Crude futures have been moving quite precisely to our pivots, as some of you have noticed. The last minor-cycle peak fell just a nickel shy of a well advertised 58.21 projection, and the subsequent low at 53.45 (basis the continuous contract) missed by just 12 cents. Now the futures are off and running again, bound in my estimation for at least 60.40 over the next few weeks. If this is cause for worry, you wouldn’t know it from the blasé reaction yesterday of the stock market, which recouped moderate losses from earlier in the session to close slightly higher.

Don’t Worry, Be Happy

Maybe Wall Street’s equanimity derives from the Bobby McFerrin Theory of Economics, which states: “Don’t worry, be happy  we are a service economy” (as Mr. Greenspan and his shills are only too happy, if not quite blithe, to remind us whenever necessary). Granted, the U.S. economy does skew rather heavily toward services, as he implies. There are all those banks. And Hollywood. But we still consume quite a bit of gas getting to the office and to the grocery store -- not to mention, to Chicago, New York, Washington, Seattle and L.A.. to “service” our clients.

Considering there is almost no new oil being discovered, though, at least by the majors, what do you make of this story, out Monday in the Wall Street Journal under the headline ChevronTexaco Strikes Black Gold:  “At a time when the price of oil is skyrocketing, ChevronTexaco just laid claim to a big puddle of the stuff. The No. 2 U.S. oil major will buy Unocal, the No. 9 oil company, for about $16.8 billion, or about $62 a share. ChevronTexaco beat competing bids by Italian oil company Eni and China National Offshore Oil Corp. The deal comes as oil prices have been breaking records and ChevronTexaco has struggled to replenish its oil reserves.”

Filled the Hummer Lately?

Some are quibbling about the high price ChevronTexaco will pay for these reserves, but anyone who’s been to the pump lately to fill up a Hummer or an Excursion knows the company is onto a good thing. But strike gold? That phrase used to be reserved for oil companies that did it the old-fashioned way, with drilling rigs. Nowadays, though, it seems that most of the really big exploration projects originate in the oil companies’ finance departments.

Even if ChevronTexaco does hit the jackpot with this deal and oil prices soar, the news won’t be all bad for the economy. Here’s the silver lining: “ChevronTexaco expects the deal will help it save about $325 million a year, after a round of layoffs and other cost-cutting.” That’s what Mr. Greenspan calls a productivity gain, and this will be a BIG one. No matter that the Fed Chairman seems still not to to understand that if all American companies were to make similar strides in productivity, most of us would be out of work. Oh we’ll. It's clear that Americans no long expects a Fed chairman to understand macroeconmics. Better that the world’s most important banker be a people person than some egghead armed with a dozen algorithms for managing the world's largest economy. Putting aside the Greenspan angle, the more important aspect of the Journal story is the newspaper's perception  that CVX has somehow "struck gold." If this is the only way to find oil anymore, the $60 price I’ve projected above is just a warm-up for the real bull market.

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