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Crude hit a high over $135 in overnight trading Wednesday night but fell to close at 130.81 on Thursday. National gasoline prices rose to $3.83 and diesel to $4.57, The Energy Information Agency said current U.S. oil demand demand hit 20,687,000 barrels per day in April.

Russia saw crude production fall nearly 4% in Q1. Mexico lost nearly 5%, Venezuela -5%, Nigeria -5%. Over a dozen countries saw production fall more than 2%. Only 2 countries saw production increase by a material amount, Saudi Arabia and Angola.

American Airlines said their fuel bill rose +$1.9 billion over the last 7 weeks. They are cutting mainline capacity by 12%, regional capacity by 4-6% and grounding 75 planes. British Airways spent $4 billion on fuel in 2007, They estimate that will rise to $6 billion in 2008 despite 65% of their consumption hedged at $85. Jet Blue said they were selling planes to cut capacity but expects to pickup market share at the expense of major airlines who are being forced to take even more drastic measures to keep flying. Express Jet said they were cutting capacity by 30%.

SUV sales were down -24% in April. Ford said it was cutting production of SUVs and will produce a smaller more efficient version of the best selling F150 truck, GM said they were going to focus on more fuel efficient vehicles and reduce production on gas guzzler vehicles. Toyota said they were going to produce a hybrid that would sell for less than $20,000.

Oil prices have risen 390% since the start of the Iraq war in 2003. They have risen +85% in the last 24 months. The December 2008 crude contract traded as low as $56.90 in Jan-2007. That contract hit $136.25 on Wednesday night for an increase of .139%

Goldman Sachs projects a $141 average for oil in the second half of 2008. Boone Pickens thinks oil will hit $150 in the second half. Investment banker to the energy sector Matthew Simmons expects oil to hit $200 over the next 24 months and $500 over the next 5 years. I believe Simmons is correct.

Jim Brown

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