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Here is the original post: http://www.forexfactory.com/news.php...0p#post1697689

Here is Part II from us, a can of worms may be opening up here, so let's go fishing. This may be hard to read, and for some they will not agree, and that is fine. Its importance cannot be ignored, or can it?:

Until the US can instigate a replacement Energy source, or against all odds, convince itself that a life-style change has to be made because the 'Good ol' Oil Days of Oil at $50' are just around the bend, it will remain crippled with a Current Account deficit, and a Trade Imbalance. It is OK hearing that a cheap $ helps Export Prices, the reality is however that the US is a net Importer (more comes in as Imports than goes out as Exports), and therefore a cheap $ may not be as beneficial as some think.

Just look at the options outside of Saudi Arabia, the main source of US Oil Imports;
Canada.
The Trade disputes over Soft-Wood lumber did damage to trade relations that are still being felt now, and instigated Canada opening up Exports to other Global regions more quickly than it otherwise might have.
Venezuela.
When the President of Venezuela said at an International Convention that he could “still smell the sulpher” having followed George Bush to the podium (a reference to the Devil) it summed up the desire that each country would have in expanding further relationships that benefit each other.
Nigeria.
Strong links to Europe and the Middle East that the US will not break.
Russia.
Increased Oil production in 1990, the first Global producer to be able to do so since the 1970’s, but that collapsed as quickly as the new private company, Yukon, collapsed. Russia now just about produces enough Oil to feed itself and the surplus goes to China.
Iran.
The second largest producer of oil in the world. Iran states that it needs to build a Nuclear reactor because in a decade its own Energy needs will not be enough; without the reactor they say that they will become a Net Importer of Energy. If Iran needs to have Nuclear, and the power that gives the country, it will be in return for a continued flow of global Oil. What price to pay is that for Global Powers? Whatever the answer is, Iran needs Nuclear to allow Oil to flow; will their excess be fed straight to the US? Just think about the politics there for a moment; neither country has too much trust of the other, and both will say, "for good reason".
UK
The staunchest ally of the US, but that is getting questioned by public opinion. The growing minority population in the UK are becoming politically strong, as is their right, and as such the UK/US link may not be as strong in 10 years as it is right now. The North Sea Oil production cannot increase capacity to supply excess US needs, there is just about enough to cover the UK needs, and they still import Oil.

So, back to Saudi Arabia; they seem to have peaked in production, and for whatever reason cannot increase the flow at a rate that the US and Chindia (China and India, the worlds future Super Powers?) need just to feed the current growth rates. The Saudi's walk a fine line in the close Export link that they have with the US, as the religion that is practised by many is Wahhabi, a form of Sunni Islam. As such there is a distrust of Christian, Jew, Shiites, and, as a seperate group, the US.

So, where next? We need to look in the mirror and see if we can find Oil there, if not we need to look at whether we are each prepared to make something change, because the arguments are that if we don’t tough times ahead are going to be very likely.

This is not going away, and Traders could be seeing historical times if the US is not to be dominated by Oil Exporting countries. It is moving that way right now, a change in lifestyle is what is required;

1) Look to renewable Energy like Wind, and Tidal, the initial cost of infrastructure on them will soon look cheap compared to the cost of a Global shortage in Oil.

2) The Industrial Revolution was enabled only after switching from burning wood, an easily accessible source of Energy that was dwindling, to Coal, an Energy source that was plentiful but harder to find. Without making that sacrifice the UK would have stayed as an Island in the North Sea, rather than a tiny country that lead a Global revolution of change and advancement.

3) Maybe look to learn how to fend for ourselves, asking and learning from Parents and Grandparents the basics of Family life and survival on our own terms, and to do it before they are not able to teach us. Survival enslaved to Energy that powers our cars and computers that link us to the world will be redundant if the Oil situation is not addressed.

4) Save more, (Hard to understand for a society that has the largest net per capita income and the lowest net per capita savings rate in the world), but the lack of savings makes us reliant on Government help in creating liquidity in hard times. If Energy is not addressed the Government, running the largest deficit ever seen and the ballooning Trade Balance, will be facing debt numbers that look small at these historically high levels right now. In the next cycle of economic slow-down where will the cash come from for the Government to flood the market with cheap Interest Rates, lower Mortgage levels and Tax cuts to jump-start things again? We can't expect the Fed to just turn the printers on, or can we?

We would not maybe be as concerned if we were flexible enough and prepared to change our lifestyles, learn from older generations, (who needs to ask Grandpa when it's a lot easier just to Google it), and to save to be able to look after ourselves. In reality however we are just not prepared to do that, and unfortunately that may be our downfall in regard to Energy.

One thing is certain out of all of this; there are few, if any, nations on earth as adaptable as the US, and few more committed to 'getting it done' in good time, and therefore it will be surprising if this realization does not get addressed, it may be however that the US public need to instigate the moves at home, rather than wait for the consequences of this Energy Shortfall.

1929, 1945, 1982. Sound familiar? Depression, World War II and Recession. All three had record Government deficits and Resource shortages. In all cases Government spending tripled, higher Energy costs were then reflected in high unemployment, and the Government needed to spend its way out of trouble with Tax cuts, Interest Rate cuts, and Government work contracts. (Remember the White House having a wood burner put in to save Energy costs, and a wind turbine fitted? Where have they gone?).

If it sounds familiar it is because that is what we have now, and that is why most Trade Desks are not in Dollar Long positions for anything other than Hedges against forward positions, or to address end-of-day Risk/Assets Ratio excess and looking to earn overnight Swap Interest. (Remember that the USD is now a net PAYER of Swap Interest on some Pairs, and if the Rate Cuts continue it will cost money to hold $ Longs overnight.

We have not even started on Gold, that looks the same to us regarding US debts. Long Gold, deliverable Gold too, not paper, is where some are looking to be, the stuff that you can touch, and in small denominations that are easily tradable, and hideable. But, that really is another story.

Our Alerets have been centered around this for a while now, if you are interested please feel free to pop in each day, most of our information is free, and some say it is also priceless. Free and Priceless? How unusual is that!!!
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