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Countdown to $200 oil: $140 oil and speculation

by Jerome a Paris Fri Jun 27th, 2008 at 02:50:45 AM EST

As you may have heard, oil prices have reached a new high above $140. I can already hear the outcry against speculators and their out-of-control games to enrich themselves at our expense.

Never mind that speculators have been caught shortselling oil (ie betting on a fall in prices) more than a few times in recent months. Never mind that spot oil prices, which require actual physical deliveries of oil at the end of each month, have behaved the same way as paper futures. Never mind that oil storage seems to not be increasing.

Nope, it is just too convenient, too irresistible and, let's say it, too comfortable an excuse that speculators are to blame. It's not our fault, we have our scapegoat. Our price increases are temporary, we'll soon be back to "normal" lows, as soon as (take your pick) speculators have been punished/oil companies are taxed for their profiteering/"fundamentals" are left toset prices.

This is just denial

There are A LOT of reasons why oil prices are going up. Let me show you just a few.

A Countdown to $200 oil diary


1) The George W. Bush War Risk Premium

One you've probably heard by now is the "risk premium", linked to the prospect of a war with Iran. Let me explain how that works.

Say that the market price for oil, if there were no prospect of war with Iran whatsoever,  were $100 per barrel.
Say that the market price for oil, should there be an attack on Iran, is estimated at $400/bl (because of production disruption in Iran itself, possibly a blockade of the Straits of Hormuz, etc...)
Say that the probability of such an attack is estimated, by markets, at 10% this year.
In that case, the price for oil will be 90%x100+10%x400 = 130$

A 10% probability of war with Iran which would tentatively quadruple oil prices increases the market price by 30%. Now you may quibble with the estimates I've provided here - but the point is, the market will sum up all the various hypotheses made by all players in the game into a single price, which will reflect the combination of war premium, and war probability that the market, as a whole, includes in the price.

So it is very much possible that 20-40$ in the current price are linked to worries about war. But speculators, here, are actually providing a valuable service: by betting on oil prices (in both direction), they allow all players to hedge that risk of war. Those that think war is more likely will be happy to buy oil futures at prices they think are very low; those that think that war is unlikely and that there is too much of a premium will be happy to sell futures into that market.

While this may create an increase in prices, it would only reflect the reality that a war with Iran would have consequences, and that it's not completely unlikely yet. However, I'd note that futures do not seem to change much in 2009 compared to 2008: so either the markets don't actually think that Obama will be elected, or thy don't seem to think that it will have a material impact on the probability for war. Or there is no war premium now, and we're back to square one.

2) Chinese growth

This one has also been widely discussed, so I presume most of you are familiar with it. Still, a few graphs are worth showing here:

As discussed on Casey Research, China is enjoying staggering growth rates for car ownership.


Assuming that the 7.3 million new car owners in 2008 each drive 5,000 miles a year, and they achieve 40 miles per gallon, the result would be an additional 45.6 million barrels of crude demand, equivalent to 125,000 bbl/day. In other words, new Chinese drivers will devour 25-30% of the recently promised Saudi production increase in a single year.

Looking at this over a few years (from the International Energy Agency (pdf):

The lighter blue bit is mostly diesel. Note that 2007 consumption was 347 million tons, ie 7mb/d.

To put this in another perspective again (from Net Oil Exports):

Chinese growth in consumption dwarfs by far the declines noted in rich world countries like Japan, Germany and, yes, the USA (note that the decline in the US is still a lot smaller in absolute terms than those in much smaller economies in Europe or Japan).

So: Chinese demand growth is very real, it's very large, it's highly likely to continue for a number of years (when people finally reach the car affordability stage, they're not going to be stopped by the cost of fuel - not for a while anyway. The difference between no car and a car is so massive that the price of gas is a minor consideration - especially when gas prices are still subsidized...). and it certainly has an impact on oil prices by its sheer size, given the current stagnation of oil production.

3) Saudi numbers

The previous two graphs, and this one above (from the IEA again (pdf), provide interesting information regarding oil producers: not only is their production stagnant, but their consumption is going up massively. And it's no wonder: they're flush with money, gas is heavily subsidized at home, so people drive more and more. Thus, the biggest increases in oil demand, beyond the "usual suspects" of China (and India, which you'll note is not even in the list above) are in oil producers: Saudi Arabia, Brazil, Russia, UAE. If you look over a slightly longer period, you'll also find Iran and Canada in there.

Which means that volumes available for export, and thus volumes available on the global oil market, are shrinking (from Net Oil Exports again):

The numbers don't lie (from westexas over at the Oil Drum)

The only major producers which have increased exports lately are Angola and Russia, and Russian production is now declining (while consumption is booming). The conclusion is simple: there is less and less oil on the market for us.

4) Production declines

Beyond Russia, it is striking to note how many regions we have been relying on are experiencing absolute production declines. All mature fields have a natural decline rate, and whole provinces are seeing absolute declines in their production.

This is nowhere as spectacular - and worrisome - as in Mexico, where the supergiant Cantarell field has lost close to half its production capacity in the very recent past, thus threatening exports to the US from a (relatively) friendly neighbor: (from here)

Just like the decline of the North Sea seems to have caught the UK government unaware, and is leading to quasi-panicky behavior by the UK government (which one day blames the Russians, one day wants to go all nuclear, one day wants to go all-wind, and generally blames "uncompetitive" continental Europe for its plight rather than its own policies, or lack thereof), the brutal decline of the Cantarell field, and of overall Mexian production is likely to have brutal consequences, as the country loses its main source of exports and the Mexican government its main source of tax income. Social unrest, and massive migration toward the North could be one outcome...

5) Lack of spare capacity

But let's come back to the oil market for a second: you have a combination of still strong demand growth (in particular in oil producing countries) and stagnant production combining into shrinking export capacity and, more importantly, into a quasi-permanent lack of spare capacity (from this comment by SamuM over at the Oil Drum):

The significance of such  tightness of supply cannot be overstated. In normal times, when demand varies, market equilibrium is reached by adjusting production to such demand, which is a relatively easy and cheap process. But when supply is constrained, as it is now, any brutal change in the market (whether on the demand side, for instance through a cold spell in winter requiring more heating, or a hot spell in summer requiring more AC, or on the supply side, for instance guerilla attacks in Nigeria, a refinery strike in Scotland, or a pipeline accident anywhere) will require market equilibrium to be reached by demand destruction, which is a lot harder and triggers much more substantial price movements: prices need to move high enough for some users of oil to renounce such use and "take their demand out of the market", whether by not doing what they wanted to, or by finding a substitute. In the US, people travelling less for vacations, or carpooling, have barely managed a couple percent demand destruction. Imagine that the Saudis and Venezualeans, with their subsidized prices, are immune fro msuch pressure, and that several percent need to be cut off demand abruptly: it will require much higher price hikes than have been experimented yet.

It's simple really: price will go high enough for the pain to translate into lower oil use in price-sensitive countries, the list of which is topped by the US, where consumption is high, oil price variations are not  dampened by massive taxes (prices going from $3.50 to $4 is more painful than prices going from $8.50 to $9).

ans the lack of spare capacity certainly explains why very small variations in output or demand can have disproortionate impacts on prices: when you are right on the edge of the knife, any movement can make you fall off.

6) Refining issues

I thought I'd add just a few words on refining capacity in the US, as it is often blamed for gas prices as well.

Energy information Agency data shows that refining capacity has gone up in recent years even though no refineries were built, with refinery capacity use very stable at high levels. This has not changed much in the past 2 years, even as Katrina took its toll for a while.

And as the tables that are provided on a monthly basis by Californian authorities show (see 2008 numbers and 2007 numbers), refining margins are actually a lot lower this year than last (roughly down from a dollar per gallon to half a dollar per gallon) and have helped lower the impact of oil price increases in the past few months. So you certainly can't blame refiners this year, even though global capacity is tightening:

Altogether, it appears that they are a number of factors explain oil price increases perfectly well, with no need to go into conspiracy theories or market manipulations.

