who don't are in for a world of hurt.


The Perfect Storm

I envy anyone who was caught in Hurricane Katrina. That's because the sh*tstorm I got myself in over the weekend was even worse.

I went to a wedding on Saturday and it was the same old crap.

First we go through the Christian aerobics. Stand up, sit down, stand up, kneel down, stand up, turn around. Then the priest says the usual, "Do you?......Do you?......Good. You're married"

Afterward, the reception was cluttered with unfamiliar faces. The newlyweds smash cake in each others faces and some idiot kept tapping his champagne glass with a spoon.

Now I can handle most of the BS associated with weddings. But the one thing that really gets under my skin is the music. Have you ever been to a wedding where they didn't dance to the Electric Slide or the Chicken Dance. Usually I hope that I'm drunk enough that it won't bother me too much.

But get this. At the reception they didn't serve any booze. How could they do this to us? So there I sat, sober, watching all the happy girls and boys dance to Celebrate. It was like a knife to the heart.

So on the way home from the fiesta I did it. I dropped the ball. I put the proverbial foot in the proverbial mouth. I turned to my girlfriend and said, "Babe if we ever get married, let's tell the DJ not to play the same old crap." And at that moment I knewwhat kind of horrible mistake I'd made. It was as if a Hurricane/Typhoon/Earthquake hit the inside of my car.

If? What have I done? Why did I say "if"? It's was like I said it in slow-motion. And as the word "if" came out of my mouth I knew the ride home was going to be bad.

She nailed me with questions like, "What do you by 'if'?" and "Don't you mean 'when'?" I closed my eyes and wished that I was in a calmer place. New Orleans would have been nirvana compared to my car ride home. It was a slow downward spiral ending in a massive headache.

But the storm in my car didn't affect oil prices quite like Katrina.

Oil Blows Above $70

As Hurricane Katrina approached the coast, crude oil futures rocketed over $4, past $70 a barrel for the first time ever.

Katrina quickly grew from a small depression to a Category 5 hurricane. The storm was called one of the worst storms to ever hit land in America. At its fiercest, Hurricane Katrina ravaged New Orleans with sustained winds up to 175-mph winds and brought close to 30-foot storm surges.

As Katrina advanced on crucial offshore oil and gas rigs, import terminals, pipeline networks and numerous refining operations, investors began getting very nervous.

Over the weekend several oil companies halted offshore production. The shut down corked an estimated 1 million barrels of refining capacity. But analysts said the storm's potential damage to facilities was even more worrying.

The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States' domestic output.

On Friday, the Nymex crude oil contract fell more than a dollar to $66.13 a barrel as many traders took profits on forecasts that Katrina would likely little affect U.S. refineries and production facilities in the Gulf of Mexico.

16 Sweet Ways to Save on Gas

Even before the recent oil crunch I wanted the most fuel efficient car as possible. It's not because I'm environmentally conscience. It's because I'm cheap!

A few years ago I bought a Chevy Cavilier thinking it would save me a little bit of dough at the pump. Well let me tell you, last week I filled her up...$37!!!! I almost had a coronary.

I don't know about you but I sure could use some tips on how to save a little on gasoline. Besides, wouldn't you rather keep your cash instead of giving it to a filthy rich oil sheik? So I've complied a list of 16 ways to keep you cash in your pocket.

Be sure your tires are inflated properly

Driving a car with underinflated tires is like running laps with lead shoes. Underinflated tires can squeeze up to 10% out of a car's potential gas mileage.

The correct tire pressure, which could be different for front and rear tires, is found in a car's owner's manual. Sometimes it's pasted inside the glove box door or attached to a door frame. It only costs 50 cents at most gas stations to use their air compressor.

Use lower-octane gas.

Most cars can get by with using low-octane fuel. However, high-performance engines, such as the Mercedes-Benz 500 SEL, need to stick with higher-octane fuel. The price difference between 89 octane and 93 octane can be up to 30 cents per gallon.

Drive slower

Speeding is a very expensive way to drive. Any sort of lead-footedness is going to give you worse gas mileage. And the faster you drive, the bigger the fuel-economy hit on your car. Driving 75 mph instead of 65 mph will lower your car's fuel economy by 10%. Driving 70 mph instead of 55 mph will lower your car's fuel economy by 17%. So stop treating speed limit signs as suggestions and slow down already.

