DrumBeat: October 14, 2008
Posted by Leanan on October 14, 2008 - 9:25am
OPEC exports drop 600,000 bpd in September-LMIU
LONDON (Reuters) - OPEC seaborne oil exports, excluding Angola and Ecuador, fell 600,000 barrels per day (bpd) in September and dropped 840,000 bpd from Gulf suppliers, Lloyd's Marine Intelligence Unit (LMIU) said on Tuesday.The London-based consultancy that tracks tanker exports said oil shipments from 11 OPEC producers, including Iraq, fell to 23.031 million bpd, down from 23.644 million bpd in the four weeks previous.
Mexico's reserves down 11 pct after dollar sales
MEXICO CITY (Reuters) - Mexico's foreign reserves, buoyed to record levels in recent years by oil exports, dropped nearly 11 percent last week as the central bank sold dollars to defend a plummeting peso.As the widening global credit crisis sent markets around the world into a tailspin last week, Mexico's central bank auctioned $8.9 billion in foreign reserves in an aggressive attempt to shore up the peso.
BP announces oil find in Gulf of Mexico
HOUSTON - Oil-and-gas company BP America Inc. said Tuesday it has discovered oil in the deep waters of the Gulf of Mexico, its third discovery in this area.The discovery at BP's Freedom Prospect is about 70 miles southeast of the Louisiana coast in about 6,100 feet of water. The well was drilled to a total depth of 29,280 feet.
Virgin Atlantic Airways trims fuel surcharges
LONDON (Reuters) - British airline Virgin Atlantic said it has cut its passenger fuel surcharges following the drop in oil prices.From 2300 GMT on Wednesday, Virgin Atlantic will reduce the charge by up to 13 pounds ($22.81) per passenger, depending on the destination and class of cabin, the airline said on Tuesday.
EDF to Use Alternative to Libor on 11 Billion-Pound Buyout Loan
(Bloomberg) -- Electricite de France SA will use an alternative to the London interbank offered rate, or Libor, on an 11 billion-pound ($19 billion) loan to finance the takeover of British Energy Group Plc.Instead of Libor, the world's biggest nuclear utility will pay interest based on an average of funding rates supplied by BNP Paribas SA, Deutsche Bank AG, Royal Bank of Scotland Group Plc, Banco Santander SA and Societe Generale SA, according to a banker involved in the deal.
``The Libor rate was broken,'' said Wilson Chin, rates strategist at ING Groep NV in Amsterdam. ``It's coming back at the moment.''
GM Survival Questioned as SUV's End Chills Ohio Town
(Bloomberg) -- Gloom is spreading across Moraine, Ohio, as General Motors Corp. prepares to shut a sport-utility vehicle plant two days before Christmas, abandoning a factory in the Dayton suburb of 7,000 that stretches back to making refrigerators in 1921.``The whole town is going to be devastated,'' said Cathy Miller, 51, who pours drinks at the Upper Deck sports bar across the street from the plant, where employment has fallen from 4,200 to 1,200 in two years.
GMAC's Lending Limits May Add to GM's U.S. Sales Woes
(Bloomberg) -- GMAC LLC, the lender once owned by General Motors Corp., may deepen the automaker's 18 percent U.S. sales slide this year by limiting car and truck loans to people with the best credit scores.GMAC said yesterday it's granting financing only to buyers with scores of at least 700, who represent about 58 percent of U.S. consumers. The Detroit-based company, now controlled by Cerberus Capital Management LP, provided 43 percent of GM's second-quarter auto loans.
Thousands lose power across Ontario
More than 13,000 Hydro One customers across parts of central and northern Ontario were without power Tuesday afternoon.Hydro One has not yet specified a reason for the outages, but it comes as blustery conditions are expected ahead of a cold front moving across the province.
Methane hydrates: Energy's most dangerous game
All the energy America needs for the next 100 years lies under the sea off the coast of South Carolina. One problem: Digging it out could cause a global climate disaster.Welcome to the final frontier in fossil fuels, the wild card in climate change theories and the dark horse in the scramble to secure access to clean energy. Meet methane hydrates, the world's most promising and perilous energy resource.
Groundbreaking planned for ethanol stations
Groundbreaking ceremonies for two local ethanol and alternative fuel stations will be ThursdayCeremonies are set for 10 a.m. at the Carmichael 76 station site at 5103 Fair Oaks Blvd., in Carmichael, and 3 p.m. at the DB&S Shell site at 5551 Martin Luther King Blvd., in Sacramento.
Doubt, anger over dams on Amazon tributary
PORTO VELHO, Brazil - It is quiet here on the wrong side of progress. Hot wind blows dust across the dry bluffs. The brown river runs wide and placid.In his painted wooden skiff, Francisco Evangelista de Abreu, a fisherman, motors up-current. Two river dolphins crest and submerge. His mind is elsewhere. The dam is coming.
"I don't know what's going to happen," he said. "I don't have any experience outside of this."
The task he and his neighbors are undertaking is to re-imagine their lives. They cannot stop the dam now. Once the waters rise, Jose da Silva Machado, 45, will no longer ferry schoolchildren across the river, nor fish in its rapids, nor live on its banks. Leonel Pereira de Souza, 61, insisted that his vegetable farm, where he was born, raised his children and grandchildren, is not for sale. Period. Yet he knows that conviction will dissolve in the flood.
"We are peasants. We live off the soil," he said. "They are offering houses in the village. There is no place to plant or fish."
Gasoline Prices Drop 22%; Further Declines Are Seen
HOUSTON -- U.S. gasoline prices have skidded 22% from their highs and may fall further as the economy slows and as refinery operations disrupted by hurricanes return to normal.A gallon of regular gasoline cost on average $3.206 a gallon on Monday, according to AAA's Fuel Gauge Report. Since hitting a peak of $4.114 on July 17, prices in many places have slid below $3 a gallon.
Just a few months ago, before the credit crisis reached fever pitch, talk of $5 -- or even $6 gasoline -- was bandied about, underscoring how quickly the outlook for fuel prices has changed.
RIYADH (Reuters) - Saudi Arabia's government could step in to buy collapsing stock on the local bourse and the central bank will keep banks liquid if necessary, but the global financial crisis should have a limited effect on the oil giant.Barring surprises such as the sudden bank collapses that hit other major economies, analysts predict Saudi Arabia's status as the world's largest oil exporter offers it at least short-term protection even though falling oil prices will cut its earnings.
"They have a cushion because of the oil money in the treasury and if anyone's going to be in a safe position it's Saudi Arabia," one Western diplomat said, reflecting the general view in the Riyadh diplomatic community.
The main beneficiaries of more than $700 billion of federal energy incentives over the past five decades have been the oil and natural gas industries. The oil and natural gas industries together garnered 60 percent of federal incentives between 1950 and 2006, with 46 percent of the roughly $725 billion in federal support going to the oil sector. Our new report shows that the oil industry has benefited from $335 billion in combined incentives, with natural gas receiving $100 billion.Contrary to some claims, federal energy incentives have not gone to nuclear energy technologies at the expense of renewable energy sources, such as wind and solar. Of the total incentives provided since 1950, nuclear energy has received nine percent ($65 billion), while renewable energy has received six percent ($45 billion). Coal and hydroelectric energy sources, meanwhile, have received 13 percent ($94 billion) and 11 percent ($80 billion) of the total respectively.
API: 'U.S.' Third Quarter Drilling Activity Up 34% from Last Year'
The U.S. exploration and production industry’s drilling activity continues to outpace last year's levels and is nearly twice the level seen in the 1990s, according to API's third quarter 2008 drilling estimates."These numbers demonstrate the oil and natural gas industry's commitment to finding new sources of oil and natural gas to increase U.S. production," said Hazem Arafa, Director of API's statistics department.
Sinopec to Start Up Fujian Refinery Next Spring, an Industrial Info News Alert
BEIJING (MARKET WIRE via COMTEX) -- Researched by Industrial Info Resources (Sugar Land, Texas) -- China Petroleum and Chemical Corporation is nearing completion of a refinery and ethanol project in Fujian province and will begin running it early next spring.
Saudi Aramco Targets $1.2B, 100,000 B/D Dammam Field Development
Saudi Arabian Oil Co. plans to upgrade its aging onshore Dammam oil field, first tapped in 1938, to produce 100,000 barrels a day of crude at an estimated cost of $1.2 billion, people familiar with the plans said.The state-run oil company, better known as Saudi Aramco, is close to inviting engineering firms to make initial bids for the contract to carry out a study on the project that will upgrade the Dammam field, the people said.
Pemex Launches Tender for 4 Cantarell Platforms
State-run Petroleos Mexicanos has launched a tender to build four offshore oil platforms for the giant Cantarell field where the company hopes to stabilize production levels that have dropped by around a third over the past year.
GM closing factories in Wisconsin, Michigan
DETROIT (AP) -- The U.S. automotive sales slump worked its way to Janesville, Wis., Monday when General Motors Corp. told workers that it would cease operations at a sport utility vehicle factory there in December.The automaker also said Monday that it will close its metal stamping plant near Grand Rapids, Mich., by the end of 2009, costing about 1,340 hourly jobs. Workers at the 2-million-square-foot factory in the suburb of Wyoming, Mich. were notified Monday afternoon.
Energy teams see different shades of green
Facing soaring gasoline prices and the prospect of sky-high heating bills this winter, presidential rivals Barack Obama and John McCain have assembled teams of top-notch energy advisers to formulate some solutions.
Coal and clear skies: Obama’s balancing act
To some Beltway environmental advocates, Obama’s role in blocking the Clear Skies legislation, and his subsequent efforts to redeem himself in the eyes of coal-belt voters, speak to a tension that cuts to the heart of his environmental philosophy. Obama is among the most liberal lawmakers in the Senate - a genuine progressive with a stellar record on most environmental issues and a fine grasp of the minutiae of the energy debate. But he’s a pragmatist, not an idealist; though generally sympathetic to greens, he tends to cast himself as a consensus-builder rather than an environmental purist. It’s a political style that’s earned him a reputation as a moderate and won him friends on both sides of the aisle, but also one that has left some environmentalists wondering whether a President Obama would prove able to build a broad coalition behind his energy and environmental platform - or would bend too far, and sacrifice his environmental promise on the altar of bipartisanship.
A Modest Proposal for Winning the Iraq War
The person who really knew how to deal with the Middle East was Alexander the Great. Alexander had the funny idea that when you make war, you should defeat your enemy, not yourself. He also expected to turn a profit, and would accept nothing less than complete victory. When the cities of Tyre and Gaza declined to be conquered, Alexander besieged them, killed all who resisted, and sold the survivors into slavery. Selling defeated enemies to the slave merchant was not only profitable, but a humane alternative to their execution. Since the Iraqis are being obstinate, I suggest we sell the entire population of twenty-eight million – men, women, and children – into slavery. Once Iraq has been emptied of its troublesome native population, we can lease it to Exxon-Mobile with the understanding that they are to provide the US with oil in return for a fair profit. Energy crisis solved!
Fusion will be cracked "within 30 years"
Despite the complexity and high research and development costs, scientists are convinced they can unlock the massive power of nuclear fusion within a generation.
EU to roll out hydrogen vehicles by 2020
The EU could see hydrogen cars and buses on its roads by 2020 if a new public-private partnership takes off, according to research chief Janez Potocnik.
Chinese company produces 1st solar-powered car
The mini car produced by Zhejiang's 001 Group was designed to target the increasingly serious energy crisis. The group has so far produced over 10 such cars and each of them will sell for 38,000 yuan (US$5,560).
UK: Limited storage forces importers to give away gas
The price of gas collapsed over the weekend as warm weather and full storage tanks forced importers to give away gas for - literally - nothing.At one stage on Sunday, the within-day delivery price for wholesale gas fell to 0p per therm as suppliers were forced to give away surplus fuel in order to balance the system.
The zero-trades occurred on APX, a 24-hour trading platform, and followed a weekend of weak prices and unusually warm weather. A price of zero or a negative price is highly unusual, according to ICIS Heren, the gas price assessor.
As Food Prices Rise, Fertilizer Shortage Now Threatens World's Farms
Due to a limited supply being outstripped by demand, synthetic fertilizer prices have increased nearly threefold in the last year alone. Some Midwest dealers have experienced supply problems, leading them to restrict how much fertilizer each customer can purchase."If you want 10,000 tons, they'll sell you 5,000 today, maybe 3,000," said Iowa fertilizer dealer W. Scott Tinsman Jr. "The rubber band is stretched really far."
Rising prices have placed an incredible financial strain on companies that subsidize their farmers' fertilizer. In India, for example, the yearly fertilizer subsidy has increased from $4 billion in 2004-05 to an estimated $22 billion this year.
The Philippines: Cut in prices of farm inputs urged: No rollback in prices despite lower oil prices
LA TRINIDAD, Benguet — Groups of farmers and traders in this vegetable-producing province asked yesterday concerned government agencies to work for the reduction in the prices of farm inputs such as fertilizers, pesticides, and fungicides.The prices of farm inputs went up a few months ago because of the soaring prices of petroleum, which is the common raw-material base of fertilizers, pesticides, and fungicides, the groups said.
But despite the recent series of reductions in the prices of petroleum, there is no rollback in the prices of farm inputs, they said.
The curse of living in interesting times
The second big problem we face remains energy supplies.Oil prices have continued dropping because of reductions in demand as a result of increased prices. This oscillation in price is likely to happen a number of times as the global economy lurches through the period of peak oil and gas production. This may give false summits, but it will will cause considerable disruption.
Fuel woes continue to plague truckers in Alberta
For more than a week now, truckers like Dan Dickey of Chilliwack, British Columbia, have been scrambling around to find fuel.That’s because supplies to some of the “cardlocks,” aka unmanned fuel stations, in the province of Alberta, Canada, are being rationed and have run out of diesel because of scheduled maintenance and unexpected production problems at Western Canadian refineries.
Pakistan: Gas suspension deepens power crisis
LAHORE-Country will face yet another energy crisis as several thermal power plants with a generating capacity of upto 1,200 megawatt electricity have either halted their production or reduced their generation capacity, following the suspension of gas supply to them, it is learnt.The officials in the Pakistan Electric Power Company informed The Nation that in the aftermath of thermal plants closure due to gas supply suspension, the Pepco authorities have asked the distribution companies to prepare new schedule of loadshedding duration in big as well as small cities and towns, including rural areas, which will be from 6 to 8 hours.
Pakistan: Industry facing horrid gas load-shedding
LAHORE: At the peak of energy crisis, shutting down the Qadirpur field for emergency maintenance has left the industrial sector in the lurch, as it forced Sui Northern Gas Pipeline Limited (SNGPL) to curtail gas supply to cement, textile, and many other industries from October 11.
India: Govt to import 20 MT of coal
NEW DELHI: The Government on Tuesday said that it will import 20 million tonnes (MT) of coal in this financial year to meet the demand of the fuel.“Whenever there is coal shortage, we expedite the fuel imports,” Power Secretary Mr Anil Razdan said here adding “we would import 20 million tonnes of coal in FY'09”.
India: 21 nuclear power projects planned
New Delhi (AKI/Asian Age) - India is kickstarting its nuclear facilities by setting up 21 nuclear power projects based on three different technologies.These include the setting up of six French reactors of 1,600 MW, four Russian reactors of 1,000 MW and four American reactors of 1,500 MW within the next five years.
Senior sources in the Nuclear Power Corporation of India Ltd (NPCIL) point out that each of these reactors is likely to cost a minimum of 2 billion dollars and will collectively produce 30,000 MW of nuclear energy.
Europe's solar researchers bet on silicon
LEUVEN, Belgium —Crystalline silicon technology remains the big bet in solar cell research at IMEC, but the group is also exploring options in silicon thin films, compound materials and organics.
The province is suffering from a severe shortage of firewood. Rising furnace oil and electricity costs have many New Brunswick residents scrambling to trade in oil and electric heat for the wood-fired warmth of wood stoves. The resulting demand is driving up the cost of wood and draining the existing supply in a market that is already tight thanks to a slew of recent mill closures in the province.
'High cost of a pint will close pubs in Northampton'
Mr Cherry said that a worldwide shortage of hops as well as increases in heating and fuel bills had put a large financial strain on producing beer.Northamptonshire is currently the 18th most expensive place to buy a pint of bitter out of 30 different regions in England according to the latest figures from the Good Pub Guide 2009.
