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Welcome to the "Wolf Creek Pass" School of Monetary Policy

I don’t know if you folks remember that hit ditty: a humorous tune about two truckers attempting to manhandle an out-of-control 1948 Peterbilt down the “other side” of Wolf Creek Pass – a death-taunting section of U.S. Highway 160 where the elevation drops a hefty 5,000 feet in a relatively short distance.

The song’s two characters – a truck driver named Earl and his brother, who’s his partner as well as the song’s narrator – are taking a flatbed load of chickens on a speedy trip down this winding, two-lane Colorado highway. After the narrator gives Earl the above-mentioned warning, the ancient semi’s brakes fail.

From there on down, the narrator tells us that the brothers’ trip “just wasn’t real pretty.” The truck careened around hairpins and switchbacks, and then raced at an uncontrolled 110 mph toward a tunnel with “clearance to the 12-foot line” – with chicken crates sadly “stacked to 13-9.”

The drivers and the runaway Peterbilt “went down and around and around and down ’til we run outta ground at the edge of town… and bashed into the side of the feed store – in downtown Pagosa Springs.”

Believe it or not, I started thinking about this funny old country tune the other night – right after I’d read a piece about QE3 and the U.S. Federal Reserve.

As zany as it first sounds, the parallels are striking.

  • Featured Story

    Are We Running Out of Oil?

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    For many years, industry experts have been sounding the alarm that America, and the world, are about to run out of oil.

    Every expert who's predicted "the end of oil" has been wrong in the past. But with global energy consumption at an all-time high, and much of the world's economy dependent on oil, the question is: Are we running out of oil?


    Here's everything you need to know about today's oil market...
  • Peak Oil

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    I wasn't more than 30 minutes outside of D.C. the other night before my cell phone started ringing.

    The calls involved breaking new developments overseas that promise to have a big impact on the global energy markets. They concerned a major global energy situation that is likely to create a domino effect that will have consequences for U.S. domestic policy.

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  • The Next Best Investments in Oil Come From This Texas Sweet Spot drop of a black liquid

    As I wrote up this analysis of the best investments in oil, a familiar saying came to mind: "Everything old is new again."

    A truer statement could not be said about the Permian Basin, which is a geological formation roughly 300 miles long and 250 miles across that stretches across west Texas and eastern New Mexico.

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    After banking some very hefty profits for Energy Advantage and Energy Inner Circle subscribers on refining stocks earlier this year, the entire sector now is about to land "between a rock and a hard place."

    Once a high-flying place for investors to earn substantial profits, refiners have been under pressure for the last two months. But that's actually just the beginning of what's to come.

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  • These Oil Stocks Are the Big Winners in This Year's "Summer Pop"

    I have been "in the field" for the past several days and will be back in circulation later this week. But I wanted to send you a note on what's been taking place recently.

    The last two trading sessions have seen a spike in oil stocks. The rise has been focused on companies that provide services to early-stage field development, as well as for crude production.

    Now, we have witnessed a similar "summer pop" in each of the past three years. It tends to signal a rise in expected medium-term demand for both crude oil and oil products.

    However this time around, the improvement isn't reflected in companies across the board, but rather in those emphasizing geographically specific field plays.

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  • How to Invest in Oil's Final Frontier: The Arctic Polar bear

    Investors searching for how to invest in oil in 2013 should be focused on these latest developments from the Arctic.

    In fact, countries are racing to get a piece of what could be the final frontier for oil...

    As ice melts in the Arctic region, oil and gas trapped beneath the water becomes more accessible.

    Money Morning Global Energy Strategist Dr. Kent Moors recently explained to Money Morning members about the search for Arctic oil and gas.

    He spoke about the years-in-the-making U.S. Geological Survey's Circum-Arctic Resource Appraisal. The study found that 84% of the total undiscovered oil and gas left on the planet is located above the Arctic Circle, mainly offshore and in three huge basins that lie under shallow seas.

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    In a report entitled "The End is Nigh," Seth Kleinman says a combination of flattening demand and rising supply will cause oil prices to slide slightly by the end of the decade to $80-$90 a barrel.

    But while oil companies have made many large new discoveries over the past few years, including big shale oil finds in North America and Australia as well as deepwater finds in the Gulf of Mexico, that doesn't mean oil prices will fall.

    In fact, according to Money Morning Global Energy Strategist Dr. Kent Moors, it's far more likely that oil prices will continue to rise over the next decade.

    Moors points out what most other analysts seem to be missing - that all of the new oil finds present many challenges that will add to the cost of extraction.

    "None of this new volume is light, sweet crude," Moors said. "The average wellhead costs continue to go up, and that moves its way downstream to processing, wholesale, and retail."

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    Now, this is certainly not the only element in determining preferable stock moves, but it's critical that you know the EROEI because it could make you a lot of money.

    Recognizing the real elements that determine the genuine cost of energy production, EROEI is becoming an important factor in estimating profit margins.

    And those margins certainly influence the performance of a stock as we've seen all across the energy value chain in recent months.

    EROEI refers to the amount of energy used to produce energy.

    If this ratio produces a figure of 1.0, EROEI is telling us that it takes one barrel of oil equivalent to produce one barrel as a result.

    Anything under 1.0 means that more energy is consumed in the production process than is gained as an end product.

    EROEI has the advantage of being a useful yardstick throughout the energy curve - from upstream production sites (wellheads, generating facilities) through midstream (gathering, transit, storage and initial processing) to downstream (refineries, terminals, wholesale and retail distribution, end use).

    Some applications of EROEI are already in wide usage, although we don't tend to think about them in these terms. Energy-efficiency ratings on appliances, heating and cooling systems, windows, or building supplies are an application at the end of the energy curve.

    But how can we use this to fine-tune an investment portfolio?

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    For a glimpse of this "peak oil" future, please read on...

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    Take last weekend, when Iraq wrapped up the biggest oil-field auction in history. Major new deals were announced by Europe's Royal Dutch Shell PLC (NYSE: RDS.A , RDS.B), OAO Gazprom (OTC ADR: OGZPY), Lukoil (OTC ADR: LUKOY), China's China National Petroleum Corp. (CNPC), and Malaysia's Petroliam Nasional Berhad (Petronas).

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