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Oil Prices Fallout
From: Stephen Hege
To: Bellringer
Sent: Tuesday, April 22, 2008 10:37 PM
Subject: Fw: Oil Prices
Folks,
Over the last two days I have heard from at least three different sources that crude oil prices are going to 200 dollars a barrel. One source was a person involved with an oil company as an employee, the other two were TV commentators, but not in the TV news business. Right now crude is almost $120. I am not sure how much higher that gas and diesel fuel has to go before the majority of the trucks quit hauling or people can't afford to drive to work, if they still have a job, but I am certain it will be lower than what fuel prices will be if oil gets anywhere close to $200. That would put fuel over $5 a gallon. It will also cause thousands of bankruptcies among individuals and small businesses.
Most people are not aware of the trillions of dollars in derivatives that the major banks are holding, for example J.P. Morgan and Chase according to the IMF have 81 trillion alone. All together the derivative amounts world wide is over 700 trillion. The vast majority of these are unregulated contracts, so no one knows who has what. When the companies start taking bankruptcy, several things occur. Most importantly a bankruptcy filing causes all bank loan payments to stop. Secondly the derivatives that are supposed to protect the buyer from loss begin to be activated an a large scale. Those two actions will cause major bank failures to occur and most likely they will be the biggest of our banks as soon as any because they are the ones holding the majority of the derivatives that they will be unable to pay. The continuing meltdown of the housing industry was brought about in large part because of the derivatives, although you have not heard anything about that on news reports.
On an Iowa radio station today a news commentator said that they had information that up to 150 banks in the state could fail.
All this is presently being ignored by the stockmarkets, but that will likely not last much longer. If this unfolds as I expect in the next 30-60 days enough trucks will be forced to shut down due to fuel prices that food supplies will be in short supply in some sections of the country. Therefore I believe it is important that you do some stockpiling of staples such as pastas, rice and canned items such as tuna and vegetables. If you have small children I would get some powdered milk on hand as well. It may not happen as fast as I think possible or be as bad as it looks like it could be, but it is better to have it and not need it than to need it and not have it. So a word to the wise - - - - -prepare.
D.