Mr Cherry said: "It costs us more to brew the beer so we work on smaller price margins and then the pubs have got to make money so they have to pass on the cost."
As the world finance system disintegrates and the price of oil wafts below $80 a barrel, we are about to see yet another instance of Market Magic.Demand for oil is falling as world economic activity sputters. Many analysts are now forecasting that the barrel price could go as low as $50 to $60 in the next few weeks.
Meanwhile, however, the marginal cost of bringing a new barrel of oil into production has been rising in recent years, and now stands in the range of $80 to $100. Therefore, as the spot price and futures prices weaken, efforts to develop new oil sources will be mothballed.
At the same time, some recent adaptive efforts to develop renewable energy and energy efficiency, spurred by $150 oil, are getting slammed by lower oil prices and the drying up of investment capital.
Once petroleum supply levels have fallen sufficiently (OPEC is now trying to decide how much production to take off-line), oil prices will start to recover and will eventually soar. But the response this time (by way of investments both in new oil production capacity and alternative energy sources) will be weaker.
The G-7 world, the club of "developed" western nations plus Japan, has commenced an ordeal of suddenly waking up much poorer. All the desperate work-arounds being engineered by governments and central banks on an al fresco basis are intended to overcome this stunning basic fact, and none of them will. The benchmarks of everything are in flux -- stocks, bond values and yields, commodity prices, most especially currencies -- but these tend to disguise the basic fact of growing and spreading impoverishment. Is oil priced at $80 a barrel this morning? That's nice. Except if the company that employs you is about to fold up and you face a holiday season of driving frantically around Atlanta in search of another job, which the odds are against you find finding. Or if you're living on a retirement fund that's just lost 37 percent of its value and it's time to fill the heating oil tank.Iceland is the poster-child du jour for this. The little island nation of about 320,000 souls (roughly half of Vermont's population) lately grew a banking sector that thrived on something-for-nothing finance. In little more than a month, its banks have imploded like mini death stars, leaving Iceland with a pariah currency. Since it has to import just about everything, and it suddenly finds itself unable to pay for imports, the people are stripping the grocery markets of whatever remains there now. You wonder what they will do in two weeks. Ten years from now there may be 32,000 of them left, subsisting on blubber sandwiches. I exaggerate perhaps a little, but who really knows where all this leads? Here in the USA, the Treasury, enjoying new and seemingly limitless powers of discretionary spending, has begun shoveling dollars into every truck that backs up to the loading dock. The numbers are staggering. In ten days it's reached into the trillions in loans and handouts. Most of this money is getting sucked directly into the black hole of debt and margin calls of one kind or another. This is previously-presumed wealth that is now un-presumed. It's leaving the system, never to be seen again. One useful way of thinking about it is to regard it as our society's previous borrowings against our own future. Thus, we are seeing our future vanish into a black hole -- our future comfort, health, and basic nourishment.
Chris Nelder: Notes from the 2008 ASPO-USA Peak Oil Conference
Here are my notes from the 2008 ASPO-USA Peak Oil Conference, September 21-23, 2008 in Sacramento, California. Length: 57 pages.
Oil rises above $84 as financial panic eases
LONDON - Oil prices climbed above $84 a barrel on Tuesday on hopes the economic fallout from the financial crisis would be curbed by U.S. and European government pledges to pump capital into the banking sector.Light, sweet crude for November delivery on the New York Mercantile Exchange was up $3.37 to $84.56 a barrel in electronic trading by middayn Europe. The contract rose $3.49 to settle at $81.19 on Monday.
Cnooc Shares Rise Most in a Month as Crude Oil Climbs
(Bloomberg) -- Cnooc Ltd., China's biggest offshore oil producer, rose the most in almost a month in Hong Kong trading as crude oil prices climbed for a second day.Shares of the state oil company gained 14 percent to HK$7.17, the most since Sept. 19. Cnooc was the sixth-largest gainer on the 40-member MSCI AC Asia Energy Index. The benchmark Hang Seng Index climbed 3 percent.
OIL DATA: China Jan-Sep Crude Oil Imports 140 Million Tons; +8.8%
BEIJING -(Dow Jones)- China's crude oil imports rose 8.8% on year to 140 million metric tons in the January-September period, preliminary data from the General Administration of Customs showed Monday.Volumes - equivalent to 3.75 million barrels per day - suggest that China imported a record amount of crude oil in September.
Syria, Russia sign $71 million gas deal
DAMASCUS, Syria (AP) - Syria and Russia have signed a gas deal worth $71 million to transport natural gas from the northern Syrian city of Aleppo to the Turkish border.The report Tuesday on SANA says the agreement between Syrian Gas Company and Russian company StroyTrans Gaz provides for the construction of a 38-mile long pipeline from Aleppo to the border in 18 months.
Kuwait Producing 270,000 Barrels a Day After Power Outage
(Bloomberg) -- Kuwait's three oil refineries are producing 270,000 barrels a day out of a total capacity of 936,000 barrels after a power outage halted operations yesterday.``We're starting up gradually and now producing 270,000 barrels,'' Kuwait National Petroleum Co. spokesman Mohammed al-Ajmi said by phone today. ``We hope to resume full operations by the end of tomorrow.''
Petrobras Finds More Oil in Brazil's Deep-Water Campos Basin
(Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, found oil in an offshore well in the Campos Basin, the country's petroleum regulator said.
Gazprom Courts Alaska as Palin Warns Against Russian Aggression
(Bloomberg) -- OAO Gazprom, Russia's biggest energy company, offered to help Alaska increase natural-gas supplies to the U.S. mainland, even after Governor Sarah Palin warned against Russia's resurgence while campaigning for vice president.State-run Gazprom sent eight senior executives to Anchorage for talks yesterday with Alaska's Department of Natural Resources and ConocoPhillips Chief Executive Officer Jim Mulva, state and company officials said.
Chesapeake Energy cancels shale Web TV project
HOUSTON (Reuters) - Chesapeake Energy Corp, which recently cut its drilling budget by more than $3 billion, has canceled the development of an online television show aimed at educating landowners on urban drilling in north Texas."Given today's economic challenges faced by our country and industry, it is the right decision as we focus our time and resources on exploration and production activities," spokeswoman Jerri Robbins said in an e-mail on Monday.
China Oil Suppliers Deny Report PetroChina, Sinopec May Be Sued
(Bloomberg) -- The China Chamber of Commerce's fuel distribution unit denied a report it may sue PetroChina Co. and China Petroleum & Chemical Corp., the nation's biggest oil companies, for allegedly breaching the anti-monopoly law.The committee, representing privately owned suppliers, has no intention to sue the companies and the report is ``untrue,'' President Zhao Youshan said by phone in Beijing today. The group will instead submit proposals to the government to help independent suppliers, he said, without elaborating.
Oil price crash delays Nigeria's 2009 Budget
LAGOS (Xinhua) -- Oil price crash on international market has delayed the presentation of the proposed 2009 budget to the National Assembly by the Nigerian Federal Government.A Ministry of Finance source said in Abuja on Monday that the Federal Government is currently adjusting the 2009 appropriation bill, especially as the proposed crude oil price benchmark of 62.5 U.S. dollars per barrel would have to be changed to align with the current realities in the international oil market.
Shell India's Gas Users Switching to Cheaper Naphtha From LNG
(Bloomberg) -- Royal Dutch Shell Plc is selling liquefied natural gas in India at a third more than the price of naphtha, prompting users to switch to the cheaper feedstock, said an official at one of the nation's biggest fertilizer companies.Shell is charging as much as $22.50 per million British thermal units, excluding transportation, for LNG, used by local power producers and fertilizer makers, the official said, asking not to be named because fuel pricing is confidential. The price of naphtha of equivalent calorific value is about $17, he said.
Indonesia offers tax incentives for oil/energy
JAKARTA (Reuters) - Indonesia's president has issued a decree giving income tax incentives for investment in oil refineries and geothermal projects, according to a copy of the decree obtained by Reuters on Tuesday.Indonesia, Asia's biggest importer of diesel and gasoline, is trying to push for more investment in oil refineries to cut imports of oil products.
Motorists ecstatic about falling gasoline prices
Pump prices have plummeted to the $2 mark.OK, so it's $2.99, but after a summer of paying $4 a gallon for regular unleaded fuel, motorists welcome the relief.
"I'm flabbergasted," gushed Sue Weersma, an insurance company nurse and Saginaw resident, who happily gassed up her Chevrolet Cavalier at the Admiral station at 2621 Davenport in Saginaw on Monday.
"I didn't even need a fill-up, but I stopped when I saw the price. I'm ecstatic."
Inflation hits 16-year high of 5.2pc
UK inflation hit a 16-year high in September, as energy companies and retailers passed on high prices to their customers, but economists believe that it has now reached its peak.
A result of the drop in oil prices is sharply dropping gasoline prices. The national average on Sunday was $3.25 per gallon but 13 states had individual averages under $3. That should convince Joe sixpack to rush out and buy a new truck or SUV. Once the pain of high prices has passed the memory quickly fades. Americans still believe the peak oil story is a hoax and there will always be cheap gasoline because there are still billions of barrels of oil to be found. The majority of people never give it a passing thought until the next price spike steals their paycheck.
Financial crisis: Big government is back
We have been here before, though not for a while. Watching Gordon Brown throw an avuncular arm around a worried nation and declare himself the ''rock of stability on which the British people can depend" was to recall another world when the state ran the trains and buses, flew people to their holiday destinations, extracted coal from the ground, made steel and motor cars and provided households with water, gas and electricity. More than that, it fixed prices and set incomes. Once upon a time, this was regarded as a normal role for the government.
George Soros: End of Financial Crisis Could Be in Sight
At this point, repairing the financial system will not stop a severe worldwide recession. Since, under this circumstance the U.S. consumer can no longer serve as the motor of the world economy, the U.S. government must stimulate demand. Because we face the menacing challenges of global warming and energy dependence, the next administration should direct any stimulus plan toward energy savings, developing alternative energy sources and building green infrastructure. This stimulus can be the new motor for the world economy.
GM and Ford stocks hit road to recovery
Shares in Detroit's two biggest automakers, beaten down by about half their value last week, rebounded Monday after a weekend of hopeful signs the credit squeeze will begin to ease and of talk about industry consolidation.
The global effort to bring low-emission battery-powered vehicles to the masses could find oil giant Exxon Mobil playing a supporting role.On Monday, the world's largest oil company announced it is working with U.S. battery maker EnerDel to develop lithium-ion battery technologies for hybrid and electric vehicles.
China is set to build more than 750 hydroelectric power stations across Tibet to boost the region's electricity supply.
Climate change targets could end farming as we know it - NFU
New targets to cut the UK's greenhouse emissions by at least 80 per cent will cripple agriculture in the UK, according to farmers.The Climate Change Committee, that is advising the Government on carbon-cutting legisation, recommended last week the target be raised from 60 to 80 per cent and include all greenhouse gases.
This means that methane and nitrouse oxide, which are mainly produced by farming practices, will have to drop significantly.
Climate Change May Harm Health of Humans, Raise Disease Risk
(Bloomberg) -- The world needs to be better prepared to react to the deleterious effects that climate change may have on humans, including dirtier water, crop shortages and a higher risk of disease and food spoilage, European officials said.Special attention should be given to the impact that warming weather, malnutrition among the poor and more intense storms can have on people, according to a panel of health and food officials speaking today at a forum in Rome marking World Food Day.
Fred's Footprint: What does the credit crunch mean for the environment?
Global recession is going to have two effects - pulling in opposite directions. The economic downturn will reduce fuel burning and so cause a slackening off in the recent inexorable rise in emissions of carbon dioxide. It happened in the 1930s; it will happen now.That's the good news. The bad news is that, as the cost of fuel plunges (oil is back under $80 a barrel already), the incentives to use less and to switch to renewables will evaporate. Cheap coal will trump clean coal - let alone solar panels and wind turbines.
But what could really change as a result of the crunch is the world's view of what capitalism can and, more particularly, cannot do for us. Like protecting the planet.
A 'Green New Deal' can save the world's economy, says UN
Top economists and United Nations leaders are working on a "Green New Deal" to create millions of jobs, revive the world economy, slash poverty and avert environmental disaster, as the financial markets plunge into their deepest crisis since the Great Depression.The ambitious plan – the start of which will be formally launched in London next week - will call on world leaders, including the new US President, to promote a massive redirection of investment away from the speculation that has caused the bursting “financial and housing bubbles” and into job-creating programmes to restore the natural systems that underpin the world economy.
It aims to convince them that, far from restricting growth, healing the global environment will be a desperately -needed driving force behind it.
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Here is an interesting fact: Five of the top ten daily stock market gains in history - in percentage terms - took place during the period from Sept. 3, 1929 to July 8, 1932, the period during which the Dow lost 89 percent of its value overall:
Oct. 6, 1931: Up 14.87% (2nd highest)
Oct 30, 1929: Up 12.34% (3rd highest)
Feb 11, 1932 UP 9.47% (8th)
Nov 14, 1929 Up 9.36% (9th)
Dec 18, 1931 Up 9.35% (10th)
This compares to yesterday's percentage gain of 11.08%, which is 5th highest of all time.
Will history be repeating itself in coming months with more such spectacular sucker rallies against the backdrops of relentlessly substantial declines?
We've got about 15 days until the bond market crashes.
We have not yet seen the greatest event in the history of our lives.
Note that only 8 banks were called in to be "informed yesterday.
Note that only 8 banks will be receiving $125 billion.
Only 2500 approx. to go.
For the benefit of those of us who are not market professionals when you say the market will crash do you mean prices will go down or that something more serious will happen? It sounds serious that the market will crash.
I'd like to hear mcgowanmc's response.
My thought is that what he means is bond prices will drop a lot and there will be a corresponding rise in interest rates. I don't know whether the 15 day time frame is right, but it is a perilous time right now, and that is the general direction things are moving. As there are more and more defaults, this is the direction one would expect bond markets to move.
If bond prices drop a lot and there is a corresponding rise in interest rates, the lack of credit we have been seeing recently in bank borrowing and commercial paper will spread to the rest of the debt market--namely bonds. It will make it very difficult for businesses to finance anything. Companies (and municipalities and churches) that thought they could issue new bonds to pay off old ones coming due will find this impossible to do, without raising their financing costs to exorbitant levels. This could result in more bankruptcies, and more defaults on loans, starting the cycle over again.
These bonds are held by many organizations, mostly not banks (although banks may hold some of the bonds), so it will be difficult for the infusion of cash into the banks to have much effect in stopping the cycle. To the extent banks hold the bonds, this will bring down their equity, causing more banks to fail. The drop in bond values will eventually hit other holders of bonds, including insurance companies, pension funds, causing them to have financial problems as well.
"Unlimited dollars being supplied."
The key phrase that Bloomberg has run.
That is mathematically impossible.
the only entity in the bond market now is the US.
Everyone else is gone. who can issue paper that competes with
unlimited faith, credit of the sovereign?
But everything has already been monetized and out to forever.
A Quadrillion dollars worth. We can't pay interest on what we've got and we're issuing "unlimited" amounts more.
Counterparty risk. Until all paper is exposed and marked to market
at 8 cents on the $(per Lehman's auction),...well, this just crossed
the screen-
"Lehman hedge fund clients face margin call on frozen assets."
http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
The Baltic Dry represents shipping worldwide.
that's a picture of cardiac arrest.
Any bulk commodity, think BHP, Rio Tinto, Vale, et al.
By Ambrose Evans-Pritchard
Last Updated: 11:27AM BST 14 Oct 2008
Nuclear-armed Pakistan is bleeding foreign reserves at an alarming rate leading to fears that it could default on its loans.
There are mounting fears that Ukraine, Kazakhstan, and Argentina could all now slide into a downward spiral towards bankruptcy, while western banks exposed to property bubble across Eastern Europe have seen their share price crushed.
The 10 year bond yield is rising with every move by the sovereign.
The last thing that "Main St" needs.
When no one wants any more US bonds, the US will have to default.
Then price won't matter. The Federal reserve note of Ben Franklin then becomes the US Gov't "bond".
Mac - Why will the bond market crash in 15 days?
Because having the sovereign inject "unlimited dollars" into the system
is mathematically impossible.