Display:
http://www.dailykos.com/storyonly/2008/6/26/152024/105/608/542464

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 26th, 2008 at 06:01:57 PM EST
The truth is that it's not a conspiracy theory to the people pushing this.  It's not even a matter of drilling off the coasts.  What we're really seeing (at least in the states), with all of this bullshit about speculators and drilling, is a Republican Party in the states desperate to connect with the electorate on something.  Faux-populism on gas prices fits quite nicely in their minds.  But now that they've figured out it's not working, I expect it'll calm down.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 26th, 2008 at 08:40:52 PM EST
[ Parent ]
If they can look like they're doing something, while helping to further enrich their friends, why not?  
by gobacktotexas (dickcheneyfanclub@gmail.com) on Thu Jun 26th, 2008 at 09:43:35 PM EST
[ Parent ]
That's exactly it: Give the appearance of doing something while really doing nothing -- or, worse, while really doing something even more damaging.  American politicians and talking heads are the best in the world at it.  You actually kind of have to admire the cockiness it takes to pass some of this shit off.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 26th, 2008 at 10:38:25 PM EST
[ Parent ]
You actually kind of have to admire the cockiness it takes to pass some of this shit off.

Sorry, I'm too busy throwing up to admire people who constantly lie -- as well as the spineless media sellouts who support these ridiculous falsehoods.

by Ralph on Fri Jun 27th, 2008 at 01:08:31 PM EST
[ Parent ]
Nothing to admire because there's nothing original.  Using environmental scapegoats to cover a corporate kleptocracy has been SOP for decades, whether ridiculing the blocking of dam projects because of endangered fish, thus diverting attention from the fact that the projects were complete boondoggles, or blaming spotted owls for the loss of timber jobs, diverting attention from the timber industry shipping jobs to Asia.  It's just sick that people are stupid enough to keep falling for it.
by rifek on Sat Jun 28th, 2008 at 11:10:42 PM EST
[ Parent ]
the conspiracy theories are very much coming from the left.  You see diaries all over the left blogospere blaming big oil and speculators.  Chris Cook here is adamant that BP and Goldman are the key players in the game.
by HiD on Thu Jun 26th, 2008 at 10:46:03 PM EST
[ Parent ]
Quite the contrary, the conspiracy theories come from an obvious top-down round of propaganda by the right-wing nuts.  The left jumped on it after a report by Keith Olbermann.

The criticism of the speculator-driven bubble theory is coming overwhelmingly from the left and the more moderate parts of the libertarian right.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 26th, 2008 at 10:49:50 PM EST
[ Parent ]
I spend a lot of time debunking left wing BS on this issue.  Got anything to back your contention up?

I'll offer this.  If you go to DailyKos and input "oil speculation" in the search function, you get 317 returns in diaries over the last quarter.

Many if not most have titles like:

http://www.dailykos.com/storyonly/2008/6/1/113658/9735

Yes, the high oil prices are due to SPECULATION

blaming the faceless business world for all woes is pretty classic behavior of the angry left.

by HiD on Thu Jun 26th, 2008 at 11:10:54 PM EST
[ Parent ]
I had a look at the first 150 or so.

I have to say I do not share your definition of the word "Many"; at least not as regards titles. I also note that, with the exception of mainly Jerome's diaries, "many" (my definition) of those diaries are not exactly attracting a torrent of comments.

by det on Fri Jun 27th, 2008 at 02:26:46 PM EST
[ Parent ]
. . . of leftist discourse, "angry" or otherwise.  I'd guess a quarter of the people on that site are former Republicans (like the owner), fed up with G.W. Bush, but not necessarily fed up with Republican memes.  Probably another quarter are people who have only just entered into political consciousness to support Obama.

I'm just saying I'd be loath to point to DKos as un undistorted or undistorting window into leftist thought.

by keikekaze on Fri Jun 27th, 2008 at 08:45:26 PM EST
[ Parent ]
but the RW blather on this subject is "we need to drill ANWR, the US conti shelf etc etc, and them tree huggers won't let us".
by HiD on Sat Jun 28th, 2008 at 05:31:09 AM EST
[ Parent ]
The opacity of markets, or at least data inaccessibility and barriers to understanding their operation, has always been a wellspring for neurosis of all kinds.

you are the media you consume.

by MillMan (millguy at gmail) on Thu Jun 26th, 2008 at 11:09:19 PM EST
[ Parent ]
and general stupidity.  It's just a hell of a lot easier to blame "the man" than to accept a share of the blame and have to modify your behavior.
by HiD on Thu Jun 26th, 2008 at 11:12:07 PM EST
[ Parent ]
It's a lot cheaper too.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jun 27th, 2008 at 04:08:09 AM EST
[ Parent ]
I'm saying that in all likelihood BP and Goldman have been "partnering" for the last 10 years or so to maximise their take from oil etc.

Would that be a "Conspiracy"?

Of course not: these are fine firms with the best lawyers money can buy.

Certainly I believe that markets have been much more volatile in the past - until hedge funds moved in with massive market power - than they needed to be, and that much of the huge profits made by BP and Goldman in this period were made from this.

Such trading conduct is not "speculation" - it is "acceptable" market manipulation.

I suspect - and I may well be wrong and paranoid and all of that - that a deeply opaque combination of forward sales by BP on the one hand, and speculative fund positions on the other through Goldman - may be holding the Brent/BFO complex artificially high.

As we recently discussed, it really does not take that much money to underpin prices of BFO production of 70 cargoes a month, and to hype as necessary in the Press.

Not a million miles away from the way the International Tin Council held up the tin price for years.

And if demand DOES continue to rise and/or production flatline (which is where the ITC went wrong, as high prices brought in new production) then they would be OK, and BP would be able to continue to run an interest-free overdraft against the market (if that's what they are doing, of course)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jun 27th, 2008 at 06:02:54 AM EST
[ Parent ]
whatsoever.  Therefore a conspiracy theory from where I sit.  It's not like you don't have a lot of bad feeling from your personal experience with failure of regulation.

oil is screaming because there is no way to bring it down anymore other than demand destruction.  Since people take a while to take real steps (move out of drafty old buildings with no insulation or buy a hybrid), it will take a while.  

by HiD on Sat Jun 28th, 2008 at 05:36:12 AM EST
[ Parent ]
Of course I have no proof: do you think they'd publish it?

HiD:

It's not like you don't have a lot of bad feeling from your personal experience with failure of regulation.

That's a presumption on your part. In the immediate aftermath - yes, I did feel as you probably would have if you'd been shafted the way I was.

That was seven years ago and a lot of water under the bridge since then.

I stopped being judgmental about them years ago. They do what they do because that's what "Profit Maximisation" and the Corporation as a legal form mandate.

I don't condemn sharks because they kill, or scorpions because they sting. It's what they do.

BP and Goldman have long had the same Chairman - Peter Sutherland - and other common directorships of long standing eg Lord Browne - Fact.

Both make very large - but opaque - amounts of money from energy trading, and have been doing so for long enough for those responsible to rise to the top at Goldman - Fact

Goldman co-created and co-funded the dominant ICE platform, and BP made the earliest and biggest liquidity commitment - Fact.

BP have a long history of dodgy trading - Fact.

Goldman - like most of the rest - were involved in the systemic manipulation of settlement prices at IPE - Fact.

Does that make the BP and Goldman relationship a "Conspiracy" ?

Well, that's what you appear to think I'm alleging.

The answer is, I'm damned if I know, but it wouldn't take much to find out.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jun 28th, 2008 at 07:19:01 AM EST
[ Parent ]
very weak backup to say the least.

GS is not run by Peter Sutherland.  It's run by the same group of partners that have been in charge of the energy trading area since about 1993.  He doesn't even appear to sit as an outside director on the  main Board.

http://www2.goldmansachs.com/our-firm/about-us/leadership/board-of-directors.html

He's the titular head of the London office (Goldman Sachs International).  That's nothing like the seat of power in New York.  I doubt the energy desk ever sees the old boy.

Does that make the BP and Goldman relationship a "Conspiracy" ?

Well, that's what you appear to think I'm alleging.

Not exactly.  I find your writing on this subject to be a classic "conspiracy theorist" screed.  You can point to many links between the two, but no hard evidence of coordinated action.  When you constantly link two company names in works with titles such as "Oil Market manipulation", it's hard to believe you are not implying both illegal behavior and coordinated action.  I'll not put words in your mouth, but there's hardly any need.  You make it very clear you think they are working together.  

