EP,

Don't know...as I stated before, I really don't think oil will hit 35 a barrel... the consumption numbers are still high around the World. Put everything into perspective.

http://www.eia.gov/countries/index.cfm?view=consumption

As for major deflation....I guess...kind of depending on it. I hope interest rates sky-rocket so I can pick up some cheap real estate or lock in high value GIC's.

Raising interest rates will destroy the old bond market ( old money ) and create new wealth. Its a balance

A lot of people quote Gretzky "I skate to where I think the puck will be".

This is very true of mid term investing. I have 4 cars in operation ( my wife and 2 kids )

I pay for gas on two of them. Very nice to be filling up at 0.80 / litre in Alberta.

Back to Oil..............

Who does it hurt

Who does it help..the U.S. China any major importer of crude and every Heavy oil producer

Saudi Oil and some other nearby area's have light Crude. They can refine and get it to the pump without Tax in the Emirates for about 0.17 / litre ( translation 28.00 a barrel )

So global oil at 55 they still make money selling unrefined oil or finished product ( Jet Fuel for the UK for example )

The OPEC producing nations are operating on lower margins...but still making 40-45 bucks a non-refined barrel and more if they sell finshed product.

Countries without oil...benefit...including the U.S.

U.S. oil production is around 7.5 million barrels per day and very little of that production is Fracked shale / Fracked oil. In fact it's so small that if it dissappeared the U.S. would just accelerate the importation of oil from somewhere ( maybe Canada )

They use 25 million barrels a day. That's what kills me on BNN when the skinny blond looks seriously into the camera and says...oil went up 2.00 cause inventories are 3 million barrels lower.

3 million barrels is 8 hours worth of oil...so you Leave San diego in the morning and just past LA you and every other American would be standing around...wondering WTF.

On Average ( since refineries need buffers ) U.S has around 600 million barrels...330-380 of that in storage rest is refinery stored buffer. Oil is a fluid process...storage is important.

600 million Barrels = 24 days of oil.

A discovery of 2 billion Barrels sounds big but in real time numbers...about 80 days worth of oil in the U.S.!!

More importantly, the commuters ( a lot of suburbanites ) all benefit a few hundred dollars a month when gasoline gets this low. This is yet another way to stimulate the economy.

We use roughly 1 square mile of oil 20 feet high everyday on this planet. In one year we use 16 square miles about 432 feet high. About 89 million barrels per day annually x 365.

Fast forward to why the Canadian Government is worried.....

Well politicians have spent us broke assuming inflation would take of everything...hasn't worked.

Canadians use 104,000,000 cubic metres of Fuel every year. Averaging $ 0.32 per litre in federal tax yeilds about 35 billion dollars. So they will lose roughly 40 % of that figure as oil stays low or somewhere around 14 billion.

Why is this important...Federal Government takes in money and spends it very wisely.........................not !!!

Everything goes into general revenue so they can regurgitate the money as required to win votes through boutique taxation and playing favourites. This little oil dip....means they have to find other taxes ! When running for election they talk fairness and financial constraint. Once elected they always spend their way back into power with your tax dollars.

Russia is getting hurt this oil price is killing them. Putin is resourceful he will make nice with other countries...and work out everything they need...trade sanctions work to a limited extent. Costa Rica...fuel for pinepapples...example !!

My Guess.......

Whats really going to happen...oil will gain 10 bucks end of Feb/Mar and then slowly get back to the mid 80's to 90 buck by July.

Why, well worldwide the oil business supports a billion or more jobs directly ( and indirectly )

More importantly, a lot of major companies are widely held in government or private pensions, Lira's 401K's and other retirement vehicles. Various classes of shares and other instruments Bonds, debentures to name few are also issued by major oil. These all have rates of return dependent on profitability. low oil, no profit, no dividends, interests or conversion of financial instruments to meaningful shares.

Start affecting Pensions worldwide...then see what happens.

It will all prove out in time. I invest, I don't "trade" volatility is for traders.

As for me....I think Gold is Just outside the blue line and someone is going to get it to the slot.

I hope Probe finds a second or third or fourth zone...I will settle for 2 -3 similar to Borden.

I would like Gold to hit 1400- 1500 and stimulate interest in a PRB buyout in the 10-12 range. I will be out once were over 8-9 bucks.

I will then move into oil and gas...100 % 50 % Junior ( good balance sheets good land positions ) 50 % mid and major players Painted pony, Shell, Chevron.

Oil will get back to 125 bucks...just based on consumption and turmoil in the middle east.

Or...Putin gets frustrated and puts a wrench into a Saudi Terminal !! Or the U.S does it and blames the Russians.

Think about it this way.

Have you heard about the substitute for oil ? Nope, neither have I

Their isn't one.

Give it time....I have plenty of time. Math is your friend...use math and your time wisely.

You bring the shovel, I'll bring the lime.

Captain Time