The attempt will kill it.
The flywheel turning at enormous rpm will cause internal magnetism and stresses that would cause a solid block of metal to explode.
Do we have massive hyper inflation or massive deflation.
http://www.physicsforums.com/archive/index.php/t-238379.html
Like trying to get too much energy, too fast out of a spinning flywheel,
the flywheel will explode.
"A flywheel will only store energy; not 'generate' it. As all good physics pupils know, energy cannot be created.
You could create such a device, but it would be an incredible feat in engineering; and I'm not quite sure what the point would be. Its large mass would (depending on speed) hold a large amount of energy; but remember; the amount of energy you can get from it will always be a bit less than the amount you put in to get it spinning in the first place."
"TVP45
Jun2-08, 06:50 PM
At that radius, any known material would explode by the time you got up to a decent speed."
"The flywheel, once in motion, can only store the energy which you put into it. In otherwords, it is moving very fast and has a massive amount of energy BECAUSE you put it there. The wheel won't turn if no force is applied -- once applied, it now has EXACTLY the amount of energy you just applied. When you "extract energy" from it, you're simply taking back the energy you put there in the first place (not to mention you just lost some in the form of heat, so actually you won't even get that back!)
Massive Hyper inflation and massive deflation. It looks to me like
the sovereign is trying to balance the two against each other.
TPTB just told us straight in the face that they are going to offer "unlimited" dollars and euros to anybody "too big to fail". Translation: we would rather cover the whole world with a thick layer of freshly printed paper than let the Great Depression happen again.
So, IMO you are wrong - this rally is not going to end, but there is a great chance that by the end of it your 401K will be worthed a can of bear.
Keep your wheelbarrows greased people.
I concur LevinK.
And the definition of "too big to fail" will probably expand as time goes on.
The money supply will grow, and the Fed will act like the Burger King in the commercial - running around stuffing money into people's pockets - if they have to.
Many of us might become Penniless Billionaires if we're not careful.
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson, 1791
Too bad that when Jefferson became president he realized he needed the banksters to fulfill his plans for expanding the US Empire. Without European Banksters as allies, the Louisiana Purchase wouldn't have happened, nor the incremental takeover of Spanish Florida, etc.
Hey, banking institutions did what standing armies couldn't (see first line of Jefferson quote)... And in those cases, the Louisiana Purchase and aquisition of Spanish Florida were, as Donald Trump would say, good real estate deals (The Louisiana Purchase it was about 1/4 of the country that we got for an inflation adjusted $200 million, damn good deal). I'll even throw in Alaska as a famous real estate deal financed by bankers, which we purchased for $7.2 million in 1867 (I don't know inflation adjusted cost, but I would fathom a guess that we've extracted at least 10 times *that* value in petroleum alone from it).
HOWEVER... Can anyone say that selling a $300,000 home with a resetting ARM to a subprime customer in 2006 was a good real estate deal? No way in hell. Banks did, though, and thought they would profit enormously from it... But, instead, those costs are going to be absorbed by society...
I was merely pointing out Jefferson's gross contradiction, of which he has many.
NovaStar Finance is a subprime lender whose shares I once owned. Their usual loan required about 20% initial borrower equity on an average loan size of 170K. FICO scores averaged 635. Their default rates are still within the range of their risk models, and they have yet to default on a MBS bond payment to investors. They are still in business despite having their stock diluted with phantom shares 3x the number of shares outstanding. And they were one of the first targets of the hedge fund scheme that generated the current crisis. Certainly, NovaStar is unique in many respects. To my knowledge, very few if any lenders were making 300K loans to subprime customers.
Furthermore, yourself and almost everyone else must understand that the ABX Index--the one used to determine the mark-to-market value of MBS, CDO, and other mortgage related bonds--was massively sold short to drive down those valuations on the targeted companies balance sheets while simultaneously those same companies were having their stock massively shorted and diluted with phantom shares many times larger than the amount in the float, with the goal being to drive the targeted companies into bankruptcy through margin and repo calls and credit line suspension so as to buy up their assets at pennies on the dollar. In this, the hedge funds were wildly successful. BUT, too many other non-targeted companies relied on the same index and on bond interest payments from the now bankrupted companies. They then became targets, too, as the grosssly greedy hedge funds smelled blood and disregarded the consequences of their actions. That is the abridged version of how we got to where we are today. I continue to direct people to DeepCapture because there is much more to learn about our dilemma and its causes. I witnessed this as it all began as a participant/victim, and my fellows and I have gathered evidence that substantiates our testimony.
Actually, I'd recommend the following in case of hyperinflation (not for the feint of heart, and only if you have a VERY stable job):
Before hyperinflation hits:
1) Buy things on credit. (Seriously.) But fixed rate- not variable rate. Like, say, a house. Or, get a second mortgage. Doesn't matter. If inflation is higher than the rate on your loan, you have just pocketed the difference and it's skin off the bank.
2) Buy a home (see #1) if you don't have one. Rent can (and will be) adjusted upward to reflect inflation; mortgages can't be. Once they're locked in, they're locked in. Would you rather pay $1,000/month for a mortgage or $3,000/month for rent? Your choice.
3) Buy (and keep maintained) a new car. Assume that hyperinflation will cause things, like, oh car repair bills to go up. A new/well maintained vehicle will save money in the long run. And, buy anything you think you will need within the next few years. Yes, hoard is the word- in a world with 1000% inflation, a necktie sold at $25 one year will be sold at $250 the next and $2500 the next.
4) Make home improvements on said home (See #2) that decrease energy consumption ASAP. Buy those energy efficient windows like NOW. Put that geothermal unit in NOW. New insulation? NOW. Tankless water heater? Solar water heater? NOW. These items will have an enormous ROI if they are purchased NOW and if energy bills rise along with inflation. (Energy/fuel bills will probably rise more so due to Peak Oil and Peak Natural Gas)
And when hyperinflation hits:
5) Pay off said home and debts (See 1-4)... Not hard if inflation puts your wage at $300,000 and your mortgage is only $100,000.
6) Be prepared to expand the number of people in your house. Be prepared to have parents living there (since their retirement might be worth squat), be prepared to have siblings living there (since they may become permanently unemployed), be prepared to have adult age children living there (since, they too may become unemployed). All the improvements made in #4 will really help out when a LOT of people are using those energy efficient features. And meanwhile, if you are single... Get a partner. Get a second income to work on paying for this. Seriously- take a trip to EHarmony or something.
7) Yank out any investments you have and put that money toward #4 and #5. The ROI will be MUCH bigger.
8) Direct deposit your checks and use a check card... if it gets really bad (and you're smart about this) you will find yourself at the checkout buying groceries and swiping your card the moment the money hits your account. You will want to have that ability to do transactions with your money without having to go to the bank. Also, if employers get smart, they will pay you much more often than once every 2 weeks. Having that check card again will be a lifesaver if that happens.
9) Plant a vegetable garden at said house (see #2). Price controls might be attempted, and if this is the case the price controls might be below the cost of production of some food (in other words, you might not be able to find certain food items).
10) Be prepared to barter your services and goods.
Welcome to the land of Fiat Currency...
We've seen deflation so far in the US recently. IMO the euro is more prone to hyperinflation because the European banks are more leveraged than their US counterparts. As was the case in Iceland, large European banks have assets several times their host countries' GDPs. The recent European bailout pledge amounts to GDP ratios are a lot higher than the US bailout to GDP ratio.
LOL you have not even seen the tip of the iceberg of the US bailout. Right now we are talking about some loose change to calm the markets. Maybe in six months the US will start putting out some serious dough. Until they start throwing around 5-10 trillion dollars as bailout out money for the US your not even in the ballpark.
The you can start looking at bailout money to GDP ratios.
All thats happening now is the Europeans are being marginally more honest about their situation than the US and they are actually solving some of the problems. Longer term the EU economy is marginally more robust then the US economy and should be a follower on the way down.
Right now the skeletons are packed so tightly in the US closet we don't even know how big it is.
Being from Europe, I am not bullish on Europe. no oil, political fights between countries (weak hopers for euro), BIG overspending just as in the USA, property bubbles here and there. rumors are that some of eastern european countries are already bankrupt.
And, worst of all, no military power to speak of. (The strongest military power in Europe consists of the United States military forces located there.)
And the united states military is relying on technology already negated.
stealth? yup, in the 90's bosnian war some smart person had the bright idea since the stealth doesn't make the plane invisible to radar, it only shrinks it's radar cross section to about the size of a bird. normal radar ignores such small objects. this person used low power radar so it would pick up the birds, and then used a computer to sort through all the birds, bugs, and other ground clutter to find the one flying nearly at mach 1. end result, it shot down a stealth fighter.
The phanalx ship defense system is even more simple to beat. either just spam the ship with missiles or hit it with a super sonic missile.
The united states military won't be able to survive a long(as in MUCH more then a few weeks) drawn out war.
We saw the dollar being dumped over the summer, and all of a sudden it's a safe haven. I agree that trillions more will be needed, but so far that's not being priced into the currency markets. Too weak a dollar is a major problem for other world economies, so they print more of their own money when the dollar tanks. We observed this earlier in the year. Some European banks are too big to fail, but too big to save as well. Will Europe really pull together when things get really bad?
Hmm US wages are a multiple of Chinese wages unless China allows much stronger wage growth US wages are not going anywhere.
Also of course you have completely forgot about oil monetary inflation in a peak oil environment can and will be reflected in the price of oil putting a huge damper or the real economy and leading to even more debt defaults.
Salaries in many parts of the US would have to double to even match todays housing prices much less inflationary induced price increases. Rents in most bubble areas are 50% of the mortgage on a equivalent house and falling. The supply of houses that don't cash flow as rentals is huge. You would somehow have to eliminate this imbalance first to even begin to see rents start increasing.
Inflation like your thinking is not gonna happen all this money thats being poured into the system will disappear into writing off defaulted debt and continue to do so for the foreseeable future. Peak oil ensures that if any real monetary inflation occurs it will just result in higher oil prices and higher overall commodities prices.
If and when wages double to handle the current inflated housing prices then we can talk about a wage/price spiral.
The ability for the American worker to demand higher wages right now is zero.
I know that everyone loves the concept of hyperinflation any day now but the reality is that with peak oil we simply can't inflate our fiat currencies since at the end of the day they really are not fiat but tied to economic growth without growth you cannot inflate. No one can pay off old debts much less new debts. Also in a inflationary environment interest rates increase given the current debt load rising interest rates simply trigger more defaults and more risk.
Government printing presses or real monetary inflation only work well for isolated economies sure once the American economy becomes isolated we might inflate but when your global like we are today you get deflation and depression just like what happened the last time the global economy collapsed.
Wages are not that important. Credit is what is important. If these new measures thaw the credit freeze, there could be another round of orgy.
As it seems now, the credit markets are still pretty much frozen, so your theory stands. But as for economy - prospects are quite bad in this scenario.
Guys/gals, do you own any gold/silver. If yes, why? If no, why not?
Platinum.
I have this nice, thick Platinum ring. And my wife's ring too (I'm widowed). I have it for obvious sentimental reasons, but I also know/believe that the may have some serious value later if TSHTF.
Gecko, so sorry to hear about your wife. You are doing the right thing by staying positive and focused on the future. I hope things never come to the point where you have to think about parting with that ring.
Ditto. I'd rather let my kids have them when they get old enough to appreciate them. In an extreme pich, if ti ever came down to my ring or my life (or one of my kid's lives), I'd fork over the ring. I hope that's a place we'll never have to be...
I have several thousand dollars face value of junk silver coins and one ounce eagles.
Sort of as an investment but mostly in the event that US dollar bills turn into toilet paper.
Knowing it is there is comforting, just like the cash in reserve and the food put by.
As a renter, I can't do the preps others have. I can only do what I can and silver is part of it.
No. You can use fiat money as toilet paper, that at least guarantees a minimum level of utility; "precious metals" are entirely worthless if the high-tech applications evaporate away; you're at the mercy of finding someone who would trade you food and other necessities for a worthless trinket and I don't give that good odds of happening.
If I was planing for the imminent collapse of society I would go with a portfolio heavy in baked beans, water purifying equipment and simple tools.
Canned pineapple is a better investment as a trade good.
In an area with LOTS of potatoes, and/or apples, (or other crop in abundance), think how many potatoes or apples one could get for one can of pineapple.
Relative scarcity and the human desire for variety make pineapple a better choice than baked beans.
Alan
That's a bit rough, but the shape might be right... However, here's a better use:
Once again, you are dead on Memmel.
If I see them throwing 10's of Trillion dollars into the hole of derivative defaults THEN I will think of inflation. Until that junk is all written off, It will shrink and disappear like falling into a neutron star.
John
Ahhh... I'd like to agree with you that it just falls into that black hole of debt, and fizzles away in a burst of X-rays, but...
...Somewhere, it's been created. In order to buy the debt, the government has (or will) turn around and sell treasuries to someone (maybe some guy in Ohio, maybe someone in China or maybe even Osama Bin Laden). And with the current situation- it's not like the government is creating money and burning it up... They are transferring debt and creating money to destroy the debt. But, it has been created... Someone is on the receiving end of that debt payment and owns that debt, and will get paid by the government. They will get some piece of that $700 billion or $1 trillion or $50 trillion or whatever and SPEND it, and therefore drive up inflation.
Before the current real estate crash, someone in HousingPanicBlog.com stated that there were more balloon note mortgages than at any time since the Great Depression (incl late 20's era). The balloon notes are interest only loans where one paid interest until the note was due then paid the entire principle at once. The plan was to pay only interest then refinance the note when it was due. In theory one might never pay back the principle until the house is sold. The demand for this E-Z credit exceeds supply of dollars on deposit. People paniced when they could not get more credit extended to them. The Federal government first wanted to bail out wealthy investment banks and now has plans to open the treasury to the commercial banks (S & L type banks), Obama was talking about helping homeowners in trouble. What about the ones who were good and paid their debts? No help for those who pay their taxes, but instead giving to those who accumulate massive tax write offs? The system is tilted in a dangerous way and the dollar is at risk of losing its value, the government has not shown it is capable of efficient bank management.
Sometime during the first half of the year a lot of people started to think 'this is it' when everything seemed to be going through the roof -but look what happened: demand got killed (along with the economy) and we see a major slump in commodities.
Now I've been saying for a while that commodities (inc. oil or possibly driven up by oil becoming scarcer) will increase but having seen the up-up-up-down of the last few years I'm not so sure...
So my question would be -how can we be sure that we are in for a bout of Inflation that will last and not get 'cut in the bud' by a recession/depressionary cycle?
-In your example you could find yourself stuck on a 10 year 6.5% fixed while trackers are humming along at Base Rate of 2% (in response to the depression caused by high oil prices perhaps) + 0.5% = 2.5% ... You'd be feeling pretty silly then wouldn't you?
My mortage buddies are telling me that trackers are currently some of the best deals and if we are going to get rate cuts things will only improve.
Nick.
America Has Died - To Thunderous Applause
Denninger thinks the way they will pay for it is to force home prices down, via higher interest rates.
Needless to say, he doesn't think this rally will last long.
Thanks for posting that Leanan. I don't see how anyone can say with a straight face that we have a free market.
Rally did not last very long indeed. On the day after the US government announces billions for banks, the Dow at 17:57 GMT is up less than 1%, 84.51 pts., while the NASDAQ is sliding at 1% at -17.42 pts.
The markets that were sky rocketing yesterday seem to have stalled today.
"Rally did not last very long indeed."
Did you really think after the greatest increase in one day ever, there would not be profit taking? Starting from yesterday was one data point; you are making a prediction from one data point?
Here is my prediction based on the same information. The market may be heading for an upturn; than again, it may have just started on a new downward trend. Some think we are due a more or less sideways movement, however.
Leanan: just when you though you couldn't get any more cynical, my neighbor informed me that when Paulson was appointed he was required to sell his stock and stock options at GS. No worries. It seems we passed a law that when cabinet members are appointed and sell their stock, THEY PAY NO INCOME TAXES. He had something just north of a half trillion. Now its tax free. no wonder he took the job. Is this true?
A half trillion? Nah. He needed a compliant Congress to get his mitts on that kind of money.
