that could keep crude, NG, and the distillates high, but it could bring down the multiples on the stocks.
Well, that's the quandary the Fed seems to be facing. Inflate the economy and risk driving energy prices even higher than we know they are going to be.
And they only way they can do that is to lower borrowing costs to the extent that cheap rates mitigate the costs associated with higher energy prices.
But we know the dislocations in the energy infrastructure are not problems that will take to a "quick fix", but will require several years to resolve themselves. Either way, earnings potential in the energy sector should remain stronger than other parts of the economy.
And what we're going to see this summer in California will probably even worse than last year, given the low water levels in many resevoirs (necessary for hydro-electric power).
Finally, Bush is putting together a comprehensive energy package which is going to probably span all of North American, including Canada and Mexico. This could create the impetus, through tax incentives and regulatory relief, to open up a boom in exploration.
We need to face the fact that the US imports 58% of our oil, drawn primarily from a source (OPEC) that is increasingly being courted by China to meet its own energy requirements.
This sets up some very nasty national security issues for the US over the next couple of years, if we don't get nip it in the bud now.
Hawk |