You also ignore the large number of other players in the game.  Do they dance  while your master manipulators call the tune?  Hardly.  The fact that both make money in the same market proves nothing.  All the long term players make money or they'd be gone.

I'll ask again.  If the BFO market is being rigged to high price levels, where is the oil going?  Why is no surplus being built up?  Is there no "peak oil" effect in play as this diary suggests?  What do you think the "real" or "fair" price of oil is?  Why are there no large differentials to the cash markets other than for super heavy sours?  Exactly how are the manipulators doing what they're doing?

As for your pointing to fiddling the settles on the screen markets.  Those work both to move the settles up and down around what the market might have been otherwise.  Players pricing in bbls try to move the market down.  Those selling, up.  There's no reason to jam prices high and keep them there.

For wet oil producers, sure they love high prices.  But even here you point out BP is structurally short.  Why would they wish flat prices to be high and stable?  They're killing their refining side for what reason?

We're at these levels because of:

  1. political tension in a number of large producers - Nigeria, Iraq, Iran, Venz.  One real blow up and the world is actually short oil.

  2. all slack in the production system is used up except perhaps some heavy sour Saudi

  3. Demand growth in India/China/other Asia is relentless.  And will stay that way unless full price rises feed through rapidly.  Even then we'll just have hiccup for a while.  5% of the world's population (USA) uses 2-25% of the world's oil.  The rest want to move up from donkey carts.

  4. Supply growth is screwed.  There are no more Saudi Arabia sized areas out there.  The Brazilian finds are large as was Sakhalin, but they're not changing the equation much.  Most large producers are in decline.

  5.  End users refuse to cut back until there is so much pain they have to.  It's not easy or cheap to walk away from a gas guzzler or a building designed when energy was free (or when people just put up with being cold).
The airline business is in deep deep trouble.
by HiD on Sat Jun 28th, 2008 at 06:18:37 PM EST
[ Parent ]
HiD:
You make it very clear you think they are working together.  

I do, and I think that their relationship has underpinned their mutual profitability these last 10 to 12 years.

You clearly don't.

HiD:

What do you think the "real" or "fair" price of oil is?  

The market price is the market price. Nothing "fair" about it.

You give lots of cogent reasons why you think the high price is justified. I've said often enough I think Peak Oil is here and now.

How that translates to price, I have no idea. If the market price is being held artificially high then it will collapse - if it isn't, it won't. I guess time - and the results of the companies - will tell.

HiD:

As for your pointing to fiddling the settles on the screen markets.

The scam I blew the whistle on was seven to ten years ago: I've no idea what the games are these days.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jun 28th, 2008 at 09:15:58 PM EST
[ Parent ]
If the market price is being held artificially high then it will collapse

Agree

if it isn't, it won't.

Disagree - there are other possible reasons for a boom-bust cycle than market manipulation, or speculation. They all boil down to delayed feedback.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sun Jun 29th, 2008 at 01:42:28 AM EST
[ Parent ]
offer evidence for your charges then.  I see nothing that rises above wishful thinking.

The oil price could collapse if demand suddenly wanes and there's a fear it won't rebound soon.  Spec length flees.  Hedgers rush to lock in down the curve and no one buys.  We could end up in a heavily backward market as the prompt remains tight.  We'll see.  But in this scenario, a price drop does not make your case for you.

by HiD on Mon Jun 30th, 2008 at 01:24:41 AM EST
[ Parent ]
is a straw man.

As you well know, I am in no position to provide any.

Sure, BP and Goldman may be just good friends.

....and I've got a bridge to sell you...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Jun 30th, 2008 at 08:55:37 PM EST
[ Parent ]
what is made of straw is your argument.  You could pretty much pick any major player in the game and find similar links.
by HiD on Tue Jul 1st, 2008 at 02:31:53 AM EST
[ Parent ]
See http://www.youtube.com/americansolutions

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 02:42:49 AM EST
[ Parent ]
Newt Gingrich think tank... oxymoron.

Karen in Austin

'tis strange I should be old and neither wise nor valiant. From "The Maid's Tragedy" by Beaumont & Fletcher

by Wife of Bath (kareninaustin at g mail dot com) on Fri Jun 27th, 2008 at 06:36:50 AM EST
[ Parent ]
He thinks with his fuel tank...

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 06:38:55 AM EST
[ Parent ]
Newt Gingrich think tank... oxymoron.

Nah, just plain moron.

by Ralph on Fri Jun 27th, 2008 at 01:14:56 PM EST
[ Parent ]
I've still not seen you address the fact that barrels of oil do not translate directly into gallons of fuel. A lot of other things, such as plastics, come from oil. How does that factor into the argument?


You can't be me, I'm taken
by Sven Triloqvist on Thu Jun 26th, 2008 at 06:16:44 PM EST
One point on this is that fuel is the finished product of crude oil with the lowest value added over the cost of the crude oil ... the cost of oil going into plastics will generally represent a much smaller percentage of the price of the finished good.

So the demand destruction is going to be focused very strongly on fuels made with crude oil.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Jun 26th, 2008 at 10:06:11 PM EST
[ Parent ]
Your fingers broke?

Very little actually.  US plastics production mostly comes from nat gas (cheaper).  In China/Japan/Europe you get it more from cracking naphtha.

Just add up the pieces in the US's 20 MMBD.  The data is all in the EIA website tables.

by HiD on Thu Jun 26th, 2008 at 10:47:52 PM EST
[ Parent ]
just to add to speculation thing, trades quantity on crude oil futures and option is flat or declining since few months. no much activity there.
by fredouil (fredouil@gmailgmailgmail.com) on Thu Jun 26th, 2008 at 06:28:12 PM EST
Aggressive specs can make the market move faster in the direction it wants to go, can make it overshoot some, can increase volatility around the "real" price.  But you can't hold up a market on air forever.  If you believe that, I'm sure I can broker some Beanie Babies at $2000 a piece to you....or perhaps some tulip bulbs at $50K/each?
by HiD on Thu Jun 26th, 2008 at 10:50:32 PM EST
[ Parent ]

Gazprom chief sets out world vision

Gazprom set out a vaulting vision of its future status as the world's most powerful energy company on Thursday as it belittled Opec, saying the oil producers' cartel had in effect lost control of the market.

Alexey Miller told the Financial Times that the world was undergoing "a great surge in oil and gas prices . . . which will end with prices at a radically new level".

He added that even Opec had no real influence on prices. "Not a single decision has been passed of late that would really influence the global oil market."

Mr Miller continued: "In the coming years Gazprom will be not just a major company in the world, but the most influential in the energy business," adding that its target was to reach a market capitalisation of $1,000bn.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Thu Jun 26th, 2008 at 06:57:19 PM EST
Am I the only one who imagines Gazprom board meetings look like episodes of Pinky and the Brain?

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Jun 27th, 2008 at 11:44:19 AM EST
[ Parent ]
it cant be, they're in the White house.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri Jun 27th, 2008 at 11:53:11 AM EST
[ Parent ]
I'll add a few things to this from the anti-scapegoat perspective:

As Krugman has pointed out, it makes no sense to suggest that futures are pulling up spot prices, because spot prices have actually been higher:

This complicates the scapegoat argument, because the argument only works if oil is being physically held from the market in order to take higher prices in the future.  As Krugman and others have noted, there simply isn't evidence that a big chunk of oil is being withheld.  If you're shuffling paper around the markets -- well, that's cute, but the gas is still coming to market, and the market still clears unless you're hoarding it.

And the incentive, with higher spot prices relative to futures, is obviously to bring the oil to market, not to hoard it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jun 26th, 2008 at 08:35:26 PM EST
and there really aren't places to hide all that much oil when you get right down to it.  Supposedly the Iranians have 20 MM bbls in VLCCs parked near Kharg.  Even if they do, that's 6 hrs of the world's demand for crude.

Speculators aren't crazy either.  At $130/bbl for crude and 6% interest you're paying $8/year or 65cts/month in time value.  Add on double handling expenses, losses due evaporation, quality degradation issues on finished fuels (minor concern usually except maybe for jet fuel) and it's no free lunch to just tank oil hoping for a pop.  The only time you'd do that if you have a heavy contango (prompt physical much cheaper than futures a few months out) to pay for some of the costs.  With a dead flat futures curve, it makes no sense.  Just buy a future instead.

by HiD on Thu Jun 26th, 2008 at 11:00:29 PM EST
[ Parent ]
Is it pushing prices down? Having no effect at all? Adding 5%, 10% 20%? Are the financial wizkids just not involved in the market for some reason?

