MUCH OIL LITTLE RELIEF

Ever hear of RINS?

Renewable identification numbers. No, this isn't about some government internment camp, though one might argue that depends on your definition of government mandates.

RINS, according to many who closely follow the oil industry, are in part responsible for why abundant oil supplies have failed to show up in lower gasoline prices at the pump.
Gasoline prices are up over 10% in 2013.

In case you haven't been watching, the US this year for the first time since 1994 will  produce more oil than it imports. But hold on a second. It gets even more interesting. In 2011, as noted in a recent Bloomberg article, "the US quietly surpassed Russia as the largest exporter of such refined products as gasoline and diesel. Canada's fuel imports from the US jumped 15 percent in 2012. Brazil's demand for US-made fuels rose 6 percent."

There's a similar increase in demand from China, India and oil-rich Venezuela. "Without recognizing it," the article states, " US drivers are competing with consumers in Latin America and Asia, where demand is rising."

This past month the US shipped "a record 3.2 million barrels a day of refined fuel" out of the country. Steven Schork, president of a Pennsylvania energy consulting firm Schork Group, was quoted in the Bloomberg piece:

"The US has the most sophisticated network and the most technologically advanced refining system in the world, and it has access to a tremendous amount of domestically produced crude oil in a country where demand is stagnant at best."

A while back we wrote about states like Oregon starting to tax hybrid car owners because many states are technically bankrupt and revenue from gasoline taxes have suffered a big hit. Drivers are filling up less and driving fewer miles in part owing to those hybrids the environmentalists and government bureaucrats in their save-mother-earth zeal fronted for.

Well, those same suspects pushed for another save-mother-earth goodie, ethanol. Forget the fact that ethanol comes from corn and half the farm acreage on the planet, if these folks have their way, will be growing the stuff. Nearly every gallon of gas sold in the US must be 10% ethanol.

 Not bad if you live in Iowa and grow subsidized corn. Instead of organic labels why not subsidized ones. This product is subsidized by American taxpayers. Maybe that would help wake the sleeping masses up to what's going on.

In the meantime, the ethanol tax, and that's what it is, tacks on in some cases 10 cents a gallon. But that's only half the story. Legislators when they pass laws make assumptions. In this case, demand for gasoline would remain high. It hasn't.

For 2013 the ethanol decree requires US refiners to blend nearly 14 billion gallons of ethanol in gas sold to you and me. Bottom line: too much ethanol. Refiners don't need all that mandated ethanol, a 400 million gallon difference. To offset it refiners must buy credits or RINs. But not without some pain.

Those credits or RINs, owing to the fall in gasoline use or demand, started the year selling at 7 cents, jumped to a buck by March and currently trade around 66 cents. For refiners selling their products abroad it's a no- brainier. They avoid US ethanol mandates.

Last and even more ridiculous is something called the Jones Act. Enacted in the 1920s  it requires "any cargo shipped between US ports to be carried by vessels that are based in the US, made in the US, and crewed by US citizens." Passed to protect US shipping interests, it's made it more expensive to move hydrocarbons between  American ports.

Though some might call it poetic hydrocarbon justice, the Northeast, after a series of refinery closings the last few years, faces higher energy costs because of it. Some say it adds $6 to $8 a barrel to transportation costs, making it much cheaper for a Gulf Coast refinery to ship gasoline out of the country than to the Northeast.

VILLAINS AND THE MEDIA

I was watching the news the other night.

Now if you don't know you should. By the time a story makes the six o'clock or late night news it's older than an issue of last year's People magazine. And usually about as boring.

As is routine for MSM the local station had the requisite young, attractive, ethnically correct, late-twenty something male and female anchors. Well attired, fairly polished and energetic. Like most slicker-than-slick food packages these days, they were gluten-free.

The story centered on how much sugar, that is, grams of the sweet stuff, is in food and how fat we Americans have all become. In case you don't realize it, villains are a prerequisite. Without them who needs heroes?

The trouble with villains is they come in all sizes and shapes and sport their own packaging. So a good part of media time is about those dastardly villains we all love to dislike and sometimes hate.  

When the stock market takes a swoon for the worse, it's those nasty short sellers. If a currency gets debased in the back alleys of some forex trading den, it's those greedy hedge funds. And don't bring up bankers and corporate chieftains with their gluttonous bonuses.