Yes-Denninger was commenting on this. Supposedly the law was passed so the sharpies like Paulson wouldn't suffer any undue hardship through their selfless sacrifice on behalf of the sheeple. I beleive the amount was 500 million.
It will not.
But it isn't fascism. See the 5th plank of communism. From the people that brought you Marx and Engels.
Hey there, dont insult the great unwashed masses. they aren't called "suckers" (only in private) We prefer to use the term "Customers".
Also, to avoid all references to actual people being harmed, we prefer the term "Dead cat bounce"
Please read yesterdays post (Oct 13-th) in the genre of this thread. The writer pre-told of yesterdays rise as a "dead cat bounce". Most don't recognise a dead cat bouncing untill sometime after its accurance.
The easy way to tell a dead cat is going to bounce is,
#1; The cat dies.
#2; The cat is lifted to a lofty height.
#3; The cat drops.
#4; The cat bounces.
Repeat untill destitute.
So logically we can have 9 dead cat bounces before we can't have any more.
Doesn't even have to be the same cat.
There's much more than meets the eye with stocks and their action in global markets. This item provides the reason behind this. Some may want to read it's highlighted version here since Marion took the pains to illuminate the importance of what the writer is saying.
For more about this ongoing story, please visit DeepCapture
That the above linked op/ed appeared in the Washinton Times is as hopeful as it's illuminating.
Other references include Deep Capture: The Movie and Jim Puplava interviewing Bud Burrell in this week's Financial Sense NewsHour.
I don't have any special knowledge about this "stuff". The movie is pretty convincing that there is at least some kind of problem. I don't know how big a problem it is.
The problem is systemic and dollarwise quite massive. If all the fails in the system were forced to become valid, it's estimated most hedge funds would fail. Probably more than $1 Trillion. The cost to the country is even higher--priceless, some might say. Here are links to the most recent Mitchell Reports I find more important than others,
http://www.deepcapture.com/the-naked-short-selling-that-toppled-wall-str...
http://www.deepcapture.com/the-week-the-world-said-naked-short-selling/
BloombergTV story alledges $6 Billion in fails occur daily, http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/...
Slideshows detailing the problem, http://thesanitycheck.com/Slideshows/tabid/62/Default.aspx
Getting Started page, http://thesanitycheck.com/GettingStarted/tabid/73/Default.aspx
RegSHO page http://www.nasdaqtrader.com/Trader.aspx?id=RegSHOThreshold
There's a lot more data, scholarly essays, media reports, blogs, etc., that I might have included.
In 2005, my group NCANS bought a full page ad in the WaPost for the purpose of illuminating the problem as traditional methods and media had failed. That's right, in 2005 we were begging the government to do its job, which would have prevented much of the carnage created by the hedge funds's actions. At least two dozen people--likely many more--would be alive today if the SEC had enforced the law.
Until now, few bothered to listen when we described this problem. Sort of like the reception given people trying to explain Peak Oil. The consequences of both are now much clearer, and people are finally starting to listen and show an interest.
Here's a little something we all should start the day with...
http://wherethehellismatt.com/?fbid=S-ktb2hYV_W
Regards, Matt B
Thanks Matt,
Needed that today. Cheers!
Tom
Thanks for that.
So, everyone is wiping their brow and saying we've reached the bottom and that the heroic actions of Mr Brown et al have averted further problem. Now its only the slow climb back to where we were a year ago.
Is this the bottom, or a dead cat bounce?
It's quite simple really....in terms of growth we've hit a wall and we will keep bouncing off that wall. There could be 50 dead cat bounces (or until society destroys itself or miracles itself into some modus utopia)
Marco.
We had a very specific critical problem amid the overall myriad of economic problems -- the credit market that allows business to function seized up. The markets think the central banks of the world have solved that problem. Maybe so, maybe not. We'll know in a few weeks (days?).
However, I do not believe they have addressed any of the other fundamental problems. House prices have not bottomed. Consumer spending has not bottomed. Many US banks are still going to go bankrupt. Many non-bank US copororations are still going to go bankrupt. In the best case, we've just averted a collapse of the banking system; we're still looking at a long period of dismal economic performance.
Moreover, what the central banks have done has almost entirely been through borrowed money. If you have too many debts, you can always deal with difficulties servicing the debt by taking out an even bigger loan. But that just pushes the day of reckoning into the future (not to mention making the day of reckoning more painful when it finally comes).
Borrowing to consume, or to service debts, is transferring future consumption and growth to the present. Sooner or later the future comes and you'll either have to pay up, or borrow even more from even farther in the future. If it could be kept up to infinity, we could all be rich. But it can't.
Shargash,
Is this really borrowed money? If so, who was it borrowed from? Perhaps it's money 'conjured' out of thin air by the central banks, or 'borrowed' against future tax revenues? Surely this is only building problems for the future?
We have borrowed money everywhere, far in excess of revenues to pay them off. We have all of the folks with first and second mortgages on houses (some of them with increasing interest rates). We have all of the students with loans that they are going to pay back with future income. We have all of the government promises, like Social Security and Medicare, that they are going to pay with funds they find somewhere in the future. We have all of the businesses with loans (your local restaurant, those drilling for oil, your local hospital, you name it) with loans that they are going to pay back out of future income. Federal and state and local governments have borrowed money, they are going to pay back out of future revenue. There is credit card debt, and auto debt.
We are already reaching the point where quite a few people cannot pay all of these obligations, and at the same time pay for food, gas, and the basics of life. As the price of food and energy rise in the future, this out of balance will only get worse. Businesses such as restaurants will fail, as their revenues drop off (because people cut discretionary spending).
Some of the money is borrowed from banks. Some of the money is borrowed through bonds and through commercial paper. Some of it is government borrowing, and some of it is government promises that have been made, but not funded.
Anyone care to guess what the sales will be for the MidWinter Mandatory Buy More Than You Can Afford holiday (Formerly know as the Christian holiday know as Christmas)?
I am guessing that things will get real interesting about January 2009?
Well it may not be as big as other years, but it is manditory, so I assume it will still be rather large, especially because of Santa...
Yes, I'm sorry to any 8 year olds reading this, but... not only is Santa real, but his abode and workshop at the North Pole will be under water soon because the ice is melting. Mommy and Daddy need to borrow lots of money to bail him out.
From someone heavily tied into the retail industry (for as long as it lasts), this 4th Qtr is one for the record books (in a bad way). Expect huge discounts, shortages of "hot" items, and many, many retail locations closing in 1st Qtr 09.
If this recovery has legs it looks like PO will get back on the front page of MSM with a vengence.
Then financial crisis will elbow her way back on stage.
Then PO...
Oh, and Mom Nature will be filling in at intermission.
too late to send in the clowns ?
probably, the clowns are running the show.
It all went wrong when we left the gold standard
My guess is dead cat bounce. Maybe a bear market rally. But we haven't seen the worst. Gail's right. The underlying problems are just being papered over.
I agree with you and Gail - we haven't seen the worst (not even close) and the underlying problems are being papered over.
This is a re-run. Leaving The Gold (any commoditiy) Standard for a fiat paper system during times of growth is not unusual and can be very beneficial.
But TPTB can never get back off the Fiat Drug and eventually end in hyperinflation.
Growth is over and a commodity-backed currency is what is needed.
I think Baby Hugo Chavez is right.
Instead of gold we should now link our currencies to Energy, using an International "Oil & Gas Bank."
Not suprisingly, the tooth fairy has also not been seen. "Laissez-faire" economics do not really exist and have never been tried, because markets do not exist without some kind of government intervention (otherwise the markets disintegrate into banditry and kleptocracy). The government interventions required to create markets inevitably shape and distort them (even if the "government" is the Colombian cartel controlling who has the cocaine import franchise and killing competitors).
So "laissez-faire" economics remains an imaginary mirage, that is discussed but never implemented, always presented as an alternative to the "real world" of intervention. But like the tooth fairy it will never be seen.
"because markets do not exist without some kind of government intervention (otherwise the markets disintegrate into banditry and kleptocracy)."
As seen, for example, in the US.
Our system of societal management, law, interferes with laissez-faire economics. This type of "do what you will" economic system could be implemented as soon as we could, for example, come up with an appropriate cost for the right to commit murder, and a market in which to trade those rights.
"What price a life?" With an answer to that, a laissez-faire system will have a chance.
Unfortunately, it's exceedingly unlikely that any hierarchical, top-down market system will work. Organic sustainable systems are built and managed from the ground up.
I kinda of disagree I think the most important thing for functional markets is people with real money to be able to move markets as they wish. Leveraged or not thats up to them. As long as real wealth is used to manipulate the markets they are a level playing field. Government distortions by selective cash injections cause the people with cash to take their ball and go home.
This is the essence of a moral hazard where people don't like the rules. They don't have to be fair they just have to be equal for those that have the money.
I think the most important thing is that people not be able to accumulate vast enough wealth in the first place to 'move markets.' How to bring this about? I have no idea. It is a utopian ideal just as libertarianism represents a utopian ideal.
The super wealthy and the super poor will always exist. Whats important is that the super wealthy should make most of their money from industry and trade not from leveraged buyouts and CDO's etc etc. This can and will include manipulation the value of companies and ruining good ones and keeping bad ones going its par for the course.
Somewhere along the line playing financial games became a bigger money maker than normal business this distortion is why we are in the mess we are in today.
The rules are being changed because peak oil means we have little opportunity to make money the old fashioned way by earning it and the financial bubble has burst so game playing is coming rapidly to a close.
At some point of course the super wealthy will be forced to gasp invest in innovation but we are not there yet. I've not seen a number on how much of the GDP was driven by secondary industries in the US such as Insurance, Real Estate, Financial etc but I'd have to guess its big at least 20% and of course theses businesses have related real economic activity associated such as shops for these people to spend their earnings at.
This collapsing back down to the fairly minimal banking needs of a society with a lot of savings geared towards daily living will be huge.
Nice to see the Mises view get a fair hearing.
That is totally bogus curve-hopping. September 1931 was 15 months before FDR was inaugurated. January 1938 was 6 1/2 years later, after a recovery and a second recession. Why not count from January 1933 to January 1937 or January 1940? When did Republicans start writing in The Indepedent?
And why not count from 1933 to 1950, when America was deeply interventionist yet far wealthier than it had ever been before, after a generation of FDR's paradigm?
What the Misesians won't tell you is that if things were done their way, millions of American workers would have started burning and shooting and there would have been no capitalist system at all in 1950. Because in the Mises-verse, market bottoms don't cause real human beings to turn to revolution, just gives 'em a good Horatio Algeresque prod to start their own shoe-shining businesses. As we all know, an infinite supply of shoe-shiners will create an infinite demand of snappy dressers in dusty wing-tips.
Thank god real human beings occasionally act like Nat Turners instead of Misesian theoretical whores. I already know how I intend to act.
It's real simple.
Only one thing will fix it. Total and immediate mark to market regardless of who goes under.
But they are not going to do it until a Putin puts a gun to the back of their head.
Brownie, you're doing a heck of a job
I believe the term is "heckuva."
Re: Brown's successful intervention with the Banks:
It is like declaring that the second world war has been won
- after the successful evacuation of the BEF from Dunkirk...
Rod Dreher posted this link on a Dallas Morning News blog. It's a list of Paulson's contradictory statements over the past 17 months:
http://bigpicture.typepad.com/comments/2008/10/no-time-to-wast.html
Here are the first two:
I always find it amusing that we always expect politicians / economists to:
1)Always be correct
2)Never change their minds
3)Never lie
I wish they could all be as virtuous and perfect as I am / We are.
Marco.
It would be interesting to post Stoneleigh, et al's contemporaneous comments along side Paulson's.
the one i liked is what he told china shortly after being appointed that "china needed to modernize their financial system."
this guy is the yergin of the treasury.
No disrepect to Stoneleigh, but if he had the weight of the world on his shoulders, would he be able to make the same level headed decisions when millions of people and trillions of dollars are riding on his every pen stroke and would he (under this unimaginable pressure) be able show the same prescience that he shown so far.
We are quite insulated / comfortable sitting behind our PC's, and I personally think that we are somehow better placed to make objective appraisals of the whole situation WRT the whole 'limits of growth thing' - which maybe Paulson and gang are not as clued up about (even though they should be unless they disagree with the "supposition!!" that resources are finite!)
With Paulson though, he has of course the support of advisers, economists, public opinion etc....but at the end of the day I don't think that lessens the pressure that he is under. That said we also know there is a conflict of interest in which group he panders to!!
Final caveat: I'm not defending him to the n'th degree here, just trying to see things from his side of the fence.
Marco.
Minor note. I believe Stoneleigh is a she.
Oops. Red face. Sorry Stoneleigh.
Marco
I doubt it - especially when labouring under the added confusion of her suddenly becoming a he! :-)
Seriously, my head is spinning under all this financial info - Stonleigh and Illargi have an excellent track record, and according to them this latest deal will just exacerbate the crash, whereas according to George Soros, who is no mug, it is just what the doctor ordered.
Krugman is impressed too.
Whether we are in for deflation, inflation, stagflation or hyperinflation is also just as cloudy.
Anybody else totally lost?
LOL
Now confusion will reign all the time as opposed to just once a month!
edit:edited due to my previous backwards oops! - in case anyone read before and it changed!!
Soros always has agendas with heavy political involvement. He may have a vested interest in a short-term recovery, or he may simply be wrong.
Stoneleigh and Ilargi seem to be more objective, in my view.
just trying to see things from his side of the fence.
Would that be the fence side where Paulson/Bernankee's actions help keep their retirement cash whilst taking money from the taxpayer?
(and Stoneleigh would make better choices - she's had sleep)
Paulson is under no more pressure than any other criminal who uses public office to steal billions for his friends, like Dick Cheney. He knows the sheer outrageousness of his crime will prevent most people from believing or preventing it. So there's a Depression, Marco, what happens to Paulson? He gets fired and goes back to his Goldman Sachs job, and thanks to the bailout Goldman Sachs NOW OWNS HALF THE BANKING INDUSTRY! That's a good gig even in a Depression.
They're sociopaths, they care nothing for us.
Marco, you oversimplify the problem. No we do not expect our politicians, or economists to always be correct. We realize they are human. And we DO expect them to change their minds when the facts, or fundamentals change. But we never expect our political leaders to deliberately lie to us. Some do however and occasionally they are caught doing it.
But this is what we do expect: We expect our political leaders to be wise! Wise people still make mistakes but not nearly as many mistakes as really dumb people make. And wise people change their minds when the facts and fundamentals change. We have had a really dumb president for eight years. The man believed he could give us the biggest tax cut in history and still wage two wars at the same time. He once said the national debt was just "numbers on a line".
Is it too much to ask that our presidential candidates and their running mates be wise?
Ron Patterson
I think you've had a puppet for 8 years. He's danced every jig the puppetmasters have fiddled for him. In the end which group did he really service? - that is the question the "wise" know the answer to.
It is a sad day when we can't fully trust our own elected leaders. But I wonder if this complaint is new or has been the case throughout ther entire political histroy of the world?
Marco.
I began reading Kevin Phillips' Bad Money last night.
He's certainly not optimistic:
Being a history buff myself, I am very appreciative of the perspective he brings to the table. He says he spent "three decades of research, most intense during the last ten years, into the common attributes and eventually debilitative weaknesses of the earlier leading world economic powers: Spain when the Hapsburgs ruled much of Europe, maritime Holland, and imperial Britain."
I tend to agree with Phillips. He doesn't use it, but I believe the word that best captures the condition in which the United States now finds itself is decadence, and this in every aspect of the word--cultural, economic and political.
Talking of his pessimism that the U.S. probably will not be able to right its listing ship, he states:
Some of you might be interested in his comments in the introduction that deal more specifically with energy:
Evidently his most in-depth treatment of the energy situation is not in Bad Money but in American Theocracy: The Perils and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century, which I lamentably did not purchase, but certainly will on my next trip to the States.
Bad Money is indeed a good read, highly recommended.
So how do we know Paulson isn't really one of the puppetmasters?
History, whether long, medium, or short-term, is replete with evidence of corruption, ignorance, incompetence, and good ol' human folly in our leaders and politicians.
Maybe the problem lies in the application of our durable, hierarchical concept of "leader". We ascribe various supernatural, magical abilities to the semi-permanent leader, that they will always have their wisdom available, never tired or confused, never tempted, angry, or ill.