Or is just asking the question evidence that I've become a conspiracy minded maniac searching for scapegoats?

by Colman (colman at eurotrib.com) on Fri Jun 27th, 2008 at 03:25:03 AM EST
See the top-level comment by fredouil re:volume traded in oil futures.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 03:39:17 AM EST
[ Parent ]
Well, beyond pricing geoplitical risk on a probabilistic basis, it's not obvious it is having any effect on prices.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 04:29:25 AM EST
[ Parent ]
Is it obvious that it's not having an effect on prices? I'm extremely concerned that you have precisely the opposite confirmation bias to politicians, in that you want there to be no contribution from speculation while they'd love speculation to be responsible for U$120 of the US$140.
by Colman (colman at eurotrib.com) on Fri Jun 27th, 2008 at 04:41:10 AM EST
[ Parent ]

it is obvious that it's not having an effect on prices

and


it is not obvious that it's having an effect on prices

are not the same. I wrote the second, you claim I wrote the first. Nice attempt at putting the burden of proof on me.


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 06:02:35 AM EST
[ Parent ]
No, I'm raising the first as a question. I'm trying to establish if you believe the it to be true, and if so, why. If not, I'm trying to work out where the uncertainty is.
by Colman (colman at eurotrib.com) on Fri Jun 27th, 2008 at 07:56:21 AM EST
[ Parent ]
I don't know, but stand by my 'it's not obvious that speculation plays a role' line.

Here's another interesting graph showing the lack of elasticity of oil demand (not sure what the 3 lines goign through it are, though):



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 09:18:14 AM EST
[ Parent ]
That looks more like the supply curve than the demand curve.  Sure you've got that right?

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 09:26:01 AM EST
[ Parent ]
That is production, you are right.

But production = consumption.

While we have data on "production capacity" and so can look at the supply "slack" (or lack thereof, at present) there's no equivalent data for "demand".

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 09:32:27 AM EST
[ Parent ]
pretty much:



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 09:46:02 AM EST
[ Parent ]
Pretty much, too...



When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 09:48:55 AM EST
[ Parent ]
I completely disagree with the theory that energy demand is inflexible. It is entirely a function of how you choose the scale of your graph.

So far the practical price of energy has hardly changed at all. When gasoline costs $25 a gallon there will obviously be a reduction in demand.

For example, suppose I own a gigantic SUV. If I sell it I'll get enough money to cover about 1/3 the price of a new hybrid (or 1/2 the price of a new conventional compact car), but with a new car I will have to pay a big registration tax and will have to have collision insurance coverage. The savings in fuel cost simply don't cover the extra cost of having a new car.

Plus, my SUV can carry more stuff and go off the road and is more intimidating on the highway and is preceived as being safer. The argument simply doesn't work out when the cost of fuel only doubles.

by asdf on Sat Jun 28th, 2008 at 12:01:19 PM EST
[ Parent ]
I think that confirmation bias does exist among some, but getting down to the cold, hard data suggests that speculators aren't really playing a role here.  The signs one would typically look for, if speculators were to blame, simple aren't there.  It points pretty clearly to the price reflecting fundamentals.

The chart on Chinese car ownership is an important.  Eyeballing it, the number of cars seems to have risen about sixfold over the period in which prices began to skyrocket.  And that's just China, and only looking at cars.

Some of the conspiracy theorists are simply people with bubbles on the brain, too, I suspect -- having now seen the housing bubble pop, they're looking at this in the same way, thinking "There's no way prices could rise so quickly due to fundamentals."  But, as you know, it's quite possible.  And the US energy secretary told us as much when he said they were projecting rises of almost 20% in price for every 1% increase in demand.

You've got a fixed supply and a very inelastic demand curve, so as demand shifts outwards with the emerging markets needing more and more oil, price rises should be quite steep.  That's at least what I think is going on.  It reads more like a textbook S-D situation than an Enron-style process of manipulation.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 09:08:10 AM EST
[ Parent ]
Is there any evidence that intermediaries are making extraordinary profits? Independent refiners are getting hammered, and HiD and others see no evidence that traders are cornering the market. Jerome recalls that if speculators have caused price spikes it has been because some traders have had to close out short positions betting on lower prices.

So, it would seem "extraordinary profits" are accruing to producers, be it the oil majors or OPEC. Given that there if no slack of production capacity over actual production (unlike in the 80's), the problem seems to be lack of production capacity. Refining capacity is also a bottleneck.

What speculation does is reduce price friction so that prices can more easily respond to (upward) pressures. Given that industrial developments to increase production capacity take years, and claims (in particular by Francois) that as a price for energy $150/bbl is already too high, it would seem that what speculation has done is create a price overshoot by decoupling the time scale of oil price movements from the time scale of energy infrastructure development.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 09:40:19 AM EST
[ Parent ]
Well if the risk of Iranian invasion is adding say, $30 to current prices - which should suppress long term demand somewhat - what is the effect of the Iranian invasion NOT happening - or being perceived to become v. low risk - e.g. with election of Obama? Would that mean that the unwinding of this risk should reduce prices by $60 - to get back to no risk premium, and to compensate for previous over-pricing (risk turned out to be 0) when invasion didn't happen)?

Seems to me risk premiums always seem to work one way, and never compensate when risks are not realised and much more benign scenarios unfold.

"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jun 27th, 2008 at 01:41:09 PM EST
[ Parent ]
That might be because the risk premiums are generally overestimated as a source of price increases. Or it might be because we only talk about the risk premiums when prices are already going up fast and for a multitude of reasons, and then the removal of the risk premium could easily be eaten up by the general upwards movement (assuming that the risk drops in a continuous fashion). Or it might be that prices are not path-independent, so you don't recoup all the premium in any case. Or any combination.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 28th, 2008 at 04:02:37 PM EST
[ Parent ]
With over 300 comments on dkos it's possible that every thought has already been expressed, however...

One axiom that is frequently used is that high prices will lead to an economic slowdown which will then lead to lower demand and then lower prices - economics 101.

I'm just wondering if the oil producers are willing to allow this game to be played. Since it is to their long-term benefit to keep oil in the ground for future sale (at ever higher prices) when demand drops they can just cut production to an extent that there is still a slight shortage. The result will be that demand will fall, but prices will remain high.

This failed in the past because OPEC was in disarray and because it didn't control enough of the supply. Now OPEC may be in less disarray, non-OPEC states have lower ability to make up for their cutbacks and the non-OPEC states may also decide that hoarding for the future is to their benefit as well.

It's like when the waters rise on the Mississippi, sometimes all you can do is standby and watch; poor planning in the past brings disaster in the present and there is nothing to be done but suffer.

The question is what will the industrialized nations do in response to oil prices which cripple their economies? Obviously restraining speculators and issuing new exploration permits are not going to do anything. So what real steps can be taken?

The US has only developed one tool to control its access to worldwide resources - the military. Just because this approach didn't work in Iraq doesn't mean it won't be tried again elsewhere. Causing a change in government in several Latin American countries is relatively easy, no bombing or invading needed. New client governments in Venezuela or even Mexico might do wonders for short term supplies to the US.

If anyone sees realistic steps than can be undertaken in either the US or EU to affect demand over the short (1-5 years) term I'd like to hear them.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Jun 27th, 2008 at 10:29:59 AM EST
I'm just wondering if the oil producers are willing to allow this game to be played. Since it is to their long-term benefit to keep oil in the ground for future sale (at ever higher prices) when demand drops they can just cut production to an extent that there is still a slight shortage. The result will be that demand will fall, but prices will remain high.

How do we know that Chinese (say) demand won't make up for "demand destruction" in The West™? That would prevent a gap between production capacity and actual production from developing, which would provide OPEC (say) with plausible deniability ("we're producing all-out!"). They don't have to develop new fields.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 10:55:48 AM EST
[ Parent ]

If anyone sees realistic steps than can be undertaken in either the US or EU to affect demand over the short (1-5 years) term I'd like to hear them.

