Here We Go Again!

Here we go again!

Speculators and  the uncertainty in the Middle East have once again fueled oil prices to its highest levels since 2008.  While Libya only contributes 2% to the global crude oil production it is a major regional player. Libya is Africa's third-largest crude producer and has the largest oil reserves in Africa, approximately 44 billion barrels. The world consumes 87.5 million barrels of oil per day.

Today crude oil hit $92 a barrel on the New York Mercantile. Brent crude hit $106 per barrel on the ICE future exchange. As these price increases work through the supply chain we expect to see gasoline prices continue to rise. World economies continue to gain momentum and energy consumption is expected to increase. Don't be surprised if gasoline hits four dollars a gallon in the U.S. this summer. As long as the price of crude oil does not reach $150 a barrel, Semico believes the economic recovery will continue.

As for semiconductors, higher energy prices are always a concern as products have to be moved around the world from production to assembly to store shelves. Semico's IPI index has been declining since midyear 2010 raising our worries about the strength of the semiconductor market in the second half 2011. There continues to be much excitement around new entries into the tablet market, android-based cell phones and increased capabilities of the wireless network with 4G deployment. We continue to be cautiously  optimistic that the semiconductor market will show 8% growth in 2011 and expect 2012 to be the year when the semiconductor industry actually side steps a major downturn and will experience a soft landing.

Jim Feldhan, President