The term gluten in Latin means glue. Who the hell dared put that vile stuff in our sustenance?  So what if it pumps up bread and increases shelf-life, two features usually the private reserve of politicians.

Keeping your money locked up in anemic-yielding saving and checking accounts in the face of economic slowdowns in the eyes of many is a villainous act.

Forget Oklahoma, villains are the reason God made legislators. And if you are not diligent the next villain they turn up could be you.

The sugar story is an old one That it's just now making it to your local media proves the point. People like Adele Davis and William Dufty railed against its harmful effects in the 1970s. Dufty in 1975 published his now classic, "Sugar Blues."

Critics of Davis, and she had many, what most of us get when we step on establishment toes, will cite her court cases involving the deaths of some children whose parents followed some of her homeopathic prescriptions.

Let's set the record straight. One person in the US dies everyday from penicillin reactions. That's over 300 per year and it's only one of hundreds of patented medicines people ingest every day. Penicillin was discovered in 1928 by Sir Alexander Fleming and came on the market after World War II. At one time the number of annual deaths was much higher.

Davis also spoke out against saturated and hydrogenated fats long before it became acceptable to do so by the establishment. If those fats are not important today why is nearly half the US adult population over 45 on statins? 

If it isn't science, then it must be profits. For the record the diabetic problem the media and social do-gooders like Mayor Bloomberg rage about, mostly Type 2, the acquired kind, is a $35 billion industry.  It's common today to see Type 2 diabetics on two or even three oral hypoglycemics. There is even a pill for so-called pre-diabetics.

The unspoken mantra of big pharmaceuticals is: You got a problem, we got a pill. This isn't a ban or taxing over-sized portions issue. It's an individual responsibility issue, clear and simple, two basic concepts politicians and MSM have an extremely difficult time comprehending.

After all villains are much easier prey.

TUESDAY READS

BULL MARKET: WHICH STAGE ?
http://www.minyanville.com/business-news/markets/articles/The-6-Stages-of-Bull-Markets/4/1/2013/id/48996

CAFFEINE ADDICTION SPREADS
http://www.sciencedaily.com/releases/2013/03/130327133523.htm

NEW JAPANESE CENTRAL BANK CHIEF SPEAKS
http://www.reuters.com/article/2013/04/02/us-japan-economy-boj-idUSBRE93100M20130402

CHINESE CONSUMERS AND PRICE
http://www.minyanville.com/sectors/global-markets/articles/Pricing-Right-to-Win-Chinese-Consumers/3/27/2013/id/48956?camp=syndication&medium=portals&from=Fool

PLAY IT AGAIN WALL STREET
http://www.moneynews.com/newswidget/Wall-Street-synthetic-Richter-shipping/2013/04/01/id/497165?promo_code=10907-1&utm_source=10907Financial_Content_Network&utm_medium=nmwidget&utm_campaign=widgetphase1

FEWER DRUGS
http://www.pharmalive.com/drugmakers-are-licensing-fewer-compounds

SUCCESSFUL IS AS
http://blogs.hbr.org/cs/2013/03/the_most_effective_strategies.html?utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet

MONETARY MISCHIEF

It is simple to state how the money supply is so centrally controlled. It is hard to believe. I have personally observed that non -economists find it almost impossible to believe that twelve people- out of nineteen--none of whom have been elected by the public--sitting around a table in a magnificent Greek temple on Constitutional Avenue in Washington have the awesome legal power to double or to halve the total quantity of money in the country.

The exercise of this arbitrary power has sometimes been 
beneficial. However, in my view, it has more often been harmful. The Federal Reserve System authorized by the Congress in 1913 and beginning operations in 1914, presided over the more than doubling of prices that occurred during and after World War I. It's overreaction produced the subsequent sharp depression of 1920-21. After a brief interval of stability in the 1920s, it's actions significantly intensified and lengthened the great contraction of 1929-33. More recently, the Fed was responsible for the accelerating inflation of the 1970s--to cite just a few examples of how it's power has been used.

The above quote is from Milton Friedman's 1994 book Money Mischief Episodes in Monetary History.