But the leader is still nothing more than a imperfect, lumpen, decaying, smelly human being, with limited mental capacity and perception.
Just like the rest of us.
I have been encouraged by the crop on new elected officials around New Orleans post-Katrina.
Arnie Fielkow could be making $1.5 million/yr as an NFL GM in Miami or Seattle, but he chose to make $40,000/yr as a New Orleans city council member.
My ophthalmologist is head of a group practice, successful and has cut his earned income by roughly a third by becoming a state Senator.
And several more.
Attracted to politics in the post-K recovery, driven by a sense of civic duty (and, yes, they enjoy the job and "making a difference").
Best Hopes for Better Politicians,
Alan
It seems to me that only after a landscape changing event (no pun intended) that people who are well-meaning can actually become elected into office, as the political landscape changes. In your case, the demographics changed in regards to the numbers and individuals in the area, but also the minds of the people who did not leave have changed.
Taking a look at the national scene can show you where such things are not happening, by the automatic discounting of 3rd party candidates, but today people are more irritated, and were more interested in the primaries, as that was the earliest and best place that people could implement change.
We will likely see true change at the national level when enough people are irritated enough to dispense with at least one of the two dominant political parties.
I think that utter devastation is the point when you get a different crowd at the top. The bastards that ran a country into the ground, especially by losing a war, get terminated and the well-meaning subordinates show whether they've learned anything. In 1945 Japan, the meek but somewhat honest bureaucrats were freed from the grip of maniac generals, and one of them presented the American occupation with a land-redistribution plan that he'd kept in hiding from the fascists, a plan that created a successful class of small farmers who became the foundation of the rebuilding.
Mancur Olson wrote on the idea that countries that were ruined by lost wars often gained an advantage over the winning countries because they had to rebuild their institutions using the newest information. I think it's more than that. I think ruling classes just spoil over time and have to be flushed. I did a paper in college comparing post-war Indonesia and the Philippines, noting that the US propped up the Spanish-era landlord class in the P.I. such that it had the 2nd highest per capita income in East Asia in 1963, but strife-torn Indonesia then zoomed way past it. I concluded that since the Dutch had wrecked the old feudal elite, and then been destroyed by the Indonesian independence army, Indonesia simply had more modern leaders and institutions, as awful as Suharto was. Perhaps Mao Tse Tung's greatest achievement was simply destroying a fossilized upper class so that a more competitive one could form over his dead body.
Too bad that it takes massive suffering to get rid of these relics.
George Carlin for Prez- 2008. Slogan: "F*ck it if I'm dead!"
Vietnam and the Great Society?
It's a bad sign that Paulson was forced by dire circumstances and foreign governments, screaming and kicking like a spoiled child, to do something that might actually ameriliorate the credit crisis.
And now that Wall Street and the equities markets have been thrown a lifeline, there's resistance to doing the same for Main Street:
Nouriel Roubini, however, argues that a bailout for Main Street is absolutely necessary:
George Soros (see George Soros: End of Financial Crisis Could Be in Sight above) makes similar arguments:
My hope is that a new administration and a new president will bring about the political will necessary to throw the necessary lifeline to Main Street. However, I'm not totally optimistic. The fact that Obama has Robert Rubin, one of the free market fundamentalists that got us into this mess, as one of his economic advisors is not reassuring. However, since Warren Buffet and Paul Volker also have the king's ear, perhaps there is some room for hope.
When I think of the U.S. economy, I visualize it as being like the second of the Twin Towers that got struck. You have 110 floors. The plane struck on the 60th. Floors 90 to 110 are the financial services industry. Floors 60 to 90 are the equities markets--stocks and bonds. Floors 1 to 60 are Main Street.
All efforts thus far have been directed at putting out the fire on the 60th story. This is absolutely necessary because, if this fire cannot be extinguished, the upper stories will come crashing down on the lower stories. Paulson's original draft of the $700 billion bailout was the equivalent of taking all the fire trucks over to Long Island and watering the lawns on his rich friends' estates. Now he's been forced to direct the water on the fire.
It now appears there's some liklihood that these efforts will be successful, that the fire will be extinguished.
Now imagine that at the base of the building, on its four corners, are four pilars that support it:
Pilar 1: Energy Supplies
Pilar 2: U.S. Public Debt
Pilar 3: U.S. Manufacturing
Pilar 4: U.S. Households
And imagine four big burly construction workers with jack hammers pounding away at these four underpinnings.
This is my visual concept of the U.S. economy.
Now consider that, when it comes to Pilar 1 (Energy Supplies) and Pilar 2 (Public Debt), we are virtually helpless (at least in the short-run) to impose any restraints on the guys with the jack hammers. We are completely dependent on other countries to keep buying our Treasury debt and on other countries to keep meeting our immediate energy needs. They're the only ones who can keep the jack hammers at bay. Pilar 3 (U.S. Manufacturing) and Pilar 4 (U.S. Households) we have more control over.
My concerns are these:
1. The efforts to put out the fire on floor 60 may not be successful.
2. If the fire on floor 60 is successfully extinguished, the political will to restrain those four burly construction workers pounding away with jackhammers at the four pilars may also be extinguised.
3. Even if we can marshall the political will, we may not be able to stop the guys with the jack hammers.
4. The top-heaviness of the building will not be corrected. The financial services industry currently occupies floors 90 to 110. It should occupy only a couple of floors. After the fires are put out and the dust clears, our new building should look like this: Floors 1 to 78 mainstreet, floors 79 to 108 equity markets and floors 109 and 110 financial services.
Then some wise guy comes along and notices that some of the support columns appear to have been cut by shaped-charge explosives. Better dump all the wreckage on a barge out of the country before the forensics guys get to work on it.
The only catch is that none of these folks are peak oil aware. Any "fix" they come up with will be temporary at best, because over time resources (oil, natural gas, fresh water, minerals needed for manufacture) will be in tighter and tighter supply. These items and food will be higher and higher prices, and there will be more and more defaults on loans. The "fix" that looked like it would work might be OK for 6 months or even a year, before more problems start coming out of the woodwork.
It is easy to follow someone like Nouriel Roubini, but you need to remember his view is still not peak oil aware. He sees how banks might get past the next hurdle, but not the fact that there will be a lot more hurdles down the road due to peak oil.
I couldn't agree more. I thought my methaphor took care of that pretty nicely. You can do all you want up on the 60th floor, but if the cornerstone gives way (energy) the building is still going to fall over.
Even though they've won over Soros, Roubini and Krugman, I see where not everyone is on board as to the current direction the bailout is taking. Leanan posted a link to Denninger and he's still adamantly opposed. And I read an article on CNN yesterday by an economist, I think from Columbia University, who is still very much opposed.
bush said today (buying equity in banks is) "not intended to take over the free market but to preserve it."
corporations are running the government, and the government now has a vote ?
Socialism for the rich. Free Markets for the poor.
LIBOR should've been crushed flat by these actions.
The toxic paper that is worth maybe 8 cents on the $ is still in the vaults of the banks that the Fed is paying your money for.
To do what? Return to the status quo ante of the last 8 years?
Who is going to run out and buy an F-150 now? With what?
Wages must double. Home prices must be cut in 1/2. Imports
must stop.
"The toxic paper that is worth maybe 8 cents on the $ is still in the vaults of the banks that the Fed is paying your money for."
Please share with us how you determined the value of "toxic paper" other than protological data mining?
Wages must double? Why must they double and how in the Hell would you accomplish that? Is productivity going to double too? How? Or should I see the above for the source of that statement.
Want more affordable house prices, than let the market hit bottom on its own; no bail out for subprime mortgage holders. Get rid of all those housing restrictions that make homes expensive on the West coast and else where; see how it is
done in Houston and Austin instead.
Imports must stop? Read up on the The Smoot-Hawley Tariff Act and get back to me on that.
I'll take a wait and see approach on LIBOR; it seems to be heading down. I'm old, I guess I have more patience than you.
ECON 101: Wages increase when productivity increases, as you state. Fuld, Paulson, Rubin-these guys are so productive they should never have been paid at all-they should owe money to the shareholders of the firms they have been screwing. I forgot-productivity only applies to the schmucks. So now these screwups will be getting the schmucks' money also as a reward for their incompetence-real productive.
The schmucks have been rewarded for their relentless increase in productivity by having their jobs outsourced.
"Trust us - this re-training program is far more valuable than higher wages..."
/S85
Actually, a great portion of the home price isnt in the home!
Take for instance the escrow fees, or the realtor fees
or the tax stamps fees, or the transfer fees, or the myriad other cost associated with the purchase or sale.
Unlike other "investments" such as say, (google) Anyone can purchase and sell a million dollars worth in mere seconds with a mouse click. For ...$4.99 at a online discount broker.
Don't neglect these fees I speak of, they add up. Like considering only the initial cost of a car, what about car washes?, tags, title, taxes, insurance, etc etc...it all adds up.
In the case of houses, people most often "roll over" all these fees into the mortgage, then pay intrest on those fees for 30 years. AGAIN THIS ADDS UP!
Lets be honest and talk about the lunacy of all this and dont neglect the make of the truck that hit us and only give a plate number of the vehicle that ran us over.
The last time we collapsed housing prices here in Houston it took a decade for the market to recover. But at least people could move away to healthier states buoyed by cheap oil. Where will we move this time?
Maybe Mcgowan is saying that this depression will go on for a very long time, because these things will not happen.
Who's going to drill the outer continental shelf at $80?
NOBODY
It's helpful to put the "crash" in oil prices in perspective, in terms of recent annual spot prices:
As Rockman noted, he didn't know anyone who was using $100 plus oil prices for economic planning. BTW, to the extent that offshore projects may be delayed or canceled, I suspect that it has more to do with rising costs and funding problems than with projected product price.
Having said that, I think that we are looking at a long term geometric progression in oil prices--a series of doublings--but I have no way of trying to quantify the time frame. My fundamental premise is that we looking at a long term accelerating decline in net oil exports.
I too believe this play will last several years untill the final outcome is clear.
No use in predicting when one's ability to predict is based on nothing. Even people with there nose in it ( eg Paulson ) appear to be dead wrong.
Altough 'long term accelerating' has a certain contradiction in it :)
Note that net export declines tend to approximate linear, i.e., approximately fixed volumetric, declines. The ELM decline can be roughly modeled as follows: 1/10 (-10%/year); 1/9 (-11%/year); 1/8 (-13%/year); 1/7 (-14%/year); 1/6 (-17%/year) . . .
This accelerating net export decline rate is what we saw in the UK and Indonesia and--so far--for the world in 2006 and 2007. So, as time goes forward, I expect that we will lose a proportionately greater share of our remaining net oil exports worldwide every year.
WT et al,
Need to make a slight adjustment in my optimism over future NG prices. It had been bothering me that prices still remained relatively soft with 38% of GOM NG still shut-in. Finally able to dig out the facts. The shut-in volume was offset by the Independence Hub coming back on line. If you recall there was a bad valve that cut back IH production shortly after it went hot. For those unfamiliar the IH it is a gathering system for Deep Water GOM NG fields. The IH production has essentially off set the shut-in volumes so we're essentially flat despite the hurrican damage. I've seen no estimate of when/if the shut-in NG will be returned to the system.
As I said a few weeks ago, I am perfectly content in my little corner of the oil patch--looking for small, but commercial, overlooked oil fields in a mature play.
I'm not even that ambitious WT. Been a development geologist my whole career. I'll stick with my nasty old (1940's) high water cut fields. Can't get anymore unsexy than that. But it looks like we'll clear $400,000 per location over 5 years at $60/bbl. Have over 100 potential locations so I think I'll just ride it out till I retire in another 5 years or so. Boring as watching paint dry but a good living none the less. But, unlike you, I have trees to sit under and watch them pump.
Thanks Rockman I was wondering where this NG was comming from.
That explains it :)
Where does one get information on Independence Hub production? Can you get it from MMS public reports using this source?
Gail -- I picked up my info from Rigzone. It was an MMS press release (http://rigzone.com/news/article.asp?a_id=67841). I would guess the MMS web site would be the first place I would look for ongoing updates.
BTW, if oil prices average $80 in the fourth quarter, the average annual price for 2008 will be about $105, versus $72 for 2007.
Also, it's interesting that the run up in oil prices really kicked off in 2004, which corresponded to a slowing in the year over year increase in net exports for the top five. The top five showed a declining rate of increase in 2004 and 2005, and then they showed actual year over year declines in 2006 and 2007.
There is someone who is using 100 dollar oil for planning.
https://www.desc.dla.mil/DCM/Files/Fuel_Price_Memo_24Sep08_1.pdf
The DESC (Defense Energy Support Center) is using 100 dollar oil or thereabouts for pricing of all of their products. It sucks because here in Japan on base we are still paying $4.06 a gallon and the price hasn't budged, whereas when the price in the US was rising it rose here every week as well.
Interesting mag. But I was only referring to price forecasts by folks who are actually spending money to find oil/NG. And besides using conservative price expectations the industry also uses a couple of other wiggle factors to minimize potential outcomes. Makes a big difference when you're betting your own money on an investment.
Most of the current CEO's were pups when the oil boom of the late 70's DESTROYED a big chunck of the industry. Yes...the boom and price spike cripple the energy industry for over 10 years. When prices shot up many foolish managements thought it would keep climbing and invested accordingly. It was a bitter experience no one in the business has forgotten. Given the volitility of oil prices just in the last 12 months only confirms the the validity of current conservative approach
Sorry Preston -- $80 oil won't kill the shelf or most other plays. I've been a petroleum geologist for 33 years and see economic analysis of drill/acquisition deals all the time. New drills and acquisitions over the last 12 months were based upon $80 oil or less. No one but an unethical promoter or an idiot would have been using very high prices to sell a drilling deal. Even when oil hit $147 a few months ago no one (in the E&P biz) was using anything above $70 - $80 in their economic analysis. And even most of those companies were using about 10% lower oil prices for years 2 and 3 with a slight inflation there after. All the new drills currently producing which were drilled in 06 an 07 were based upon oil prices closer to $50 then $100. Even with the drop to $80 recently these wells are still generating higher cash flows then were originally used to justify their initial investment.
And NG still looks good. Prices may have dropped from the spring peak of $13/mcf to around $7.50 in August. But that Aug “low season” price was about the same as the “high season” price last Jan. With a good bit of NG still shut-in in the GOM (which would normally be going to storage for winter peak demand) and the recent NWS forecast of a much colder than normal winter, we’re expecting a very good 6 months forward on NG prices. I consult for one of the big NG E&P companies and they’ve already approved plans to increase their drilling rig count by almost 50% in 2009.
Don't let all the chatter and hype over the futures market confuse you: the E&P side of the oil patch doesn't use those numbers and don't change their price expectations every few weeks. Just a rough estimate but I would say 2008 average oil price was at least 30% above the price used to justify the previous year's investments.
Good job of explaining how the oil patch budgets exploration and future investments. This kind information is sorely lacking here at The Oil Drum.
Thanks puh. I don't like to lecture folks but many get confused with all the chatter about the futures market and begin thinking it has a bearing on E&P decisions. I've had more companies shot out from under me then I can remember. And many of those failures resulted from management playing the futures game and not from E&P failure.
If I wanted to judge the competency of all current managements I would look at how much risk they've taken on the futures/hedging side of the game. It can take many years viewing drilling results to measure technical competency but just a few months to see how poorly a company is managed based on those futures bets.
Quite possibly true.
But not just the outer continental shelf:
Anywhere at high risk.
HPHT Wells
Areas of fiscal or political instability
Areas of high tax
Areas of gold plated regulatory authorities
In the time since 25 dollar oil, Rig rates have tripled, service hand rates have doubled.
80 is the new 60 in many areas.
There will be a correction. Small cap and mid cap companies with risky exploration plans will be denied credit. There will be mergers, acquisitions and takeovers. IOC Majors will cut back on exploration.
Deepwater semis and drillships that cost just half to one billion to build, crew and kit out will run idle.
This is not good for finding more of the badly needed black-stuff.
Hey, it's all good... We'll just print more of the badly needed green-stuff and we're good to go.
/sarcasm
Hi,
Does the posting at the top that methane hydrates should be exploitable in 5-10 years make any sense to you?