If supply is constrained, price will go high enough to cause demand to be affected. We're in that process now.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 11:35:31 AM EST
[ Parent ]
I guess I should have said "to effect demand without causing a major depression".

We can also cut demand for food stuffs by allowing millions to starve to death, but I don't think that is the preferred solution to rising prices.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Jun 27th, 2008 at 12:13:00 PM EST
[ Parent ]
I think that it's possible that OPEC may have decided that a transition from oil is now unstoppable, so that there's no point keeping prices low (even if they could) in the hope of keeping us addicted. May as well screw us for everything we have now.
by Colman (colman at eurotrib.com) on Fri Jun 27th, 2008 at 11:37:06 AM EST
[ Parent ]
In order to keep prices low, you'd have to increase production (maybe not by much initially, since it's all so inelastic, but by over 1 million barrels a day every year after that, and probably more).

In other words, you'd ensure that within a couple of decades, there wouldn't be ANYTHING left to sell. And everything would have been sold at a low price in the meantime.

So, even if there was no unstoppable transition because of global warming, we couldn't do anything about the fact that we have used up over half of the total supply, even though many countries, now using a lot of oil, almost didn't use any of that half.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Jun 27th, 2008 at 11:56:30 AM EST
[ Parent ]
Cyrille:
In other words, you'd ensure that within a couple of decades, there wouldn't be ANYTHING left to sell. And everything would have been sold at a low price in the meantime.

Pretty much describes UK energy policy....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jun 27th, 2008 at 05:31:47 PM EST
[ Parent ]
I don't honestly understand most of this (due to lack of effort), but I am convinced that obscenely high gas prices has been the best thing to happen to American culture in ... maybe ever!  You can spend decades lecturing people about the benefits of caring for the environment or consuming less of everything.  Nada.  Throw a "$4.95" up on a gas station sign and suddenly everyone one and their mother is taking public transportation, biking, buying less crap, going to farmers markets, finding creative non-expensive ways to spend their free time...  Frankly, I'm looking forward to $300/barrel!  Bring it on!  I want to go Darwin on the SUV crowd.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Jun 27th, 2008 at 11:54:57 AM EST

I want to go Darwin on the SUV crowd.

Nature will do it first. You can only watch, not participate.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 12:01:35 PM EST
[ Parent ]
Because this comment creeps me out, I want to clarify that I'm not advocating for the extinction of people but of an irresponsible lifestyle.  Must make that VERY clear!!!  I wish no one actual harm.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Jun 27th, 2008 at 12:18:46 PM EST
[ Parent ]
$300 a barrel will very likely kill people if it happens suddenly.
by Colman (colman at eurotrib.com) on Fri Jun 27th, 2008 at 12:19:54 PM EST
[ Parent ]
Yes, that's the problem.  As much as I enjoy watching the SUV crowd get financially slaughtered by gas prices, it's important to keep in mind that this can be life and death stuff for many people across the globe.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 12:26:44 PM EST
[ Parent ]
I'm actually trying to be serious.  High gas prices have sent this country into a "going green" frenzy.  I'm not delighting in people being financially slaughtered.  I'm delighting in people who are forced to find alternative ways, more responsible ways to live.  

What about green jobs?  Will scary high energy prices not stimulate this sector?  We live in a country where there is so much waste.  Which means there is a lot we can afford to throw away.  Isn't it a good thing if we are forced to be more conservative and resourceful?  Can a crisis not present an opportunity to radically restructure our priorities.  

I'm not advocating for Shock Doctrine.  The shock is already here.  Do we try to undo it and return to the status quo, which is frankly going to lead to more shock?

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Fri Jun 27th, 2008 at 12:38:44 PM EST
[ Parent ]
There is an opportunity to invest in green jobs, but who's going to do the investment? Who has the capital? Does the US have the stomach for <shudder> public investment if the private sector doesn't step up to the plate because they don't see the opportunity to make a quick buck?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 12:44:36 PM EST
[ Parent ]
But if the demand is there, or if people see an industry headed in a certain direction, there is the opportunity to make money.  Building codes are changing and people are desiring more energy efficient homes, so they need people trained in this field.

I've even heard someone talking about starting a turbine industry in Detroit to replace jobs lost from the auto industry.  

There has to still be a handful of visionaries who are looking for long-term investments.  The 20th Century had its Fords.  The 21st has its Guillets.  Right?


"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Fri Jun 27th, 2008 at 01:04:43 PM EST
[ Parent ]
I saw a fellow from this organization speaking last night and was pretty impressed:

Green for All

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Fri Jun 27th, 2008 at 01:57:21 PM EST
[ Parent ]
I'm not delighting in people being financially slaughtered.

Sorry, should've been more clear: I wasn't suggesting you were delighting in it.  Rest assured that there was a lot of self-criticism in my comment, because I'm probably more guilty than most when it comes to not considering how other parts of the world are not able to cope with it while enjoying listening to energy slobs here squeal about gas prices.

I'm not sure I agree that high gas prices have sent the country into a "going green" frenzy.  We've spent a week talking about drilling off the coast of Florida.  I think they'll push green energy eventually, but the country has a way to go before it gets religion on this.  I'm sure there's a disconnect, as seems to be a constant this year, between discussion at the national level in the press and what's going on at the local level.

And things are probably different in Chicago from DC.  Here people are still in the Bitch & Moan stage of energy consciousness.  More people are taking public transit, but many are not, and many still believe cheap energy will return.

I'm glad to see higher energy.  That's the only way we're going to get green energy to market.  The dirty shit has to be made too expensive.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 12:50:52 PM EST
[ Parent ]
poemless:
The shock is already here.

You know, I've the creeping suspicion it's not. It's still coming. What the world is currently seeing could be the proverbial iceberg tip.

Not that I'm pessimist - yet. I think an energy crisis does have the potential to reshape western consumerism dramatically. For better, or worse.

(Like the sig!)

by Nomad on Fri Jun 27th, 2008 at 12:54:39 PM EST
[ Parent ]
As will global warming.  

What's the scenario where we stop using obscene amounts of pollution-producing energy and we all live?  Appealing to the goodness of people's hearts seems to have a lower success rate than appealing to their pocket books.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Fri Jun 27th, 2008 at 12:28:23 PM EST
[ Parent ]
The scenario where the "serious" people listen to these guys instead of laughing them out of town?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 12:31:02 PM EST
[ Parent ]
As will global warming.
We'll see about that...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 27th, 2008 at 03:18:25 PM EST
[ Parent ]
But people still aren't making the connection between the fact that the weather's gone absolutely insane and climate change.

What's it going to take?  Losing New Orleans didn't do anything to spark a conversation, let alone spur action.  Atlanta and Charlotte coming pretty damned close to running out of drinking water didn't do anything but lead the wingers to stand in front of the Georgia State House to pray.  Australia is now in what seems to be a permanent state of drought.

People aren't going to get climate change until West Antarctica or Greenland go, and have Wolf Blitzer leading us with video of the Potomac reaching the White House steps.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 05:56:04 PM EST
[ Parent ]
According to Flood Maps you need a sea level rise of at least 6m for water to reach the White House's lawn.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Fri Jun 27th, 2008 at 06:04:50 PM EST
[ Parent ]
nifty site. NYC does surprisingly well. 1m has zero effect, 2m minor ones in southern Queens and southeast Brooklyn, 3m starts really hurting in south Queens. The most vulnerable area in the region is on the western shore of the inlet that runs roughly parallel west of the Hudson in Jersey - i.e. places like Elizabeth and Newark, and the Atlantic shoreline along southern Queens and Nassau county on Long Island.
by MarekNYC on Fri Jun 27th, 2008 at 06:21:43 PM EST
[ Parent ]
It also shows the Dead Sea flooding, well before sea levels rise enough for it to be connected to the Mediterranean.
by gk (g k quattro due due sette "at" gmail.com) on Fri Jun 27th, 2008 at 11:51:29 PM EST
[ Parent ]
Huh, at +7m, my apartment building becomes an island.  The other two get flooded.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 06:55:28 PM EST
[ Parent ]
Not to mention that much of eastern Jersey becomes a salt marsh, along with southern Queens. It really gets interesting at 14 meters.  In London one certainly wants to be on the north side of the Thames. New Orleans becomes an aquatic park.  Houston has a beach. It used to be called Pasadena.  Texas City, along with its refineries is under at least 25 feet of water.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 27th, 2008 at 10:45:42 PM EST
[ Parent ]
Doesn't matter which side of the Thames you are, London becomes a toxic swamp with a few meters rise, and the foundations of any tall building get way too suspect for continued use.
Same goes for NY: it fares a lot better than I would have thought (by the way it's only a website and may be wrong: there are areas where I know they'd be flooded earlier than reported), but I certainly wouldn't set foot in a Manhattan skyscraper that was not built for amphibian use.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sat Jun 28th, 2008 at 02:47:56 AM EST
[ Parent ]


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Sat Jun 28th, 2008 at 06:37:52 AM EST
[ Parent ]
This comic book was actually published in 1968. At the time, the climate change and subsequent flooding of NYC was triggered by a nuclear war in 1980.
by Bernard on Sun Jun 29th, 2008 at 12:28:05 PM EST
[ Parent ]
My understanding of the landscape of Manhattan is that the tall buildings are built on bedrock.  This includes the tip, from the Battery up through the Wall Street area.  Then there is  a drop off until you get to mid-town.  I am certainly not an expert on the subject, but have picked up those tidbits over the years.

