Where was I?
Oh yes, how most folks have gotten the Oil supply and pricing story wrong - so far.
See, "no battle plan survives contact with the enemy". In this case, I think a great many folks are going to pull their horns in right when they are going to be very, very right.
I am not terribly bullish on Oil prices in the near term, primarily because I foresee one final deflationary disaster that will create the greatest buying opportunity since Noah built hisself a boat... UNLESS something bad happens within the boundaries of the Kingdom of Saudi Arabia. Look, the U.S Federal Reserve forced a great deal of money into risk assets, and when the Fed begins its exit it is going to have the opposite effect, not to mention all of the emerging markets whose central banks have been printing like mad will have to stop printing and tighten liquidity, too. If this proves correct, then the deflationary wave will be dumbfounding/tidal in its magnitude. While the Fed has made me look dopey in the near term, I am going to bet big on my vision of the outcome. I know a great many people - the "shorts" and the "doomers" among them - that absolutely HATE Bernake & Co. Not me. I underestimated the capacity of the Fed, and missed a big opportunity. Oh, well. I didn't lose, I just didn't capture the opportunity. You gotta be able to forgive yourself and move on to the next trade. I remember a smart, older trader from my time at Laidlaw; he would say "don't get stuck in a rut on your thinking... keep thinking - and trade."
Too many people in the "Peak Oil discussion" universe get stuck on the price of Oil. Don't. If my deflationary wave comes to pass, it will wash Oil out with everything else - and that includes precious metals, grains (weather permitting), equities, maybe even bonds (got noodle that some more). We are getting a hint of things to come from housing and wages, neither of which are responding positively to the Fed's inflationary call to buy risk assets. These aren't canary's in a coal mine; these are freaking Ostrich's.
I have been hanging onto to my view of that one last deflationary wave, and missed the trade on QE2. I forgive myself. Now what? Now the Fed does not have the political cover to do QE3, and by the time they do, the wave will be overwhelming (my friend, the Mad Scientist, thinks QE3 is in the cards. Maybe. Even probably. But not until the water is coming over the bow, me thinks).
So what's this have to do with Oil supplies, politics, Matt Simmons, and Dan Yergin?
Simple. The emerging markets are going to continue to compete with the U.S. and the West for a declining volume of exported oil even as the deflationary wave (brought about by the withdrawal of liquidity in the same developing nations that are competing for said Oil) makes the production of marginal, unconventional oil very, very unprofitable. This, and I reserve the right to change my mind on a dime, will create the entry point for Oil that most of us missed in 2009. Actually, the entry point for equities, real estate, and other commodities, too.
BTW... I was kidding when I said "Simple". Also, shorting is for pros and big boys. Don't try it at home unless you know what you are doing and what risks you are taking.