This past week started with a bang, as a west Texas refinery blew up. That price explosion was supplemented by OPEC reports that they would reduce output next month to support crude in the $85 to $100 price range. Recessionary concerns also threaten to curtail energy consumption and that may have been part of T. Boone Pickens’ rational in his forecast for a $10 to $15 break in crude back toward its recent $86 per barrel low.

On the other hand, there are indications that world economic conditions may not be as weak as many postulate. Militants in Nigeria have asked President Bush to mediate their long-lasting crisis relating to attacks on the country’s oil infrastructure. Crude oil economics are like economics on steroids. OPEC meets March 5, so there is not going to be much of break before they shake things up again. Another bearish factor leaned on crude Thursday as the U.S. inventory came out larger then expected. Heating oil stocks declined more than estimated but the heating oil season is winding down from the hardest winter in years.

All-time highs in soybean and palm oil have the fledgling diesel oil alternative fuel business in a real profit bind. I don’t care how much we need to find alternative fuels, if they cannot be produced at a profit they will not work. Our leadership in Washington has thrown up some impossible dreams in what they have seen as a political expedient smokescreen for poor suffering consumers. The occurrence of the super-hyped-up national election season makes things worse as politics are altered to look attractive to fired-up followers. If only we could get as enthused over our crippled school systems as we do over fuel questions.

The technical make-up of the crude oil, in the view of one of my oldest and trusted chartist colleagues Julia Bussie, has an upside potential of $109 to $115 per barrel and $85 on the downside after that topside objective has been achieved. That seems appropriate if all things are equal, but the global energy markets rarely run on an even keel for very long. If not geopolitical uprisings, there are dramatic weather events like the upcoming hurricane season coming in the wake of our tough winter in the U.S. Then pipelines can rupture, oil boats can spill their cargoes and let’s not forget the saboteurs and the crooked oil moguls in every corner of the world. The Russians have had a hard time forming a free enterprise system, but they have certainly caught the spirit of corruption.

It seems to me that we are overlooking our best alternative energy sources in wind, solar, thermal and if we can figure out a way to take out the garbage, nuclear.

Gary Wilhelmi can be reached at gary.wilhelmi@dtn.com

(CZ)