One shudders to think of the consequences of submerging much of the Jersey shore, home as it is to refineries, chemical plants and old manufactures. Same for Texas City and the Houston Ship Channel.  Somehow I doubt that a bath is what the environmental doctor ordered here.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 28th, 2008 at 01:44:46 PM EST
[ Parent ]
High tide will get you a meter.
by det on Sun Jun 29th, 2008 at 10:01:42 AM EST
[ Parent ]
$300 a barrel will very likely kill people if it happens suddenly.
Especially people in exporting countries on the recieving end of the MEF's...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jun 27th, 2008 at 03:17:04 PM EST
[ Parent ]
I was actually supportive of your point, and was pointing optimistically that nature was pushing us - hard - in the right direction, because theyre is no other choice.

It is precisely if we go green that we'll avoid the worse fates you mention.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 27th, 2008 at 01:14:12 PM EST
[ Parent ]
There isn't enough mass trans capacity in America to handle all those additional riders.  Worse, there's not time enough to build out that sort of expensive infrastructure.
by snowmizuh on Sat Jun 28th, 2008 at 11:10:04 AM EST
[ Parent ]
How about replacing cars with buses?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 11:12:19 AM EST
[ Parent ]
To me, the scariest realization is that human civilization is alomst entirely Petroleum-based.  With oil spiking this high everything will be affected: financial systems, food distribution, transportation, law enforcement, etc.

How are local governments going to buy new buses as tax revenues plummet from collapsing real estate market and no one working and buying?  Whose going to ride buses when law and order breaks down New-Orleans style when shelfs go empty in the local Walmarts?

All you Prius drivers are going to have fun getting those little golf cart wheels massive potholes and failed bridges after there's no more money to maintain the nation's roads and bridges.

Is there an off-road, 4WD Pruis yet? :)

by snowmizuh on Sat Jun 28th, 2008 at 11:21:44 AM EST
[ Parent ]
There is plenty of capital in the US. It wouldn't surprise if the richest ten people control half a trillion dollars. That alone would more than double US nuclear generating capacity, for example.

The money is there. You just have to tap into it.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jun 28th, 2008 at 11:31:40 AM EST
[ Parent ]
Yes, but how long does it take to bring a nuclear power plant online?  5 yrs minimum I would expect, and 10-20 yrs is more reasonable.

There's only so much fissile material as well.  What we are seeing with Petroleum we will also see with Uranium and Plutonion.

Furthermore, we have to retrofit the entire transportation system from a liquid-fuel-based vehicles to electric vehicles.  This too will take years.

I don't see how there's enough time to deal with this sort of price spike.

by snowmizuh on Sat Jun 28th, 2008 at 11:43:36 AM EST
[ Parent ]
On that you have a point: the next 5 years are going to be a pain.

Wind turbines, however, don't need 5 to 10 years to bring online - just 1-2 years.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 11:45:07 AM EST
[ Parent ]
Even if there's a sudden jump in demand? Can the turbine manufacturers scale up that fast?
by gk (g k quattro due due sette "at" gmail.com) on Sat Jun 28th, 2008 at 11:49:24 AM EST
[ Parent ]
Airplane engine manufacturers can convert...

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 11:52:44 AM EST
[ Parent ]
There's plenty of time if you take into account the recession that goes along with it. We already did this once before, remember? In the 1970s...

All you have to do is raise the price of energy, or reduce availability by rationing of some sort, and people start to ride the bus, carpool, reduce flying, turn down thermostats, take shorter showers, insulate their windows, stay near home for vacations, etc. It is not that hard to make busses if your pickup truck factory is idle. It's not that hard to insulate your house.

Particularly in America, where we still have quite a lot of available energy resources and where we are so wasteful (and can therefor easily reduce demand), there is a pretty good cushion against abrupt changes in the energy price & availability situation...

by asdf on Sat Jun 28th, 2008 at 11:49:26 AM EST
[ Parent ]
I hope you're right.

For a more pessimistic (realistic?) position, I recommend this:

http://www.lifeaftertheoilcrash.net/

by snowmizuh on Sat Jun 28th, 2008 at 11:52:52 AM EST
[ Parent ]
Sure, but that article is based on a backwards-looking viewpoint.

"Farm implements are powered by oil." Sure they are, because oil is cheap. If it's not cheap, then the irrigating pumps and tractors and combines and trucks can be replaced with other technologies. It's not rocket science to build an electric tractor, for example, and my uncle has a farm where they recently changed their pumps from electricity to oil (i.e., in the opposite direction from what you would expect) because of the relative costs. They can be changed back again pretty easily...

Electric busses can move people around and are easy to make and install. Many more people could telecommute than actually do--because companies don't currently have a problem getting people to commute. You don't NEED petroleum based fertilizer to grow crops. You don't NEED a new computer made from energy-intensive silicon chips and plastic cases. You don't NEED all that other plastic crap that's filling up your basement...

by asdf on Sat Jun 28th, 2008 at 12:11:59 PM EST
[ Parent ]
No, of course we don't need it.

There question is logistic, not strategic: how long will it take to retrofit the entire's world food production system to feed 8+ bil people?  Can it be done quickly enough if oil continues on a hyperbolic tragectory?

by snowmizuh on Sat Jun 28th, 2008 at 12:19:29 PM EST
[ Parent ]
No, we will continue to have a big chunk of the global population that starves. What else is new?

Perhaps to answer this question we would need to know the energy intensivity of food production for various locations around the globe. Obviously western food is produced with huge oil-supported infrastructure. I'm not so sure about Africa and the Far East, though...

by asdf on Sat Jun 28th, 2008 at 12:26:35 PM EST
[ Parent ]
I doubt much has changed in the past four or five years in African farming, and four to five years ago I looked at data (that might have been a year or two out of date, of course) about what different farming styles are optimised for.

European and American farming is optimised for greatest output per man-hour. Japanese farming is optimised for greatest output pr. area. African farming is optimised for greatest output pr. calorie of input.

I.o.w. after the oil crash, Africa will not be any more screwed than usually on the food front (or at least not due to a sudden need to scale back oil use in agriculture). Japan (and presumably much of China, which I expect to be a cross between African-style and Japanese-style farming) will be able to convert, but it may hurt. Europe and the US needs to start last decade. Fortunately, we still have superior infrastructure to pretty much anywhere else in the world, and a substantial industrial base to start from (Europe more so than the US, of course, but compared to rural China it's still pretty good).

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 28th, 2008 at 03:03:58 PM EST
[ Parent ]
The hyperbolic trajectory is a price trajectory - production has been flat for about 4 years and could well stay essentially flat for a number of years.

The hyperbolic price trajectory may ensure that we get to work on the logistics while we can still produce 90 million barrels a day.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 12:26:51 PM EST
[ Parent ]
asdf:
It's not rocket science to build an electric tractor,

Actually it is. 50-100HP at high torque, with enough charge to run for a day or so, on a unit which weighs as much as a small truck? There have been sporadically successful attempts to retrofit tractors, but you always run into two problems - charging time and current, and cold weather performance.

asdf:

Electric busses can move people around and are easy to make and install.

