Sharky et al:

A. While the economy at present appears to be weakening, I expect several things:

1. The US has a Congressional election coming up in November. Do not kid yourself, the Democrats will do whatever is required in an attempt to prevent now projected massive Democratic losses at the polls. Expect some sizeable quantitative easing to make things economically appear to temporaril make things appear to be, better than they actually are. Also, expect some major quanitative easing which will be highly inflationary. If the Republicans make sizeable electoral inroads ( as currently forecast ), the Democratic Congressional majority is at risk and certainly, they will lose their veto proof Congress. Such will accomplish a couple of negative consequencesand will further detract from fiscal prudence doing further damage to the already massive defecit and undermining the economy. In the process threatening longer term an inflationary depression in the US. Just what Bernanke is counting on so as to inflate away US indebtedness.

B. Further undermine the integrity of the US$ on the international markets. It is only a matter of time until the "bond vigilantes" move from Europe to the US. If the value of the US$ decreases, the price of oil goes up.

C. While fuel consumption has declined modestly in the West, this shortfall is more than being made up by increased demand in the developing world. Remember, 5 out 6 people in the world come from the developing regions.

D. Currently the oil industry is having to go deeper offshore and to more expensive sources for crude ( example Oil Sands). This will require higher prices in order to justify the added cost.

E. An ever increasing percentage of petroleum production is controlled by national governments and cartels.

Brian