It sounds a pretty optimistic projection to me,
BTW, I don't know if you take any medicines, but if you missed my post on the Energy Security forum make sure you get your prescriptions ahead of time this winter, as the Government in it's wisdom didn't manage to ensure supplies for this winter.
As if said before. I am a notorious AGW denier...
But mining Methane Hydrates seems to me like crossing the street to pick a fight with somebody a head taller, ten years younger and 40 pounds heavier.
You would have to be seriously stupid to go mining clathrates - for all sorts of reasons.
The first reason (of self preservation) would be not to go onto a semi submersible mining vessel above the area of mining at sea.
Two Words:
Bouyancy factor.
Hello Mudlogger,
Yep, that would be tragic for those platform workers, but if their mining efforts cause a subsea landslide, the numbers of dead could be much, much higher. Some scientists think the Scotch Cap Lighthouse/Hilo,HA tsunami was caused by such an event:
Art of event:
http://www.semparpac.org/tsunami.jpg
[24-page PDF, maps, charts and photos in bottom pages]:
http://www.usc.edu/dept/tsunamis/2005/pdf/Unimak1946.pdf
--------------------
[page 6]..Our maximum run-up value is 42 m [138 feet] at Scotch Cap, near the ruins of the radio station (Figure 2).
[page 12]..The unique character of the runup along the Southern
shore of Unimak probably reflects an exceptional volume for the landslide, which in the crude model of Figure 6 would total at least 200 km3.
---------------------
Excellent 53-minute video below: "Methane Hydrates: Natural Hazard or Natural Resource? - Presented by geochemist Miriam Kastner"
http://stop-looking-around.blogspot.com/2008/08/methane-hydrates-natural...
Let me know if I missed the press release Mudlogger but has anyone even taken an actual sample of a MH deposit? It would have to be pressurized else it would gasify (new term I guess). Perhaps the person specualting on the 5 - 10 yr time frame isn't aware that MH only exists as a solid under the extreme pressures found at the depths of the ocean. Way beyond my area of knowledge but I might guess more of a 100 time frame.
Yes, there have been samples taken. Most recently by China and Japan.
Japan's Arctic methane hydrate haul raises environment fears
Breakthrough on new energy source
But I expect "receding horizons" will apply.
Iraq opening bidding for 20 year contracts for 1/3rd of oil reserves
More to follow after first round.
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/13/AR200810...
The article fails to state where these fields are located; Kurdistan of southern Shia areas.
Alan
I found a good web site to track the development of the Chevy Volt. A neuroscientist with some spare time started http://gm-volt.com/.
Battery technology is advancing rapidly. When you see oil companies starting to support battery development, you know things are really changing. This is another reason peak oil will not have the devastating effects everyone writes about on this site.
Let me put those -ve ratings into words/context:
Marco.
Are the oil companies supporting it or are they acquiring patents so they can kill it?
The jab about oil companies owning the EV battery market is a cruel truth. I thought it was a silly urban legend, but it is true.
Stanford Ovshinsky created, and Energy Conversion Devices/Ovonics owned, the patents on the nickel-metal hydride vehicle battery. Long story, but he is a better scientist than businessman, and TEXACO ended up owning them, shortly before Chevron bought Texaco.
The bottom line is that you can't build a relatively inexpensive, decent electric car with Lead-acid or Lithium batteries. Lead-Acid are too heavy and too prone to being killed by deep discharge, and Lithium are too expensive and prone to overheating. Nickel-metal hydride would be the best choice at this time, but Chevron/Cobasys will not sell small commercial quantities to start ups, and they seem to be doing everything they can to discourage their use, or are just plain incompetent.
If ECD hadn't licensed the technology to Panasonic before the Texaco takeover, there would be no Prius or Civic hybrid.
Apparently the patents expire in 2015. You won't see a decent electric car before then. There is too much risk involved, as Mercedes has found out. Here is an example of the shenanigans going on:
http://www.autobloggreen.com/2008/08/03/chevron-drains-battery-planned-f...
And the award for best use of mealymouthed doublespeak to dodge legitimate interview questions goes to:
http://www.hybridcars.com/components/cobasys-ceo-defends-his-battery-com...
There was a strong rumor that GM was about to buy Cobasys just before the crap hit the fan. I'm guessing that has been put on hold, now that GM is in such dire straits. If we are going to bail out Detroit to the tune of Billions of dollars, the US should "invest" in Cobasys to free up the patents and get this show on the road before 2015.
I hope a few thousand people get to buy these before the economy tanks (or GM tanks, whichever comes first).
Personally, I'm not waiting to spend the $40k on that car, I'm building my own EV.
Plug In Prius.
I have read TOD the last yaer. And found a lot of sens in it. Mony = Enegy. Ther can not be more mony whit out more energy.
"Mony = Enegy"
Exactly (sometimes in the past money has been the stand-in ("equals") some other limiting commodity.
Sometimes we make our money "equal" our society's "economic potential" - in other words, what we believe our economic growth is worth. This usually occurs when we have soooo much energy and commodities that we take them for granted - they are not limiting factors.
That is when we leave the gold standard or whatever commodity our money is linked too. That is when we make a Fiat(by declaration) Paper currency.
But now with Peak Oil, we are back to "Energy (and materials) = Money."
Ithaca, NY, wants to be America's 1st podcar city
Podcars make a limited amount of sense in communities that actually want to get rid of the automobile and can't be made walkable as easily. Paso Robles, California might be a good example. If you convert roads over to them, it's not dissimilar from a trolley system. But I'm not sure they're cheaper than light rail. It just seems to be another attempt to get around the idiotic cultural revolution that began between the World Wars and was completed by Eisenhower: only poor people take public transit. And consequently, prosperity is the verdant decadence of a lawn and an ornamental garden with three cars in the driveway.
And nothing said about operating costs (I anticipate VERY high pax-mile costs there, see Morgantown, Miami and other comparables).
New Orleans built (over built) the 5 mile Canal streetcar line for $150 million ($125 million with a do over). $25 to $30 million/mile with cars that will last centuries (truly !) and quite low operating costs.
France will build 1,500 km of trams (light rail) for 22 billion euros. 23.46 million euros/mile.
Best Hopes for no podcars,
Alan
Alan: I will know when the end of the world has arrived. When you miss an oppratunity to promote elec rail or Toto doesnt rail about NPK.
I hope this day never comes, I am as certain these occurances will be heralded by the above mentioned percursors, as Red breasted Robins signal spring time in the northeast.
The pod car concept appeals to the Star Trek fan in me. So let's make a big assumption that a city could finance such an expensive project. There would obviously be a charge to utilize the system. And let's assume there is sufficient demand to use the system. This model now reminds me of the Chunnel: the train tunnel built under the English Channel. Very expensive but they are carrying the passenger load they had anticipated. Unfortunately those passengers are willing to pay only half the rate the project was modeled upon. As a result, between the operating expense and the debt service the Chunnel will never pay off its construction loan. It is now essentially owned by the lenders who will receive interest payments indefinitely.
It's great to see folks using their imaginations to try to solve our problems. But the conversation can't be taken too seriously until the hard numbers are crunched.
I think Greer is right.
I agree that Greer is right on target. We're going to be using what we've got for the most part, investing in smaller infrastructure projects - we may be bring back old rail lines, but will we build more? I'd love to see it, but I don't hold my breath. We probably won't do grand things, but small things. And this will be painful for people who mostly think in grand terms, and disdain small ordinary things.
I've come to have great hopes for small things - the garden in each front yard, six people crammed in a Ford Taurus, the backyard chicken, seeds, needles and thread for mending, giving neighbors a hand, the quilt over the window to keep out winter, the bicycle, the help grandma gives her grandkids to get set up in a business, and the help the grandkids give grandma when she's having trouble getting around, the tree planted for fruit or nuts and wood, the shared meal.
This is what is left to most of us - and in the aggregate, it isn't as small as it seems. In fact is remarkably vast, if we can move it - and affordable. But many of our grand plans are done with, and IMHO, letting go of them, or selecting a very few that may be implementable, is the first major project of the new reality.
Sharon
I thought of putting in a separate thread earlier on some of these points, but then thought naw. Your response brings it right back.
Donning my doomer hat for awhile, and yet admitting your small things can be endearing, perhaps uplifting, there's a level of reality that is glossed over. That of food preservation. Soviet Russia is said to have lost 40% of harvest to post harvest problems, without it your garden feeds for a couple days, perhaps weeks. It's a whole new level of work, IMO usually more than the production. I see backyard gardens or kitchens rotting with produce. The time and energy for preservation will be daunting to all even if they mange to sow, cultivate and harvest. Each crop and region has its own requirements. Root cellars work for some crops in some locations, canning requires alot of energy and time, not to mention the initial and recurring costs of jars and lids. In this regard, I hope community canning facilities will be promoted. Drying is often touted, but here again, it's a crop and weather issue. Most apples ripen long after natural drying is possible in the temperate zones. The fallback of present times, freezing in plastic bags, may not be so easy down the road.
And I have a special scorn for chickens in northern areas. Perhaps they work better in southern areas, but farther north they are simply grain burners. Free range is fine for a couple months, but soon the bugs are gone and out comes the grain. A difficult product to produce and harvest on small plots. Much more sensible is livestock, where the winter hay feed is easily produced, harvested and stored on small farms.
You could be right about chickens. They are very popular as pets around here, but the cost of feed is getting to people. They're cutting back their flocks, even bailing entirely.
I don't see that - we're increasing ours. We don't feed them much, as they wander the yard all day. However, we did just buy a livestock guardian dog to keep watch over them and the rest of the place, and it would appear she's going to be a big girl when she's grown - so we'll have to feed her. Not sure how that'll net out.......
Anyway, the feed costs are pretty much chicken feed (sorry) - not really noticeable expenses right now. And we get a decent quantity of really nice eggs.
You feed the dog food scraps and bones.
We feed the chickens corn fines left over from combine harvesting (may not have such ready access to those post-peak), vegetable kitchen scraps, and egg shells.
The farm animals can close the loop -- no need for composting or throwing out scraps.
Some folks have criticized us for feeding "people" food to the dog. Our darling dog may have a shorter life-- what with eating all my kids' leftover rice crispies and whole milk-- but I suspect this is the relationship we evolved with dogs over the millenia. They eat our scraps and bark at the bad guys. A fair trade.
It is work, you are correct. I didn't say all that small stuff was easy, just that it remained possible while the major projects probably are not.
I grow and preserve more than half my food, plus some for sale, and write about it. I've been emphasizing food preservation for my readers precisely because of the reasons you mention. That said, it isn't impossible - apples can be sliced and dried in the warmest spot of most houses. I'm drying apples today during Indian summer in a solar dehydrator - we usually get a period of Indian summer, and planning around it, and emphasizing drying crops that come ripe in the summer is important. Most of the places that you can't dehydrate much of the year, you can root cellar. I agree freezing, and probably canning will be too energy intensive for many - which is why I think season extension (possible in quite cold places, drying, root cellaring, lactofermentation and salting will probably have to be the primary solutions.
As for chickens - we grow Amaranth, corn, buckwheat and sunflowers in garden sized quantities to supplement food scraps, garden wastes and worms from our worm bins for our chickens. It isn't that hard, and we do it on a garden, rather than a field scale. The value of eggs as fat and protein in cold climates is extremely high - but again, you have to manage chickens, rather than treat them as pets - butcher older layers that aren't going to be productive through a winter, make sure every scrap of food waste goes to an animal, figure out and learn something about feeding requirements. I think the reason people may now be feeling chickens aren't productive is that they aren't thinking about them in practical terms.
All small things - agricultural or technological - will require we make radical changes in assumptions and shifts in our basic thinking. For example, right now people are thinking "oh, if gas prices rise, we have to leave the 'burbs." Because they are more used to moving than carpooling. This is fairly dumb, and it will take a real shift and greater necessity to get people to fit six people in a Taurus, or 15 in the back of a pickup truck the way poor people do all over the world. The shifts you are talking about are the psychological and practical shifts from being rich people to poor people, and they will take time. But again, that's what's left to us.
Sharon
Our family has produced, butchered and preserved more than half of our food for many years also. Now that the kids are gone, my wife and I continue the old habits, and stuff our kids vehicles full when they visit.
As you proceed north, drying even with solar apparatus becomes problematic with all the cloudy days. Our experience with root cellars, burrow pits and the like varies with the crop and winter. You need to know what works in your area, and even then mold or freezing can get you if you don't continually monitor. And decent root cellars are difficult in the burbs, esp with shift to homes without basements. I'm sure you know all this. So I won't continue. Other than to say worm bins freeze in the winter, and egg production drops to zip till photoperiod changes. The $ or effort for a couple eggs in the spring never balances that carrying cost. Most birds fly south.
A small note on apples-get a summer variety or two for drying. One we are fond of is the Duchess of Oldenburg, usually ripening with several weeks left of warm, sunny weather. You about have to dry it-it's a poor natural keeper.
I don't think we must necessarily become poor, with all the baggage of that term, just more practical and self (community) reliant. It was actually just a short time ago when store was not the first thought that crossed our minds for any desire.
Good luck with all your suburban/urban efforts.
Doug,
A few too many broad strokes there. The one I did buy is 'What works for your area'..
I take issue with:
On coastal Maine, (Casco Bay, anyway) there is a lot of sun. Bright and Cold. Good for solar.
We kept our worm bins indoors. Hardly smelled at all, and so we had just gross amounts of meat on hand, if we had the stomach for it. (Ketchup)
Doug, I don't deny there are places too far north to do much drying - I live in upstate NY, west of Albany and east of Ithaca - and the optimization of apple drying/saucing/cellaring has been interesting. My oldest, autistic son is addicted to apples, and we like to buy them (we grow them but our trees are young yet and not producing as much as we want) in the fall, so we buy 10 bushels, in addition to what we put up every year. Our spies, winesaps and other keeping varieties keep on an uninsulated porch with blankets for insulation until late April. We also sauce and dry summer apples (Duchess is great, and I like yellow transparent for sauce as well). Our basement is too wet to store food well. I suspect with the enormous increase in square footage for folks, many houses will be able to convert a walk in closet, porch or extra bedroom with a cracked window to adequate storage. Or they will take their freezer, dig a hole and bury it in the ground.
Honestly, one of the biggest things is adapting people's diets. We eat cabbage all winter long. Lots of cabbage. It is our primary green - we buy a little and season extend a bunch, but most days from December to April, we eat cabbage. This is not a problem - I like cabbage, my kids love cabbage (they dip it raw in ketchup, which I realize is weird, but it works), and I know a bunch of fabulous ways of cooking it that make other people demand recipes - in russian style vegetable pies, stir fried with garlic and with rice and beans and hot sauce, with kimchi and homemade tofu... and by the time we're totally sick of cabbage, well, there are dandelions and good king henry, etc... There are very few places where people can't produce a healthy, if monotonous homegrown diet. And some kitchen creativity can make it not that monotonous either. For those who can't keep apples, it may be better to eat other fruit that can be dried in summer. I think shifting diets around is going to be one of the central projects of dealing with our future, and is one of my central projects (I'm writing a book about it now).
I've not had your experience with hens - I think that the rush of eggs in the summer and the meat in fall does balance out the long months of relying on eggs we've preserved in fat and husbanding them. The worm bins come in the house with us, so that's no problem. It may well vary, though, depending on where you live and what your experience is. And I agree - an actual accounting is central. It isn't easy - it is merely easier than coming up with enough money to do anything else ;-).
Sharon
re: older hens. We bought a couple dozen smallish eggs from the younger girls on a farm in Western Maine yesterday and learned a poem..
Roses are Red
Violets are Blue
Hens that don't lay any eggs
End up in the Stew
I am a better employer than most of you I guess. My hens all get full retirement benefits when they end their egg producing days. If I add up all the eggs they produce in a lifetime, the amount of feed I supply them during their average 2-3 years of life after production really isn't that much. But then I never have more than 6 hens at a time.
Still, they take care of me by supplying much needed healthy food and I reciprocate by taking care of them after they are no longer able to produce eggs.
Meat chickens are not so lucky. One summer running around outside in the sun is all they get.
Maybe if we could do that with humans we would not be in the terrible fix we are in?
(Tongue in cheek people!)
I've found that increasingly I have to develop two sets of garden plans: an in-season fresh use plan, and a storage plan.