Also, not without some major reorganisation. Take a typical exurb - even if there's a general commute to the nearest city, most of the travel end-points within the city will be anywhere within a 5-10 mile circle. To be viable, busses have to have a fine enough drop-off and pick-up pattern to make them worth using. The finer the pattern gets, the longer the overall journey takes.

Population densities drop off rapidly once you get outside the central area, so you have two problems - you can't run a regular service to every exurb, and you can't take people directly to and from where they need to go without choking the system.

You can solve the second problem with radial access points, of a park and ride type, which offer a network of central access routes. That will work, kind of, although with an enforced change, journey times will be longer.

The first problem can only be solved by increasing population densities, and abandoning some of the exurbs.

In fact decentralisation might work better - move a lot of work out of cities back into more rural areas, shorten food supply lines, and create much smaller units with localised power generation which are closer to being self-sustaining.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jun 28th, 2008 at 01:16:00 PM EST
[ Parent ]
"enough charge to run for a day or so"
You assume battery power, I assume extension cords. Seriously.

Re transport in exurban areas: How did people get around in rural England in the 1930s? By multiple bus lines that ran all over the place.

Besides, electric cars are already practical, just expensive. They're not much different to make from regular cars assuming that customers will buy them.

by asdf on Sat Jun 28th, 2008 at 02:29:38 PM EST
[ Parent ]
what about solar panels built into the car rooves, as well as parking lot rooves too.

when a car's battery was full, the panels on its roof could be switched to feed the other emptier ones.

co-operation!

OT; i had a dream the other day where it was the future(!), and we generated energy somehow just using our physical weight while we slept. the bed was attached to microgeared cogs and flywheels, and very slowly descended during the night.

springs were involved...

dream on...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jun 28th, 2008 at 02:49:16 PM EST
[ Parent ]
i had a dream the other day where it was the future(!), and we generated energy somehow just using our physical weight while we slept. the bed was attached to microgeared cogs and flywheels, and very slowly descended during the night.

100 kilos x 1 metre x g = 1000 Joules = 1 kilowatt-second.

So you need thousands of sleeping people to make one kilowatt-hour.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 05:20:48 PM EST
[ Parent ]
heh, and here i was thinking people were going to call me on the energy needed to reposition the bed for the long night's slow action...

the most pleasing factor in the fantasy was how all could start to feel useful, even ole folks who don't do much moving around any more.

the principle could extend to dance floors, which would be hinged to see saw, turning flywheels that way..

thanks for doing the calculation migeru.

would heavier people create more energy, or just hit bottom faster?

depends on the gears, i'd guess...

"We can all be prosperous but we can't all be rich." Ian Welsh

by melo (melometa4(at)gmail.com) on Sat Jun 28th, 2008 at 08:56:32 PM EST
[ Parent ]
Solar panels on car roofs aren't big enough to help very much. The amount of energy in a gallon of oil is very impressive when you start trying to replace it with something else...
by asdf on Sat Jun 28th, 2008 at 11:53:22 PM EST
[ Parent ]
I can't take extension cords seriously. There are literally miles of fields around this house, and they're easily accessible by tractor - they're ploughed, sprayed and harvested every year. To make extension cords likely the entire area would have to be rewired, at a huge cost.

Re: commuting - people did a lot less getting around in rural England in the 30s than they do now. And we had a much bigger train network, which served as the standard long-distance option. People also lived much closer to where they worked. Long distance commuting was limited to a couple of specialised dormitory areas around London which were served by tube extensions and rail. People often walked or cycled to factories because they were close enough to walk to or cycle to.

As for the practicality of electric cars, see the recession watch diary.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Jun 28th, 2008 at 02:58:09 PM EST
[ Parent ]
Farming by electric vehicles would be quite a bit different from how it is now, but in the early days of tractors, one method used involving cables (for pulling on, not for electricity) that reach across the field.

"Steam-operated cable plowing developed successfully in England, using a system of two steam engines pulling a cable-drawn plow. The English cable plows were capable of traveling safely at up to 4 mph when plowing through good soil. The length of the furrow was usually measured in 1/2 miles rather than in rods, and the early English cable plows, with their short strings of cable, were grossly inadequate. By 1870, there were 3,000 steam cable-plowing outfits in operation in England and only four outfits operating in the U.S. Henry E. Lawrence, a southern planter, used one of these plowing outfits on his 1,000-acre sugar estate near New Orleans."
http://www.steamtraction.com/article/2003-03-01

And obviously we have huge central pivot irrigation systems that reach every part of a field. It's not that hard to dream up possible methods of rigging up a power cord to a tractor...

by asdf on Sun Jun 29th, 2008 at 12:09:27 AM EST
[ Parent ]
I can't take extension cords seriously. There are literally miles of fields around this house, and they're easily accessible by tractor - they're ploughed, sprayed and harvested every year. To make extension cords likely the entire area would have to be rewired, at a huge cost.

Nope, not after Cameron throws all the Poles out.

I can't take the idea of extension cords for farming seriously either.  I would suggest, though, that the assumptions we're making about battery power could be incorrect in a big way.  There's, for example, that technology they developed out in Silicon Valley that increases battery power tenfold.  Presumably there are ways we haven't gotten to yet that will allow us to get more juice out of them.

Even getting ten times the charge would get the job done for most people.  Then you'd be talking about driving 400-500 miles instead of 40-50.  Nobody other than guys driving semis is going to drive farther than that out of necessity, and truck drivers presumably won't mind getting a little more sleep.  If push came to shove, you could toss an extension cord or two out the window to charge it up every night.  Initially, at least, it's going to be crude arrangements like that before everybody's got electricity outlets on their driveways and stoops decades from now.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jun 29th, 2008 at 10:00:18 PM EST
[ Parent ]
I doubt that batteries will ever work out for farm implements. Big plowing rigs and combines put out a couple of hundred horsepower on a continuous basis--unlike cars that cruise on the highway at around 20 HP. Also, when it's time to harvest there's no time wasted, so they run for 16 hours a day. Even a very advanced battery system would have a really hard time with this situation...

by asdf on Sun Jun 29th, 2008 at 11:36:36 PM EST
[ Parent ]
France went from no nuclear to practically all nuclear in 15 years. That's the time frame.

Uranium availability is not an issue. The latest Red Book update shows what everyone has been suspecting, that is, as soon as prospecting started uranium reserves started ballooning. Uranium prospecting is where oil prospecting was about the year 1900.

Switching the entire vehicle park to electrics will take at least 15-20 years, which is why substitute fuels like CTL, GTL, tar sands, heavy oil and CNG will be crucial. And no, there won't be any CCS.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jun 28th, 2008 at 03:01:58 PM EST
[ Parent ]
One's mind turns to the use of "Assignats" during the French Revolution.  These were based on the value of the holdings of the Catholic Church in France at the time.  These holdings were estimated to consist of the prime third of all land in France.  Unfortunately, the natural tendency of my US compatriots is towards the right.  I don't know if they can bring themselves to accept that that tendency has been what has gotten them into this mess.  Hope I never have to find out.  Worry that I will.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 28th, 2008 at 01:52:56 PM EST
[ Parent ]
Why do you need to go off-road? And, if you can save oil just for off-roading that will probably be okay.

I'm not a Prius driver. I ride mass transit, bike and walk.

Want sustainability? Move to a dense urban area.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes

by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 11:35:55 AM EST
[ Parent ]
My point was simply the Prius is very useful when roads are no longer well maintained.

Plus, in a sh*t-hit-the-fan scenario, there will be many blockades and obstacles on major roads, I suspect, as local 'tribes' pirate the wayward Prius drivers attempting to escape population centers.

by snowmizuh on Sat Jun 28th, 2008 at 11:45:46 AM EST
[ Parent ]
Sorry, I meant the Prius is NOT very useful without well-maintained roads.
by snowmizuh on Sat Jun 28th, 2008 at 11:46:24 AM EST
[ Parent ]
Bovine feces. Strong centralised states existed long before oil and coal became practical. And if they really, really need to, they can go back to existing that way. Not, perhaps, with the level and geographical spread of population we have today, but there are plenty of ways to reduce population short of civil war (non-civil war being one of the traditional favourites...).