Don't run yellow lights

Few people know that trying to squeeze through an intersection on a yellow light can conceivably use more gas than stopping for one. The problem is that when drivers stomp down on the accelerator to make it through the light, sometimes driving gas consumption to higher levels than if they had stopped and idled. Brake pads are cheaper than gas.

Carpool

I know how you like to rock out to AC/DC on your way to work. But carpooling is probably one of the best ways to save money on gas. If you really want to save money on gas, then you'll just have to suck it up and ride with a buddy.

Lose weight

Not from your body. From your car. Look in the trunk to see what kind of weight can be jettisoned. Less weight means better mileage. Carrying an extra 100 pounds in the trunk of your car may cut your car's fuel economy by up to 2%. Leave the golf clubs at home. You don't use them everyday. But don't get ridiculous. Keep the spare tire.

Also get rid of the roof rack. You're not using it anyway. And avoid carrying items on your car's roof whenever possible. A loaded roof rack not only increases weight but they also increase your car's air drag and can pull down your car's mileage by 5%. Lose it.

Give your car a tune up

Cars run more efficiently when they are kept in tune. It often makes sense to get them tuned more often than the manufacturer recommends. You can also our bottle of fuel-injector cleaner in the gas tank every six months or so to help the engine maintain peak efficiency.

Use less air conditioning

I know how hot it's been this summer. But if you can get away without using air conditioning, you'll save gas. Air conditioning can drag down your car's fuel economy by up to 20%. On days when air conditioning is a must, first try cooling your car the old fashioned way: roll down the windows. You'd be amazed how much hot air you can clear out of your car just by opening up for awhile. Flipping on the air conditioning full blast as soon as you hop into a hot car is a big waste of gas and money.

But there's a flip side to opening your windows. If you roll down the windows, you create more drag. Late-model cars are designed for more aerodynamic efficiency by having their windows in the 'up' position.

Use the proper oil grade

Use the lightest grade of oil recommended by the vehicle's manufacturer. A multiviscosity oil such as 5W30 can save gas compared with regular 30-weight oil because it creates less friction. The engine doesn't have to work as hard.

Replace your air filters

Dirty air filters make it harder for the engine to breathe. Air filters should be checked once a year and replaced every 18 months.

Be a smooth operator

Abrupt stops aren't great for your car or your car's fuel efficiency. So anticipate stops whenever you can. Letting your car coast to a stop is a good way to improve your gas mileage.

Use the cruise control

Using cruise control out on the highway will help you maintain a smooth, constant speed and will boost your gas mileage.

Avoid rush hour

Sometimes I rather hit myself in the head with a ball peen hammer than sit in traffic. Not only is stop-and-go traffic stressful and annoying, it's bad for your car's gas mileage. So avoid driving at rush hour whenever you can. Stagger your work hours so you can time your weekday commuting at less busy times of the day.

Plan your trips

You can save fuel and cut down on the wear and tear on your car by choosing the shortest route to your destination and combining short trips whenever possible. Mapquest it if you have to.

Don't let the car idle

When you idle your car, its fuel economy crashes to zero miles per gallon. And the larger your engine, the more gas you wind up wasting while idling your car. And get with the times. Modern vehicles don't need to warm up, so don't bother trying.

Get yourself a gas card

Credit cards that offer up to 10% in gas rebates can take the edge off soaring prices at the pump. Just don't dig yourself deeper into debt.

Discover has a credit card that gives up to 5% cash back on gas purchases and up to 1% on other purchases. The Chase Perfect Card offers a 6% rebate on gas for the first 90 days the account is open and a 3% rebate after that.

You can find better rewards, but to get them, you may have to stick to one brand of gas. Chase has a Hess Visa Platinum card and a Marathon Platinum MasterCard with up to 10% rebates

Okay. These ways will only save you a few bucks in the short term, but consider this. A two-car household using 80 gallons a month will spend an average of $2,448 in a year if gas prices remain at their current level. If you save 10% of that, you did pretty good.

With that money you could, pay greens fee and rent a golf cart ($60), buy 4 fine cigars ($30), get yourself a case of beer ($25), take your old lady out for a steak dinner and a bottle of cabernet sauvignon ($100), get yourself another AC/DC album ($25), and get you dog a bone ($4).

Total 10% savings on gas -- $244.80
Keeping your money instead of giving it to oil rich middle easterners -- Priceless


- Luke Burgess

Buffett's Envy: 50% Annual Returns, Guaranteed