ANTIESTABLISHMENTARIAN

Oil hit another record high Tuesday at $119.90, one thin dime short of $120.00 which was my prediction for July. Gasoline futures broke the three-dollar mark while retail gasoline according to AAA averages $3.503 nationwide. Diesel averages $4.20.

Market Watch reports that refinery production dropped to a low of 80% the week ending April 11^th, due in part to very low crack spreads, meaning that refiners are on the edge of taking losses because retail fuel prices haven’t caught up with oil. Yet the public continues to believe that “oil companies” rig the price of oil. Refiners therefore take the opportunity to do more maintenance when they’re not making money. This will likely cause a spike during late May – early June, depending on how long the slowdown lasts.

Recent attacks on pipelines and an oil tanker highlights a new but predictable development. The more critical the oil crisis becomes, the greater will it become a target of political complaint. Supply interruptions are likely to become commonplace and more severe than the relatively minor disruptions due to attacks over the last several years. This means that much greater resources will have to be devoted to protecting infrastructure, which will further drive up costs. One easily imagine what will happen if a major refinery gets hit.

Some might call it premature for me to declare that the power boat industry is dead. My response would be, what can save it? Power boat builders and their respective dealers are now the walking dead who haven’t a snowball’s chance in hell of not melting away. I’ve heard reliable reports of Florida boat builder’s sales so far this year of incredible numbers, such as one, eight and eleven boats sold in three months. We’ll never know what the numbers are for the likes of Sea Ray, Cruisers, Carver, etc. are until they finally shut down but word is slowly leaking out of massive layoffs and widespread plant closings. These things don’t make the news until large operations shut down completely. The grossly overcrowded outboard market has already seen numerous closings.

The picture is growing clearer in the wider economy as the oil crisis (yeah, there really is one) as,

Delta Airlines records a record $6.4 billion loss.

American Airlines come in at $537 million loss.

April 23, 2008 03:22pm, Agence France-Presse,

CHINA only has enough coal for 12 days of consumption, three days less than a month ago, state media reported Wednesday, sounding the alarm bells over the nation’s most important source of energy.

Moreover, China posts a new record for oil imports in the first quarter as U.S. fuel consumption doesn’t increase, but doesn’t decline either. Four dollar gasoline seems only to mean that consumption isn’t growing in the U.S. while its growing massively elsewhere. 2008 demand is expected to increase by 1.5 mbd yet there is no expected increase in supply. It should be no surprise now that no sirens are sounding as TV people keep on pushing their energy consumption products. One doubts it would even get a mention if oil were cut off completely.

On the inflationary front I note lately that many experts are now admitting that they don’t know what the hell is going on. One of my favorites says, “We’re going (financially and economically)where no man has gone before, so there are no experts.” He’s got that right, and is the reason why I dare to try to understand this brave new world, simply because everything that used to be true, no longer is. If you wanted a global economy, then celebrate because you got one. Yet some are calling it the Mad Max e-CONomy.

Foreign investment in the U.S. continues to decline precipitously, down 68% from a 2006 high as the Useless dollar continues to fall to new all-time low of $1.60 to the Euro. Our money has lost 40% of its value in the last 5 years.

One of the problems of inflation (just ask Paul Volker) is that it has a very long gestation period. The Fed can blow out too much money one year and it likely won’t show up in price changes for several years. That is what is happening now because we exported (by means of debt and imports) our excess dollars for years 2001-2004 and mid 2007 to present. Those excess (inflated) dollars have poisoned the entire world economy and now are returning home to roost in the form of higher import prices combined with the commodities problem (the flight from dollar debt assets). This is a done deal and the Fed cannot stop this train wreck which will continue to worsen, despite apparent brief periods of respite. That’s why I call stock market speculators are ignorant fools.

I find it appalling that most Americans blame “oil companies” like Exxon-Mobil. When I tell people that 85% of the world’s oil is controlled by national governments, they don’t believe me. That leaves the oil companies controlling only 15% of world oil, and that number is dropping rapidly. So, go ahead, hate the oil companies and then congress will punish those evil bastards by taxing the hell out of them, which will only push prices higher. Dumber than a box of rocks. Never permit the facts to interfere with one’s opinion.

Here’s another fact pointing toward peak oil: Average Non OPEC oil field decline rate was 7.7% from 2000 to 2007. For the Uk, US, Australia and Norway, the average was above 15% per annum. Source: Energy Information Agency report, 3/11/08.

All the doomsayer messengers who were hooted off TV by calling for sustained oil price of over $100 are now calling for $125 to $180 oil this year. If the anticipated 1.5 million barrel per day shortfall holds this year, the $180 number is far from excessive. What this boils down to is that the average diesel boat owner with a 300 gallon tank will be facing a $1500 fill up. Who’s going to buy a boat under these circumstances? Answer: possibly a couple of whacked out rock stars, but no Joe Ultra Light Six Packs.

A South Florida friend of mine was talking about how developers are probably salivating over all those dying boat yards and marinas down there. Probably salivating, but definitely unable to buy them up as there won’t be another condo built down there for at least a decade. I’m just really curious about what more than a million power cruiser owners are going to do with boats they can’t sell. The National Liquidators auction has jumped to 344 boats this week while Yachtworld listings climbed to 120,678 up 5.6% over January 1 but the smaller sites like Yacht trader have grown enormously (as their prices are cheaper) up more than 20% to 51,076. Boattrader, for smaller boats, has 130,331 listings.

Those numbers do not yet indicate a panic. Yet. But we can expect a huge glut of used SUV’s coming soon. I’ll bet by September you can pick up a 2007 Cadillac Escalade ($56,590) for 50 cents or less on the dollar.

While the stock market (and by extension, the Fed) loves inflation because that means more $$$ to speculate with, the rest of us are being driven to the poor house. Stagflation is already upon us as reversion to mean intensifies.

Oh, and by the way, there is no stress showing in the mega yacht market.