CURRENCIES

Here is a link to some currencies. Pay particular note to the last two paragraphs about China and Brazil. The implications for the yuan and the dollar should never be too far down on your investment radar. http://www.cnbc.com/id/100604785

MONDAY READS

RALLY ARTIFICIAL?
http://www.moneynews.com/newswidget/El-Erian-Fed-market-central-banks/2013/03/29/id/496934?promo_code=10907-1&utm_source=10907Financial_Content_Network&utm_medium=nmwidget&utm_campaign=widgetphase1

NANNY STATE A PENNY PER OUNCE
http://online.wsj.com/article/SB10001424127887324789504578380271797966326.html?mod=opinion_newsreel

JAPANESE INFLATION
http://www.reuters.com/article/2013/03/31/us-economy-global-weekahead-idUSBRE92U07920130331

ARRESTED
http://www.guardian.co.uk/world/2013/mar/31/egypt-orders-arrest-tv-satirist

SMALL BUSINESSES MAY FURTHER DAMAGE EU
http://www.reuters.com/article/2013/03/28/us-italy-spain-banks-idUSBRE92R03K20130328

KOREAN SITUATION AND THE MARKETS
http://www.futuresmag.com/2013/03/31/commodity-stock-markets-assess-risk-of-korean-war?ref=hp&t=forex&page=2

HOLD THAT TAX
http://www.reuters.com/article/2013/03/31/us-brazil-economy-cartax-idUSBRE92U00N20130331

WHAT'S IN YOUR WALLET?
http://www.moneytalksnews.com/2013/03/28/what-should-and-what-shouldnt-be-in-your-wallet/?utm_source=newsletter&utm_campaign=email-2013-03-31&utm_medium=email

GOOD ADVICE
http://www.psychologytoday.com/blog/strategic-thinking/201303/why-we-ignore-good-advice

HIGH STAKES

If you track hydrocarbons you'll usually find the trail leads to more than just some information about oil and gas reserves.

Forget the Bourne Identity or Bond. Truth is far more intriguing than fiction.

US special forces have been training Syrian rebels for some time now. That's not news. What is news is the US government's sudden efforts to get the story out and to make it look as if it's a leak.

Unlike some of its neighbors Syria is not landlocked, a key point. This is about more than helping to remove a government regime viewed as unfriendly to the West. This is about gas, lots of it and who controls it.

Recall the story involving Attorney General Eric Holder and those weapons that allegedly found their way into the wrong hands, agents of Mexico's infamous drug cartel. Well, Syria holds a similar time bomb for the administration: Just who are the American forces in Syria training, true independents or jihadist who have infiltrated the movement?

As Jen Alic for Oilprice.com notes, reports from the area state the Free Syrian Army, the people the US is supposedly training, have been heavily infiltrated by jihadists. Officials in Washington claim American special forces there are training Jordanians in Jordan, not members of the Free Syrian Army.

Last week the Associated Press, citing several un-named officials, began "leaking" the story. Whoever the US is training, Jordanians or otherwise, reports say that information is being passed across the border to Syrians where the the fighting between the Free Syrian Army and government forces rages. CIA operatives hover nearby.

Enter Ghassan Hitto, a former resident of Murphy, Texas, who was born in Damascus, United Arab Republic (now Syria) in 1963 and migrated to the US in 1980. Educated here Hitto holds degrees in mathematics and computer science, he worked in technology and was one of the founding members after 911 of the Muslim Legal Fund of America to give legal aid to Muslims. He is Kurdish.

Late last year he suddenly moved to Turkey and got involved with the National Coalition for Syrian Revolutionary and Opposition Forces. In mid-March he was elected prime minister of an interim government in a split election that was boycotted by some members of the Coalition, including some of the Free Syrian Army, one of the major groups aligned against Assad's troops.

The truth is the Eastern Mediterranean is gas rich, a fact of more than passing interest to any number of players, not the least of which include: Russia, Europe, Turkey and the US. Hitto is the US's man in waiting. Some say he's also Turkey's choice.

The US itself is a surrogate man in waiting. A lot remains at stake here. More than many would imagine. Different countries are backing the various so-called freedom fighters for different reasons.

Cyprus is just a tiny part of a story that could easily rival most spy thrillers. Noble, a Houston-based oil company, is set soon to start drilling for gas in a block in the Mediterranean owned by Cyprus. They're looking for oil and gas, not something endearing them to Turkey.

