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Yes, 1%-2% More Oil Would Make a Difference

August 09, 2006

Dear Fellow Options Trader,

Back in May, I'd had an opportunity to talk to Sen. Joe Biden (D-Del.) at the Options Industry Conference in Miami. I'd asked the senator a question about lessening America's dependence on foreign oil.

My direct question in front of 600 people at the Loews Hotel in South Beach was, "Would you break from your party and support drilling for oil in the Arctic National Wildlife Refuge (ANWR), or off the coasts of California, Florida, Texas or Louisiana?"

Sen. Biden's reply was, "I'd take the $6 billion we gave ExxonMobil and big oil and put it into hybrid technology."

Now, let me set the scene. The audience was filled with professional traders who know more than a thing or two about supply and demand, and they wanted to hear the answer to my question just as much as I did. In fact, a Goldman Sachs representative asked the senator to please answer my question!

What, you ask, was his answer? Sen. Biden suggested that the 1% or 2% more oil those areas could provide wouldn't make any difference in the grand scheme of things. I'd thought he was dead wrong back then, and this week's news from Prudhoe Bay has proven how wrong he really was.

On Sunday night (Aug. 6), news from BP described severe corrosion that had occurred in its pipeline from the Prudhoe Bay oil field in Alaska -- damage extensive enough that the company could shut down that portion of the pipeline and take 400,000 barrels per day off the market! That's half the total we get from Prudhoe, and it sent crude prices higher by $2.25 to almost $77 per barrel in Monday's trading, where it's still hovering.

Given the potential loss of 400,000 barrels per day toward the world's oil supply, we're bracing for the impact. And guess what? We shouldn't have to be! Why? Because drilling in ANWR wouldn't account for 400,000 barrels, or even 800,000 barrels per day. Instead, it could yield 1 million barrels per day!

Go ahead, check out the recent debates and subsequent bills coming from the House and Senate. There's a million barrels per day of oil that we can be generating, yet one of the men seeking the 2008 presidential nomination thinks 1% or 2% really wouldn't make a difference. Unbelievable! The only good thing about the shutdown and repair of these 22 miles of pipeline in Alaska is that maybe, just maybe, it will prove to Sen. Biden and others what a mere 1 million barrels of crude oil can do to help the U.S. begin to wean itself off foreign oil dependence.

Good luck trading and remember -- pigs get fat, but hogs get slaughtered, so don't be a hog!


Jon "Dr. J." Najarian
Editor
ChangeWave Options Trader