You won't have armed tribes roaming the countryside looking to kill you and take your stuff. At worst, you'll have press-gangs roaming the countryside looking to ship you off to some hell-hole war of attrition in a country you never heard about and care even less about.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 28th, 2008 at 03:14:24 PM EST
[ Parent ]
Why would a Prius driver attempt to escape a population centre?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 05:27:02 PM EST
[ Parent ]
I think soon you are going to need to worry more about survivability than sustainability.
by snowmizuh on Sat Jun 28th, 2008 at 11:49:00 AM EST
[ Parent ]
So, what do you advocate, guns and hummers?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 12:01:03 PM EST
[ Parent ]
Hummers will soon be irrelevant.  As will the Prius.

Natural selection will determine whether those who see the value of guns as tools or those who eschew them have better odds of survival.

by snowmizuh on Sat Jun 28th, 2008 at 12:17:30 PM EST
[ Parent ]
"Hummers will soon be irrelevant.  As will the Prius."

Yes, they will both be replaced by the Chevy Volt!

Oh, no, wait; that would be yet another GM scam...  :-(

http://fastlane.gmblogs.com/archives/2008/06/at_last_behind.html#comments

by asdf on Sat Jun 28th, 2008 at 12:24:14 PM EST
[ Parent ]
Natural selection will determine whether societies where people feel they're in it together or those where people feel they need to arm to defend from each other have better odds of survival.


When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 12:24:22 PM EST
[ Parent ]
That is an optimistic assumption!  I just pray that the angels of our better nature come to the fore here.  Else, the Abyss yawns.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 28th, 2008 at 01:59:10 PM EST
[ Parent ]
[snowmizuh's Crystal Ball of Doom™ Technology]

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Mon Jun 30th, 2008 at 07:21:00 AM EST
[ Parent ]
The Prius doesn't have "little golf cart wheels." It has 15" wheels, which are a perfectly normal size for any sort of car built before about 2000, when wheel sizes went completely crazy. Hybrids do tend to have low ground clearance, but I have driven my Honda hybrid (with 14" wheels and snow tires) through all sorts of blizzard conditions here in Colorado without problems.

If you want to go off the road, what is wrong with walking?

by asdf on Sat Jun 28th, 2008 at 11:44:29 AM EST
[ Parent ]
That's a common myth about Priuses, though, out in Jesusland -- that that a Prius is a kind of rice-burner-meets-go-cart vehicle.

The Prius is actually a pretty good-sized car.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Jun 29th, 2008 at 09:48:08 PM EST
[ Parent ]
The impression I get is that the Prius is seen as a car for the effette latte-drinking liberal elites.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Mon Jun 30th, 2008 at 07:19:53 AM EST
[ Parent ]
>>Is there an off-road, 4WD Pruis yet? :)

My first thought was of the Lexus RX400h, but that's only because my in-laws have had one for about five years now.

Googling hybrid SUV takes you to www.hybridSUV.com which tells me that there are currently 8 models available in the US with more coming along. Mileages are only in the 20s or low 30s, but that's a hell of a lot better than the barely-scraping-into-double-digits totals that traditional SUVs muster.

Regards
Luke

-- #include witty_sig.h

by silburnl on Mon Jun 30th, 2008 at 07:17:41 AM EST
[ Parent ]
Welcome to posting on ET, snowmizuh!

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Sat Jun 28th, 2008 at 12:19:22 PM EST
[ Parent ]
nitpicking, but how do hot summers lead to oil demand? AC runs on elecricity and very little of that is produced with oil. I'd imagine it would hit NG since that tends to be the source for peak demand situations in the electricity market.
by MarekNYC on Fri Jun 27th, 2008 at 02:16:05 PM EST
Travel?

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.
by poemless on Fri Jun 27th, 2008 at 02:18:47 PM EST
[ Parent ]
Summer is travel season.  Kids out of school, parents taking them on vacation.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Jun 27th, 2008 at 05:43:57 PM EST
[ Parent ]
you'd be surprised at how much oil goes into electricity if you check out places like Asia, FL, Italy.  Even in NY there were many fuel oil burners just a decade ago.  They just weren't used due to pollution regs except in critical peak load times.
by HiD on Sat Jun 28th, 2008 at 05:48:32 AM EST
[ Parent ]
The Los Angeles Times is envisioning a world of $200-a-barrel oil:

Three months ago, when oil was around $108 a barrel, a few Wall Street analysts began predicting that it could rise to $200. Many observers scoffed at the forecasts as sensational, or motivated by a desire among energy companies and investors to drive prices higher.

But with oil closing above $140 a barrel Friday, more experts are taking those predictions seriously -- and shuddering at the inflation-fueled chaos that $200-a-barrel crude could bring. They foresee fundamental shifts in the way we work, where we live and how we spend our free time.

"You'd have massive changes going on throughout the economy," said Robert Wescott, president of Keybridge Research, a Washington economic analysis firm. "Some activities are just plain going to be shut down."

Besides the obvious effect $7-a-gallon gasoline would have on commuters, automakers, airlines, truckers and shipping firms, $200 oil would drive up the price of a broad spectrum of products: Insecticides and hand lotions, cosmetics and food preservatives, shaving cream and rubber cement, plastic bottles and crayons -- all have ingredients derived from oil.

The pain would probably be particularly intense in Southern California, which is known for its long commutes and high cost of living.

"Throughout our history, we have grown on the assumption that energy costs would be low," said Michael Woo, a former Los Angeles city councilman and a current member of the city Planning Commission. "Now that those assumptions are shifting, it changes assumptions about housing, cars and how cities grow."

Push prices up fast enough, he said, and "it would be the urban-planning equivalent of an earthquake."

by the stormy present (stormypresent aaaaaaat gmail etc) on Sat Jun 28th, 2008 at 04:00:38 AM EST
There have been threads on the Pentagon fuel bill.

What does $200.00 bbl do to it, I wonder?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jun 28th, 2008 at 04:37:06 AM EST
[ Parent ]
The Pentagon takes precedence over the needs of the civilian economy, doesn't it?

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat Jun 28th, 2008 at 04:56:00 AM EST
[ Parent ]
the population agrees to it.  Time of necessary war -- sure.

An adventure in Iran?  Not for too long.

by HiD on Sat Jun 28th, 2008 at 05:49:48 AM EST
[ Parent ]
The Pentagon funded an Amory Lovins analysis of the oil situation called Winning the Oil Endgame

It was written written before today's prices, but it gives insight into where the Pentagon gets one aspect of its baseline theory.


What has changed since I completed this book in mid-2004? The world was then a less dangerous place. Thousands of Americans and tens or hundreds of thousands of Iraqis had not yet died to settle empirically the question whether Iraq would become Singapore on the Euphrates or Yugoslavia with oil. North Korea's and Iran's nuclear ambitions were not yet so clear. Terrorism driven by an intolerant and totalitarian ideology had not yet metastasized so widely around the world. Climate change had not yet shifted from an apparent controversy to a broadly accepted global emergency. And the United States, the nation most responsible for creating these problems and best equipped to solve them, had not yet squandered so much reputation and goodwill.

Amory has blind spots in his analyses, but one has to respect the breadth of his efforts.  (the above quote comes from the introduction to the Chinese edition.)


If anything in this study seems to you too good to be true, please remember Marshall McLuhan's remark: "Only puny secrets need protection. Big discoveries are protected by public incredulity."


"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Sat Jun 28th, 2008 at 06:36:09 AM EST
[ Parent ]

"Only puny secrets need protection. Big discoveries are protected by public incredulity."

Sadly, only too true.  Big discoveries imperil big vested interests.  Often paradigm shifts are required for their potential to be realized. But we appear to be poised on the edge of such an event.

A letter to the editor of the Arkansas Democrat Gazette today said:

"Changed my voting. Now independent. Not voting for candidate when he, running mate or relatives have ever been in Big Oil....They stall. It is a conflict of interest.  We don't need this."

Just one small sign of shifting attitudes.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 28th, 2008 at 02:14:17 PM EST
[ Parent ]
There is this.

On July 1, the cost for refined fuel used by troops will jump from $127.68 a barrel to $170.94 - an astounding 34 percent increase in just six months and more than double what the Pentagon was paying three years ago.

One hundred years of poverty?


As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 28th, 2008 at 02:32:39 PM EST
[ Parent ]


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