I need to figure out how much of various crops we use during the growing season, and spread out the plantings and harvest so that we bring in that little we need each week for as many weeks as possible. Spreading out the harvest and extending the season early and late is the challenge.
I also need to figure out which crops I can grow which can be stored (and figure out storage strategies for each), and how much of those we need and can be stored net of losses through the off-season. The focus here is on concentrated harvest in quantity at the peak of the season for each crop. (Most of us find that it is usually easier to process a crop for storage in a concentrated period rather than spreading it out in dribs and drabs.)
For example, we rely on our yellow squash and zuchini during the growing season, and I try to plant to produce just enough for our weekly use; I'm still experimenting with succession schemes and varieties that will extend the harvest earlier or later without increasing it much each week. During the fall, winter, and early spring, however, we rely on winter squash. I grow and harvest (all at once) enough of this to store and supply us for about six months. I grow a variety (Butternut) that stores especially well; that is the first and most important criteria for that crop. We simply don't prepare recipes that call for summer squash in the wintertime, nor do we prepare recipes that call for winter squash in the summertime. This last point might be the first adjustment that people need to make, for all of the cooking shows and magazine articles tell people to make recipes without any regard for the seasonal availability of produce. Those of us that have been doing this for a while have learned that you can't cook that way.
How about 60s vintage, pedal operated, sewing machines like the one my mom used to use to sew her own dresses back in the day? (using dress patterns bought at the store). This sure is looking like "forward to the past" instead of "back to the future".
Alan from the islands
Small is Beautiful.
In some ways, our situation today has a lot in common with the typical 3rd world developing country forty years ago. We're facing huge multiple problems. The thought occurs to TPTB that huge problems can best be solved by huge solutions. Thus, the standard model for "development" assistance is structured around the construction of huge public works - dams, irrigation projects, transport, etc. The problem is, each of these requires huge resources, especially financial resources, of which there is far too little to go around. Thus, miserably poor people wait year after year while the too-few funds trickle down to one mega-project after another.
Then there are the unintended consequences. Too much of that too-little money ends up getting diverted into the pockets and Swiss bank accounts of local kleptocrats. This, in turn, strengthens the local kleptocratic power structure, and results in a more repressive, more corrupt society. The megaprojects run rough-shod over the local environment. Interventions in the local economies often do more harm than good, with imported or donated goods crowding local producers out of the market. The local economy becomes more dependent upon outside countries, needing to expend scarce foreign exchange on supplies, parts, and expertise to keep the megaproject running.
EF Schumacher had a better idea. He noted that in many cases, simple, inexpensive tools - "appropriate technology" - could often make a very big difference in the lives of people. For example, instead of a water supply megaproject, the same money or even just a fraction of it could equip more villages with the low-tech, inexpensive equipment and know-how needed to construct local wells, reservoirs, and storage tanks, pumps and piping, and filtration systems. Instead of waiting years for the funding for the megaproject, work could begin immediately with available funds, helping one village at a time.
Thus, you are right, Sharon. Instead of waiting forever for all of the massive wind farms, and massive CSP and PV arrays, and massive geothermal installations, and massive tidal and wave and thermal gradient oceanic energy megaprojects, and massive electrified rail transit systems - instead of waiting for all of that, there is a lot that each of us individually and in our own communities could do now, deploying inexpensive and available appropriate technologies.
There was a time when Communist China was the big pimp for appropriate technologies - probably because that was what they were best equipped to export for their foreign aid/propaganda efforts. Has there been much follow-up on the effect of those programs, which seem to have been terminated to clear the way for China Inc.?
I beg to differ that people won't be doing grand things anymore, oil consumption first soared in the early 1900's, but there were still beautiful cities,good roads,wonderful bridges,fine churches and cathedrals. People had homes.
I mean Rome was built without oil, places like the Sistine chapel, Notre dame Cathedral, the Eiffel tower was constructed without much oil use. The Egyptians built the pyramids, the Cambodians built Angkor Wat, the Indians had the Taj Mahal and fine palaces and cities pre oil use and the Chinese built great structures such as the Great wall and the forbidden city etc etc.
So not all hope is lost. People still dreamed, they traveled (on a far smaller scale) and did commerce and trade. It was on a smaller scale yes, but it still occurred. :-)
I think casting decisions have already been made.
Big surprise. Your name was not on Cheney's short list.
For some reason that story made me think of the trams in Las Colinas
(I bet it could be argued that Las Colinas itself would not exist except for the strong forces of cheap energy / sprawl / developers throwing money into anything that looks promising)
..with our aluminium foil hats firmly in place, can anyone shed any light/thoughts on this?
http://www.bbc.co.uk/blogs/thereporters/markeaston/2008/10/map_of_the_we...
Is it possible that following on from the success of the Iran Contra 'affair' TPTB have ulterior motives for their continued presence in Afghanistan?
Is pain relief (i.e. heroin) the ultimate post peak barter item?
The raw materials will be more difficult to get hold of, the areas of production less stable - wonder who is getting the supplies in...
LOL So we not only have organized vs disorganized crime, there's now serious organized crime (SOCA in the article), suggesting disorganized, unserious crime. What could that be? The DUC unit for bad detectives.
Maybe governments are stockpiling heroin for the new currency standard after the old currencies are scrapped. Fort Knox could take a few tonnes.
The US already keeps morphine at Ft. Knox for use in a prolonged war.
Reagan era quote According to the emergency management agency, about 70,000 pounds of morphine is now stored; the agency's goal is to store 100,000 pounds, the official said
http://query.nytimes.com/gst/fullpage.html?sec=health&res=9B00E3D6143BF9...
Alan
Serious Question: Say you have the means to pay off the home mortgage in the next 12 months. Do you still do it?
Does a full crash next year make me wish I had that cash for something else? If so, what?
Note: I already have two wood burning stoves and 7 cords of wood ( 3 dry and 4 green). Cars paid off.
I know I will pay more taxes next year without the mortgage interest write-off.
See my post at top... Look at making improvements to your house that increase energy efficiency (energy efficient appliances, geothermal heating/cooling, extra insulation, energy efficient windows, Solar heating/panels if you live down south). In a high inflation and decreasing energy environment (Peak Oil, Peak NG), this will have an insanely high ROI (since energy costs will go through the roof). Also- get an energy efficient car as well.
If/when hyperinflation hits (and assuming you still have an income that will be inflation adjusted) your mortgage will become worth less and less over time. You may be able to pay off large chunks of your mortgage using your paycheck alone... i.e. if you make $300,000 because of inflation, then a $100,000 morgage is very easy to pay off... BUT, a $3,000/month energy bill because of poor energy efficiency housing will put a crimp on that.
Yes I was also wondering about that. Let's say you have enough savings to pay off a third of your mortgage or your house or apartment in the city or else you could buy (without a mortgage) some farmland a couple of hours away. It would be enough land to get by on an impoverished subsistence level. But your job is in the city and it's a good job, let's say you work for the government. What do you do? Pay the mortgage partly off and lower your payments so you can buy more food and survival items later? Or do you buy the farmland and wait until your job is toast, then flee???
Take this and put it on your wall in the closet so you can remember when you run to hide in it, that someone told you this ahead of time.
DO WHATEVER YOU HAVE TO DO, TO SURVIVE. The Cities will become a Death Trap. Get as far away from them as you can, as soon as you are able. What you see now, is not even the tip, of the Iceberg of what is ahead.
Mumbo Jumbo about "Pod Cars"? Really? Can you eat a Pod Car? Look at Iceland. Modern Society dead in it's tracks. It took what, a few weeks of nuttiness in the financial markets. Think your government will save you? Look out for you? Are they doing so now? Lot's of nicely worded ideas here, interesting topics and all, but the basic premise is this is not going to turn out well.
Paying off a mortgage gives you the positive cash flow that is greater than the interest deduction. Would rather pay more taxes and have more personal income leftover than to merely pay less taxes and have less disposable income with the deduction. What is housing inflation anymore? We have not seen it in a while.
Cross threading the blogs - short entry, but interesting.
here->http://oxdown.firedoglake.com/diary/714
fuzid -- the quick details: McClendon though CHK stock was a bargain at $40 to $50 a share so he put up his stock position as collateral and borrowed $100 million to buy some more. When the maket crashed and dragged CHK down with everything else his collateral was seized and all 33 millions shares of his stock were forced liquidated at around $12/share (?). From the stock hiogh of $70 his holdings dropped from $2.3 billion to perhaps zero. Now that's a bad week.
Last report I saw CHK is still in good shape...it just got caught up with all the sheeple running from the market. Last ime I heard the stock jumped back up over 100%
BTW, that forced sale drove down the price even further for everyone else. This is why I asked the other day why his board hasn't demanded his resignation. The job of the CEO should be to INCREASE shareholder value, not DECREASE IT. The fact that it has since recovered doesn't let him off the hook.
That's a valid point I hadn't thought of WNC. I wonder if the board was aware of his margin? Probably since it was an insider trade. Maybe they were't paying attention or didn't think it would come back to bite his ass. On the other hand, though, I think the CEO of a company buying $100 million in stock would have been applauded by most share holders at the time. As a shareholder, would you have been happier to see your CEO dump $100 million of your stock?
But then I've always been of the opinion that one should never borrow money to by an equity. Just my philosophy.
Buy with his own money? Yes, that would be a good sign.
Buy on margin? No, that would definitely make me nervous, to say the least.
So, according to the story up above, we'll have fusion energy within a generation. Funny thing... I heard that two generations ago, too.
It just goes to show that people are right: Fusion is the energy source of the future... and it always will be.
We already have a perfectly good fusion reactor pumping out plenty of energy for us. Only 92 million miles away. . .
_________________________
If there is anything left of our nation or planet, maybe next President can reverse course? (Change the course in place of BAU "stay the course".)
The TED SPREAD is rising again, now at 4.38. Earlier today it was 4.25.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP%3AIND
that is not good for credit markets, but well, a little bounce doesn't mean anything really...
of course, if it stays this high, its scary. what could governments do next? it seems to me that they shot out every fkin bullet
not quite - there is one left chambered. Guess where the gun is pointed though.
I hope not at me. ;)
They could force banks to lend money -- at gunpoint.
that's why they are going to acquire big share of financial firms.
On Bloomberg right now, the TED SPREAD is no longer available. What's that?
The TED SPREAD is rising again, now at 4.38. Earlier today it was 4.25.
http://www.bloomberg.com/apps/quote?ticker=.TEDSP%3AIND
Just took a peek at the DJIA and it's down 260 points.
What a turn-a-round from the morning.
whole hour left...any bets as to whether it ends down or up?
It opened at 4.57 and it's now around 4.36, it will take some time before it goes down, the new bailout plans have just been announced.
Is college worth it? - With graduates earning less and tuition rising, it pays to weigh your debt against likely career earnings
It depends on the classes you take. I imagine "Hotel and Restaurant Management" would be a bad major, but "Mechanical Engineering" might still pay off.
I wonder. I have a degree in mechanical engineering, and frankly, I don't think I learned anything in school that could not be learned on the job. Indeed, many of the old-timers in my field do not have college degrees. Some have two-year degrees, often earned during military service...and their work is as good or better than the college crowd's.
In the UK I would imagine that most would do distance learning via the Open University, as it is hugely cheaper.
Do I take it that there is not an equivalent in the US?
As in so many things, there is not AN equivalent so much as there are MANY equivalents. There are quite a few colleges and universities that are getting into distance learning in one form or another. It is quite possible in the US to earn degrees through distance learning.
Again, as in so many things, it is hugely cheaper in the UK than in the US. Distance learning in the US is actually pretty expensive; the cost savings are in being able to avoid living on campus, and instead staying at home and maybe holding down a good job.
When times get tough, and people are let go, every bit helps. If a design group has a product engineer and a design engineer, plus two designer/drafters; a drafter will be first out. I still remember the 10% per group has got to go days in the early 1990's.
I think the most productive and lowest paid workers will be kept. Those are not necessarily the ones with fancy degrees.
I have been through this several times, and practicality and productivity are not always the main factors.
The supervisors, who get to make the "downsizing" selections, often hold exaggerated value on pedigree. Completion of a nice degree is often their own crowning achievement.
I think the recent emphasis on productivity is going to change that.
There are no drafters any more. There were in the early nineties, but now every engineer has their own CADD station and does their own drafting. Many of the former drafters are now engineers.
Similarly, there are very few administrative assistants. Word-processing software and voicemail made them unnecessary. If layoffs come, it will be engineers who take the hit, because there are no support staff any more.
Being a well-compensated senior engineer working on new products is a worry for me. If push comes to shove, the "well-compensated" part is negotiable, but in a down-turn there is value in being an engineering peon working on sustaining projects for existing cash-flow products.
That's the thing that was so brutal about the corporate downsizings of a decade or two ago. Unlike the past, the bias wasn't in favor of the most senior and experienced employees, they wanted to keep the young and cheap ones. They figured that they were investing in their future. Hundreds of thousand of mid-career professionals discovered that their careers had ended unexpectedly. Many of them never did get back to earning anything close to what they had before the downsizings, either in their previous or new careers.
>>Hundreds of thousand of mid-career professionals discovered that their careers had ended unexpectedly.<<
You have just summed up the History of The Oil Industry 1986-2003.
'You dont know what you got 'till it's gone'
Most jobs in today's corporate world have been dumbed down. Processes and systems have made robust enough so that they are no longer that people dependent. A person with 15 years of experience probably costs 2 or 3 times as much as a person witj 5 years experience but does not add 2-3 times as much value. When times are good companies indulge a bit. When times get bad you want the cheapest input.
Srivathsa
Oh, that explains why all we get from them now are crappy products and crappy service.
The really remarkable thing is that any of these companies manage to remain in business.
My opinion on the matter, (and something that I did) is to just go get a job, preferably one that offers tuition reimbursement, and go to school part time, taking 1-2 classes a semester. I've heard people say things like, "Well, I have to go for a degree in a field that matches my job." That's OK. All degrees have generic requirements of English, History, etc... Go for the degree you don't want, while making sure all of your basic courses that you take match up with the ones you need for your truly desired degree. At least then you can get the basics for free, then you can switch majors later. :) (Tis also what I did.)
I worry more about high school kids even being able to make it through to college. This is the generation that will be a strain on society. I don't know what the statistics are...but kids I observer today are not too aware of what is going on. This might be reflected in the average age of the TOD readership. Any ideas there? I would bet the over 40 crowd is predominant.
I remember my dad saying that when I was about to start high school :)
hehe...I think my dad did as well...maybe I have just turned into my dad....these dang kids today!
I'm 25. But then again I have two relatively broad degrees in the earth sciences and a slightly less materialistic upbringing than most of my age and class.
My recommendations:
1) HS students should go for whatever AP credits they can get.
2) Community collges are the best value in higher ed today. If a student can possibly swing the academic work (and just about everyone who is at least literate and numerate can, the rest probably really do need to be flipping burgers), then continuing to live at home and going to the local community college is going to be the least expensive option. They should also find it easier to get good part time jobs (maybe something better than flipping burgers) and work their way through school; that experience will be very helpful for getting their first real job, even if an Associate's degree is as high as they ever go.
3) Some students might also be able to benefit from distance learning or credit by examination, but be careful about the costs and make sure that they have the discipline to do the work.
4) IF a student has proven themselves capable of handing the academic work during the first two years at a community college, then they can transfer to a four-year school or university to earn a Bachelor's degree. Most of these institutions will have articulation agreements with the community colleges in their state so that the credits will transfer; except for the most selective four-year colleges, most of these will also have seen so many first and second year students flunk out or quit that they will welcome any community college transfers. In some cases students will be fortunate enough to have a campus of an inexpensive state university close enough to commute (allowing them to continue to live at home), and that might be good enough for their needs. For about 95% of college graduates, simply BEING a college grad and having A degree will do; it is only the elite 5% or so of the jobs that are going to be so competitive that WHERE you went to school will really make much of a difference. Two possible strategies: a) get a part-time job and work yourself through those last two years - the challenge is to keep those two years from stretching into three or four or forever; vs. b) load up on credits and try to get through those last two years in just three semesters - if you can pull this off, then you have cut the cost of those last two years by 25%. I'd recommend the second strategy (in which case those extra distance learning courses & credit by exam might make the difference), but this requires financing all of those three semesters. Hopefully, the student will have been able to earn enough while working at a part-time job at the community college to not only cover all of the community college expenses, but also to save extra. At worst, they might have to take out a student loan to cover their last semester or two; if it makes the difference between earning or not earning a degree, and if it is at an inexpensive state university, then that might be worth doing. I wouldn't recommend taking on more student loan debt beyond that, though.
