Today, 2007 October 15, the major stock market averages were down. In particular, the Dow Jones Industrial Average was down 108.28 to 13984.80; the NASDAQ was down 25.63 to 2780.05, and the S&P was down 13.09 to 1548.71. Why did the stock averages go down? The analysts on CNBC and other places have come up with a number of reasons. The financial stocks all went down, so therefore, they say, they caused the market downturn. We aren't out of the housing crisis yet. They are awaiting the Fed's next move. Earnings of companies are down. Bladada blah blah blah.
No, people. None of these are the reason why the stock market went down. If you will get your head out of all these mathematical models, computer programs, and analysis diagrams, and take a look at some real things, you will see the answer. Gold is real. It is element 79 with symbol Au. The Gold Bugs index (^HUI) was up 5.43 to 418.77, a 1.31% increase. Oil is real. You can never run out of money; you can just print more. But we can and are running out of oil. The AMEX Oil Index (^XOI) was up 15.43 to 1495.47, a 1.04% increase. Why? Because the dollar continues to sink. But more likely because oil continues to go up in price. It went up $2.44 or so today to $86.13, a new high, and only about 14 dollars removed from $100 a barrel.
Why? Oil stocks (meaning supplies) are down. The Energy department had expected them to go up. The International Energy Agency also reported a decline in world supply of oil. OPEC is saying that it will produce 110,000 fewer barrels this year than expected, when it expected a raise. World production of oil reached about 84 billion barrels a day in 2004, nearly a thousand barrels a second. Since then it has been holding steady. Four of the world's largest oil fields, namely Ghawar in Saudi Arabia, Daqing in China, Burgan in Kuwait, and Cantarell in the Gulf of Campeche near Mexico, are starting to decline, some precipitously, as Cantarell, which furthermore got hit by two Category 5 hurricanes this year.
That's the reason why stocks fell. It is also the reason why gold and oil stocks went up, and why the price of oil is up. Our civilization is beginning to run out of cheap oil. To me it looks like prices are going to go up. At $86 a barrel, gasoline prices should be $3.02 in southern Virginia; instead they are around $2.55. There is nowhere to go but up for these prices. Further, especially if prices don't go up much, shortages could develop. And then there will be a big outcry. The outrage at being fooled on the supply of oil will more than exceed that of finding out that there were no weapons of mass destruction in Iraq.