Cyprus is two-thirds controlled by Greek-Cypriates, the other by those with ethnic Turkish ties. Turkey just severed an agreement with Italian oil company, Eni, presumably because the Italian firm recently started operations off the Cyprus coast.

When in 2004 the tiny island was accepted into the EU it was only the Greek-Cypriot two-thirds, the Greek-Cypriot Republic of Cyprus, that joined the union. Turkey only recognizes the northern third.

Turkey's press release about its actions against Eni cited concerns about Cyprus' Turkish population getting its fair share of the possible proceeds coming from Cyprus-owned Mediterranean oil and gas blocks.

 The timing of the announcement, many observers believe, coming just days ahead of scheduled biddings for more Cyprus oil and gas licenses, sends a subtle message: drill offshore in Cyprus, miss out in Turkey.

Russia now supplies Europe with a major portion of it natural gas. New supplies from the eastern Mediterranean, depending on who controls them, could threaten that hold. Here are some links about what's at stake from a report way before the Cyprus story hit the international media.

As we said big players, high stakes and lots of intrigue.

http://carnegieendowment.org/2013/02/08/battle-for-syria/f6t6

http://oilprice.com/Energy/Crude-Oil/Recent-Oil-Discovery-off-Lebanese-Coast-Draws-Naval-Powers-to-East-Med.html











 

WEEKEND READS

ONCE THE SAFEST
http://www.marketwatch.com/story/money-market-funds-are-a-most-dangerous-investment-2013-03-29?pagenumber=2

BEWARE OF THE HUNGARIAN FORINT
http://www.bondvigilantes.com/

CONGRESS EXPORTING MORE IGNORANCE
http://cafehayek.com/

KNOW YOUR FRIENDLY DENTIST
http://www.chron.com/news/us/article/HIV-test-urged-for-7-000-Oklahoma-dental-patients-4392561.php

OIL,STEEL, RAIL AND AYN RAND
http://blogs.oilandgasinvestor.com/

JINGOISM
http://www.reuters.com/article/2013/03/29/us-korea-north-idUSBRE92R13R20130329

MUCH NEEDED HARD TO DIGEST

We came across a French poll earlier this year that showed 80% of the people polled believed their country was bankrupt.

Well, here's France's new president, Francois Hollande, a Socialist many in European media gloated over when he won, calling for no new taxes, protecting defense spending, cutting state spending and red tape for businesses.

Mr. Obama and Mr. Krugman, are you paying attention?

French unemployment is in double-digit land and the spread premium between German and French 10-year government bonds widened again recently, up 16 basis points since last December. 

More incentives for those drawing unemployment to return to work, unbelievable coming from a socialist politician.

But the real irony is many of these changes are mere extensions of those started by his free-market talking predecessor, Nicolas Sarkozy.

According to polls Hollande is the most unpopular French president in 30 years. 

One thing remains clear. Such changes, if they get implemented, would have digested a lot smoother had they been done a lot earlier.

http://www.bloomberg.com/news/2013-03-28/hollande-presses-french-to-embrace-social-revamp-to-spur-growth.html

BEWARE OF OCTOPI ON PEDS

It's that time of year again, tax time. 

Since the market is closed Good Friday and markets in Europe will be off  Monday, maybe a little levity in the face of all the turmoil going on might lighten things up a bit. We'll see.

Nearly a decade ago when my retired partner and I ran a small Newport Beach investment boutique for private clients, we ran into a lot of AMT, the alternative investment tax. In short, it's one of Congress' most clucked-headed, dumbest ideas. And that covers some serious ground.

 And that's where the levity comes in. Sometimes you have to just laugh at the stupidity of these folks, it's magnitude.  We spent a lot of  keyboard time writing about it then, trying to inform and warn.  It's like an octopus on performance enhancing drugs whose tentacles keep getting longer every year.

Yet there's something about even the mildly complex that turns many people off. That is, until it hits their wallet and they have to tell their significant other.

We'll spare you the angry-provoking details.  It's another one of those to-get-the-few-you-concoct-an idiotic-complex tax that eventually gets the innocent and the many and zero of the few.

So with that introduction, happy tax time to all and here is a link for your reading pleasure.

http://www.thefiscaltimes.com/Articles/2013/03/28/10-Tax-Laws-That-Hurt-the-Economy-Most.aspx#page1