Another option worth considering is degree completion. If the student has had to work several years after completing an associate's degree, they might get enough "life experience" credit to cut down the number of semesters they still have to complete to just one or two. Again, credit by exam and distance learning can also come into the mix and help them toward their goal.
Unless someone is a genius and is going to someplace like MIT to train to become a future Nobel laureate, or something along those lines, I just can't see how racking up $100K or more in student loans is a good idea.
I don't think even MIT is worth the money.
In fact, I think you can often get a better education at less selective colleges. IME, undergrads are treated like an annoyance at those big name schools. The professors are under heavy "publish or perish" pressure, and time spent teaching is time they can't spend on research. (I actually had one professor tell me, "I have a string of degrees as long as your arm, and I shouldn't have to waste my time with undergraduates.")
And once you've gotten your first job or two under your belt, nobody will care where your undergrad degree came from.
That doesn't mean you should rule out expensive colleges. They may have the best financial aid, and could end up being cheaper than your state university. But I would really, really try to avoid going into debt for college. You cannot erase student loans via bankruptcy, so barring some change in the law, you're on the hook - even if you can't get a job, and even if you don't actually finish school and get the degree.
Agree, one is not necessarilly going to get a better education at the elite schools. I am of the opinion in any case that the quality of the education a student gets is pretty much up to the student, because real learning takes place inside the student's head.
The only thing that the elite schools can really offer is that old school tie and the contacts that the professors have amongst potential employers. That extra edge which that provides in getting that first job is what that is all about. Whether that is worth going in debt to the tune of $100K or more is a highly questionable proposition.
As a teacher at a community college, I agree with all your comments, WNC Observer. The one thing I would add is that students at community colleges should make an effort to get to know their professors and teachers.
We often have contacts in the local community that may be of great benefit (internships, jobs, scholarships, etc.). Since most students DON'T talk to us after class, when a student shows interest in the lesson topics, we remember them. It just takes a few moments to chat with us and we both gain a lot (most of us LOVE our subjects and teach at community colleges because we like to teach - unlike harried graduate students at more prestigious institutions).
- Rev Karl
The quality of your fellow students affects the level taught and also, usually, affects your own efforts. An all engineering school will have a different ethos and ambiance than one where engineers are <4% of the student body.
I think it is a mistake to take an undergraduate degree at a university that prides itself on it's graduate programs.
In other words, a Georgia Tech type school (not MIT, but strong) might be ideal for a good student getting an engineering degree.
I do believe that one does learn analytical skills in college, and these skills are invaluable. Some schools can teach these better than others.
YMMV,
Alan
I am seeing an occasional minus -1 on many posts which seem to not warrant it. It appears random and without rhyme or reason. Since I am inclined to believe its a single individual, I will take liberty to remove those with my vote privlage. Sorta like picking up someone else's litter on a stretch of otherwise un polluted road.
I have been doing the same. It came to my attention when the first post the other day was none other than Westexas with a -1. Give me a break, can't he get supper user status with no negatives allowed?
No.
Ouch!
It was just a comment. At least you didn't bump me down :)
Sometimes I look at the more spurious runs of negatives the same way I listen to car horns that have gotten too disruptive. I imagine that they are just bleating sheep, crowding and blocking some pretty country lane. That way, they're cute!
Bob
I look upon negative votes like getting flipped off in traffic -- as a sign of respect for a driving maneuver well executed.
Just kidding, I know if I say anything with a political tone leaning right of Lieberman I'll get voted negative. Pointing out that Obama minions are domestics terrorists funded by organized crime will get such a low vote that a black hole is likely to spontaneously develop.
>>Pointing out that Obama minions are domestics terrorists funded by organized crime will get such a low vote that a black hole is likely to spontaneously develop.<<
Try Global Cooling :-/
Or forced population reduction?
Or the undisputed fact that the mothers of McCain minions wear army boots and march in goose step.
___________________
Gee. Flinging feces is such good clean fun!
If you had the awareness to understand global cooling and global warming would be two sides of the same coin, you'd likely not get down arrowed. But you don't, so you do.
Still waiting for that science...
Cheers
Well done. I appreciate your concerted effort to keep politics out of the conversation. And here I was, thinking there was no refuge from the onslaught of partisan hatchetry!
I'm not sure how the popularity contest up/down vote thing works here, but I would hope that each individual only gets a certain number of votes each day, and can only vote one up/down per comment.
I think people dislike it as it is an anonymous way to pooh-pooh someone else's comments, but relatively speaking, virtually any comments on TOD are anonymous, at least to the level of not knowing a person's true identity.
Just wondering Leanan.................
Is the rating system still in the beta stage?
If so would it make any difference if you took away the negative part of the rating?
For example a poster could not be rated less than zero.
Positives could be rated down but not below zero.
Yes, it's still in beta. There no consequences.
In the future, posts with a lot of negative ratings may be automatically hidden, or dropped to the bottom of the thread.
The idea behind allowing negative ratings is to have some way to deal with spammers and trolls that does not involve a staff member being here to delete posts or ban users.
Although I'm only a recent member, I've been reading the Oil Drum for a number of years, and I despise the comment system.
It's become a way to rate the popularity of content. Opposing voices (anti-PO or anti-AGW) in particular are rated down -because- of their stance, not because of the content of the posts.
I've seen posts by folks on the pro-PO and pro-AGW side that I've rated down for rudeness and intolerance (as well as posts on the anti-side).
While I think most of the anti-PO, anti-AGW, economic cornucopians are blind to what's developing in the next decade, if the comment system is used in the manner above, it becomes a way to suppress dissent, and suppress legitimate discussion.
That's why I tend to reserve my down-vote for comments I perceive as rude, whatever side of an issue they're on. I'll also give an up-vote to comments I disagree with, when they're present rationally and without insult, when those comments have a negative rating.
If the comment system becomes a tool to effective suppress discussion, I'll probably spend a lot less time on the Oil Drum.
Michael
I vote to throw him (westexas) off the island.
Yeah, WT never seems to work on the new and bigger stone heads anyway !!
Not sure about any particular PO connection with beer prices, except maybe general cost pressures. I'm surprised that the article blames shortages of hops, because the acreage under cultivation is shrinking. Like EOR and CCS the industry uses liquid CO2. In this case it is the solvent for a flavouring syrup sent to brewers which saves on transport costs. Lately the industry has been employing refugees from Somalia.
It's been reported that that's because more acreage is going to biofuel crops.
LOL.
They can't grow hops for beer because they're growing other crops to make alcohol (ethanol).
LOL.
Another weird development here is the use of poppyseed oil to make biodiesel, only 12,000 litres a day at this point. Poppy growers were licensed to sell medical opiate feedstock to drug companies but were getting low prices. It was speculated that it was due to record production by Taleban supporters in Afghanistan, though you would think that drug companies would avoid that source. The biodiesel has helped poppy growers diversify revenues.
In other words, it's like legally smoking heroin with diesel engines... Nice.
I don't know the situation in the UK or Europe, but in the Pacific NW -- which produces the vast majority of hops in the US, biofuel crops are not making much headway. In fact, Imperium Biofuels, the much vaunted biodiesel venture which built a 100 Mgallon/year refinery, has idled the plant and is restructuring.
http://seattlepi.nwsource.com/business/382978_imperium13.html
Hops would seem to be a crop where shipping costs matter less, or at least would make importing it a smaller part of the brewing cost. Otherwise, why grow it in the NW instead of where more of the beer is brewed?
There is only one use for hops.
All other uses are against the laws of God, Nature and Man
ASPO 7 Poster. I hope you like it.
Click for larger size.
Deleted.
How not to barter...
Man tries to pay for fast food meal with pot
I suspect that he was ordering the "Happy Meal" :)
That, or the 'Baked Apple Pie'..
Half baked...
I've been thinking about how things can be made less painful than they will otherwise be and ran into this article.
Businesses bank on solar power
All of this funny money that's going to be floating around soon better be spent on renewable energy or energy saving projects or it's going to be sucked into the Peak Oil black hole. Luckily for California the governator seems to have the right idea,
Schwarzenegger: Full steam ahead on green tech
This is in stark contrast to Chris O'Donnell and his merry bunch over at Nakheel in Dubai who are going full steam ahead with this insane BAU project.
New plans for world's tallest building unveiled in Dubai
In this interview O'Donnell describes the project and indicates that the foundations are "going in now as we speak" with the final cost estimated to be 140 billion euros. Is there anybody on this site that can give us an estimate of the amount of barrels of oil this building will consume during construction and how much it will consume per day to operate? It would also be interesting to have an idea how many barrels per day a development like the one around The Burj Dubai will eventually consume. I have no idea but, my gut tells me that those folks in Dubai would be better off investing that $140 billion in solar/renewable energy infrastructure to provide them with power once their pitiful 240,000 barrels per day (more like between 65,000 barrels and 80,000 barrels) is exhausted in less than 20 years time. Add the current financial maelstrom to the mix and this gets really interesting. Anybody taking bets on whether or not this project ever gets finished?
Alan from the islands
If you've got it, flaunt it, I suppose.
Take a break from financial worries. Here is a blast from 30 years past.
School House Rock on energy usage and conservation:
The more things change, the more they stay the same. The world spins, the earth precesses, and all things seem to go around in cycles (even if it is a helical course viewed end on).
P.s. The blog filter seems to disallow the <object> tag. Thus, the above YouTube video is not embedded in this posting...
I would rather not have videos embedded in the DrumBeat. The link is good enough.
The article Heat costs fuel wood shortage notes that firewood in New Brunswick (assuming you can find any suitable for burning this winter) now runs in the range of $300.00 a cord; burned in a high efficiency EPA-approved stove, that puts the cost of wood heat at about $0.06/kWh(e). At $5.50 to $6.00 per 40-lb bag, pellet heat falls closer to $0.08/kWh. Ironically, electric resistance heat in New Brunswick is $0.0861 per kWh, so any cost savings related to wood heat in that province are presumably quite modest and for pellet stove owners likely negative taking into consideration the cost of capital and ongoing maintenance and repairs.
In Nova Scotia, electric thermal storage heating at $0.0534/kWh is cheaper than either wood or wood pellet, if purchased at market prices, and a high efficiency ductless heat pump will get you down to as little as $0.035 and even half that during off-peak hours. Anyone looking to reduce their home heating costs should carefully weigh all options beginning with proper insulation and air sealing. Wood heat offers many advantages -- most notably to those who favour a high degree of energy independence or who worry about extended power cuts during freezing weather -- but it's not always the lowest cost alternative.
Cheers,
Paul
So, how is this for scaring the pajeezus out of everyone? The world financial leaders met over the weekend and came up with the "unified game plan". It was unveiled on Monday to an amazing surge in world financial indices. We threw how much money at this problem and the positive follow through has lasted how long? One frickin day? Is that it? Are things that bad that unlimited liquidity will not turn it around?
We are experiencing some scary sh*t right now if we start seeing more DOW tanking the rest of the week with all the recent steps and rule changes put on the playing field.
Globally, trillions of dollars have already been wasted. If, OTOH, these trillions had immediately been invested in government support for nuclear, rail,wind and solar it is difficult to imagine that a skilled labour shortage would not be the current story. The banks have the potential to suck all the wealth out of the global economy unless there is a major change in policy. Should be interesting.
Governments have "invested" in nothing. They have passed around some bits of colored paper and typed some numbers. The bailouts happened so quickly because they involved almost no real effort.
Nuclear, rail, and the rest will require that real people with real skills build real infrastructure. That will be much harder, and maybe the current crisis will help dispel the myth of the financial sector as economic engine!
There are many in our society who believe with religious fervor that finance rules the universe. They believe that government can spurn "innovation" forward merely by reducing taxes and by showering the upper echelons with fiat paper while waiting for the beneficial effects to trickle down to the lower rungs.
They believe in giving themselves a ticker tape parade and waiting for the gods to be appeased by the same.
Problem is that Mother Nature does not listen to the songs of the monkeys. A rain dance does not bring on the rain. A finance dance does not create real wealth. It merely rearranges rights to occupancy of deck chairs on the Titanic.
the question I have is: how do we (as TOD'ers) navigate through this mess? having a few acres of land to use is helpful, as i have. growing vegetables is easy, but really what is the best way to navigate through this mess? anyone have an idea?
Your kidding, right?
If I tell you, I would have to k*ll you. :) Just kidding.
You might want to ask this question at a better time of day.
With feed prices doubling since 2005; the poultry industry has seen major losses.
One third of the United States corn goes to ethanol production.
The drop in the number of chickens being raised is likely to cause higher meat prices in 2009. Already some restaurant chains are planning menu price increases.
In the UK some food prices were more than double the inflation rate.
"...Bread & cereal prices have increased almost 16% and meat prices have gained 19% over the last year."
Meat consumption in China has doubled since 1990. In Germany one writer predicted future generations might have to learn to eat reduced meat diets.
Venezuelan oil production has dropped from 3.2 mbd to 2.4 mbd in ten years. Massive capital expenditure on heavy oil recovery and refining might reverse this trend.
http://www.telegraph.co.uk/news/worldnews/southamerica/venezuela/3183417...
Many companies would not want to consider investing in Venezuela after the nationalization of the oil industry and incidents of state confiscation of drilling rigs leased to foreign operators. Venezuela is likely to suffer a huge drop in oil revenue and not have the cash to build the large scale oil projects it needs.
With large drops in oil revenues in OPEC nations becoming a reality; their growth in auto sales and oil consumption might diminish or disappear entirely.
rain -- Given the factors you've pointed out the latest moves between Vz and Russia would make sense on the one hand. But Russia probably isn't too interested in helping anyone, other than itself, to get additional crude to the market. But if they can economicly develop VZ reserves with confidence they'll reap the bulk of the reward then maybe. China has taken this approach with Vz for about 10 years already.
True. If Venezuela increases their production faster than their consumption is increasing, they could increase their net oil exports, but the current trend is for them to approach zero net oil exports in about 20 years:
WT -- your chart got me thinking about some sort of appendum to ELM. I doubt anyone can come up with all the data but it might justify an * on ELM adjusted numbers.
I'm referring to dedicated oil sales. I.E. -- over a year ago Vz signed a long term deal to deliver oil to China on an increasing volume schedule. This oil would seem to fall into the same category as internal consumption in some aspects. The Vz oil shipped to China is not on the global market just as internal consumption isn't put on the global market. I forget the exact numbers but the Vz/China dedicated sales were in the range 0f 300,000 to 450,000 bopd if I’m remembering correctly. Such a volume could be used to adjust your chart downward by at least a third. On the other hand, such deals are valid only as long as they are honored.
China has been cutting such deals, including sovereign ownership of oil in other countries such as Angola. Other than catching an occasional press release I found no source to quantify the global magnitude of such Chinese efforts. I also wonder if the latest chats between Russia and Vz could be leading to additional dedicated oil sales. Obviously when PO begins its long term effects the issues will likely be as much about access to oil as the price itself.
Your thoughts?
One could argue that we are seeing something similar with Iraq. The last numbers that I saw showed a pretty significant increase in oil shipments to the US from Iraq. In any case, it would appear that the long term trend is for an accelerating rate of decline in the volume of available net oil exports worldwide.
Nothing new really WT. I forget when you started in the biz but back in the 70's I worked with one of the big NG pipeline companies, Transco. They payed a big premium for having first call on NG from various producers. They even entered exploration JV's so they could get the first call on the operator's NG volume. These JV's, which chased rediculously risky and expensive wildcats, eventually killed the entire company. But it seemed to make sense at the time: they were paying $3.50/mcf for the gas at the well head and retailing it at then end of the PL for $7.50/mcf.
Makes me wonder if Russia isn't considering the same game with Vz: spend $'s to develop VZ reserves, get call on that oil at a low price and then sell to US/ China or whoever at a good markup. Not a bad plan as long as Vz doesn't stab you in the back.
I saw an article on this over the weekend and has major impacts to everything shipped around the world.
Shipping Lines Say Tight Credit Cutting World Trade