Geopolitics of Peak Oil

A few weeks ago, I highlighted the fact that the US Government was topping off the strategic petroleum reserve at a time when oil prices were over $100 and during an election year. I also mentioned that Vice President Cheney was in the Middle East at the end of March and I would add that President Bush met with Vladimir Putin just a few weeks ago. Something didn’t smell right and based on the trading in crude in the past few weeks, we're starting to understand why.

This week, we learned that the Israelis did in fact bomb a Syrian nuclear reactor last year and the United States in now claiming that the North Koreans were assisting the Syrians in their efforts. Today, the Chairman of the Joint Chiefs of Staff accused the Iranians of increasing its efforts to train and arm insurgents in Iraq and Afghanistan and there are rumors of an American ship firing a warning shot at the Iranians.

Folks, the saber rattling is getting louder and its no wonder that crude is back to all-time highs. I’m not sure what the agenda is, but it does appear that the Bush administration is trying to 1) force a confrontation or 2) get everyone to the negotiating table. This feels like high stakes poker to me.

The crude oil market has shown how sensitive it is to every little supply disruption. There simply is not enough product to go around and demand has shown no sign of abating. So how do you play the energy markets? I’m not sure you do…sometimes it's better to be on the sidelines. Right now may be one of those times.