Bill,

In my humble opinion the answer to your question about why the the arab oil states remain coorporative with the US, is simple. Just as we are addicted to oil, they are addicted to our money. The USA's reliance on the stabiliy of this region is concerning to me. I hope at some point soon alternative energy becomes a REAL priority, not only for saving the earth, but to reduce our reliance on this unstable region which has too much influence on our economy.

Rick, Bill--
A little more thats not found in the history books about oil and Saudi Arabia...

When Nixon closed the gold window, dollar stability was obviously a concern, so Nixon and King Faisal agreed to price oil in dollars in exchange for protection of the kingdom. With this arrangement, the U.S. able to run big deficits as the world clamored for dollars to fund their oil purchases.

As Asia developed during the 90's, the importance of this alignment has wained, but nonetheless, the friendship between the King's family and the U.S. is extremely important, and even more so considering the recent Iraq turmoil. We will never allow Bin Laden or anyone else to overthrow the House of Saud, and they will do whatever they can to help friendly Presidents in this country.

Be it phony CPI numbers,WMD,or Saudi oil reserves - we live in an age of manufactured truth. Decisions must be heavily weighted by anecdotal evidence and what you see around you or your assets will be someone else's next meal. Thank you, Bill and commenters, on the many excellent perspectives offered at this site.

Oil testing $70 again...

Anyone else think there is a "take down" occuring in oil/gold?

On a pure technical (cycle basis) oil is much harder to predict than gold.

Gold is at the beginning of a climb and if it falls should not fall very hard. On the other hand, oil is "making" a new upper range limit on an upward monthly trend.

At this time, (on a cycle basis) no one can tell if the move upward will stop. On the other hand, something much more haunting is the lower limit on oil. If cycles were to go fruity like they sometime do, oil could go as low as $24.

This is very umprobable, still possible. This is the lower limit of the trend.

A far more probable outcome would be (if the top at $80 is the limit of the range) that it will move between 55 and 8O to reach a possible $105 in ten years.

I am not saying that it will reach $105 in ten years, I am saying that the slope of the upper trend would be as such.
Now no one knows if it will reach $100 tomorrow.

Is this clear or is it just in my mind that it is?

Now, this is important. We are at the end of a monthly cycle and this is why it is going down. It might go down sharply (remember 1987 stock market - this is when cycle can go fruity). It might go down another month also. However, it will go back up after that and the question is:
How far will it go and this is decisive.

If oil goes back up strongly, then expect it to blow the top of the range. If it goes slow in the next three month it might well be the beginning of an important move southward.
This is on a cycle basis what can be said on oil.

Tough configuration!

I don't know if Bill will allow a reference to a book or not on his blog, but for those who are interested in the oil debacle from the '60's and 70's upto current times, a good read on the oil and middle east situation is a book called "Confessions of an Economic Hitman" by John Perkins. It shows the manipulation involving the US and Saudi relationship, among other US doings.

smess....your analysis is right on.
We protect the kingdom and in return saudi arabia
prices oil in dollars.

ALOHA !!

Do not underestimate Russia and Pres Putin, the second largest oil producer in the World. He certainly has no alliances with the USA and in fact during the Reagan era had a front row seat, via the KGB, as he watched the USA destroy the Russian currency and its economy in a time when oil flowed very cheaply and Russia was bogged down in its own Middle East quagmire to which the USA supplied high tech arms to the same people we fight against today. Guess who supplies our enemies high tech weapons today? Putin learned well the lessons taught him by the USA. He is a wolf in sheeps clothing and will not hesitate to pounce on the US economy and the US dollar when the time is right. Don't be fooled by the phoney TV show Putin puts on for Bush and the US people who believe our cowboy President actually has some clout in China and Russia. Our time will come just as we brought it to the Russians ... Russia will keep oil and gas flowing to Europe and disrupt oil supplies to the USA as much as they can covertly. Russia and China have strong relationships with all US oil suppliers. The Russians are pushing their Ruble currency at their new oil bourse all the while filling up their Central Bank with higher and higher gold reserves. The complete opposite of the USA and Europe. They have no intention of being the victim twice! You can be sure the House Of Saud has a "PLAN B" deal with both Russia and China just in case the USA goes down. Playing both sides is not the exclusive domain of the Rothschild's ...

Bill,

Truly it is the elected US leaders who have been making our bed for sometime now yet it takes two to tango and the US voters who approve this welfare system, term after term, should have no complaints when the time comes to lay down on the Serta! United States Of Socialist Republic(USSR) ...

China owns the world's manufacturing yet even their economy is bleeding inflation now exported back to the USA so corporations look for even cheaper labor sources now eyeing Vietnam, how truly ironic! Russia owns the worlds resources and I have no doubt given the recent joint military manuevers will likely team up economically as well.

All that you say is true in the sense that most of the World suffers from the exported American financial maladies. Yet there is one truth that is undeniable in that the Russians and the Chinese people and their governments know and recall hardships and economic suffering ... Most Americans have no experience or recall of hardships and faced with a severe cut in their lifestyle will not accept it lying down, not even the Big Banker Dealers ... Under such circumstances you may see many of them flee to the Bahamas.

So essentially I believe Putin sees the only difference between Russia and the USA during the Cold War was the Russian Ruble was not the "reserve currency", which is why Putin wants to use his resources to put the Ruble into view as a viable alternative "basket" currency to the US dollar, which is also why Russia is building their gold reserves rapidly as well as paying off their debt.

The World sees how the USA has severely abused its status as reserve currency. Unlimited printing will not save America which is why other central banks are diversifying out of US dollars or talking and hinting about it. Yet the western central banks(US/EU/UK)keep selling off their gold reserves ... somebody is buying any guesses who? Those with long term ambitions are buying while those with short term agendas are selling. The US dollar is nothing but an instrument of debt for which we export in greater quantities every minute of the day. IN DEBT WE TRUST!