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DrumBeat: June 15, 2007
Posted by Leanan on June 15, 2007 - 8:46am
Topic: Miscellaneous
OPEC to Maintain Its Current 30M B/D Output Level
The Organization of Petroleum Exporting Countries said Thursday that there was no need for the group to inject further oil supplies into the market in the face of rising demand, an implicit rebuke to the International Energy Agency's call this week for urgent new supplies from the group.
Basrah contains huge oil wealth
Oil researcher, Ahmad Al-Husseini, said that geological studies "in Iraq showed that there are about 530 geological complexes of good prospects for oil; about 115 sites have been drilled so far with reserves estimated at about 111.3 billion barrels of oil, which leaves 415 locations requiring exploration."He pointed out, "reserves in the 415 sites unexplored for various reasons are estimated at over 215 billion barrels." He believed that regions and provinces rich in oil "will include in future nearly two thirds of Iraq."
Chevron Chief Touts Energy Security
"America is at a crossroads when it comes to energy," the Chevron head told more than 100 members of the Commonwealth Club.Using California as an example, O'Reilly said that in 1910, California accounted for 25 percent of the world's oil production. By 1985, California produced only 60 percent of the oil it consumed and the rest came from Alaska. By 2005, 40 percent of California's oil was imported.
Retired Generals, Admiral Warn of Dangers Created by Oil Dependence, Rising Global Instability
"It has been thirty years since we've had meaningful energy policy changes relevant to oil dependence in this country, and the acuteness of the threat has only grown in that time. Our situation will only continue to worsen if we don't make changes in our consumption levels. Two-thirds of global reserves are in the Persian Gulf Region. Iran has the world's third largest proven reserves, Iraq has the fourth largest. By comparison, America holds less than 5 percent of global reserves."
China Oil Imports Rise 11.5 Percent
Oil imports to fuel China's booming economy rose by 11.5 percent in the first five months of the year, a state news agency reported Friday.China is the world's No. 3 oil importer after the United States and Japan, and Chinese leaders see growing reliance on imports as a strategic weakness.
Russia-China oil link nears completion
Construction of the first Russia-China oil pipeline is going well and is expected to be completed by next year, said experts from both countries.The pipeline will initially supply China 10 million tons annually. It will gradually increase to 30 million tons a year.
The feasibility of three more gas pipelines from Russia to China is also being discussed, said Li Guoyu, an expert with the China National Petroleum Corporation.
A Different Kind of Power Plant
We humans have been harnessing nature for ages. Last Friday at Kibbutz Ketura here in the southern Israeli desert, I saw cows in pens and algae in tubes. Guess which excited me more?
But before you get too excited... ‘Dead’ biofuel-from-algae initiative leaves a stink
The virtual collapse of De Beers Fuel, which had promised South Africa bio- diesel produced from algae, has left a stink in the local biofuels industry.
Weekly Offshore Rig Review: Semisub Shift
For a little over a year, the RigLogix team has been working with an expert in rig demand and a mathematician to create forecasts of offshore and onshore drilling rig demand. Over that time, our team has generated a score of reports that analyze the ongoing and future trends in rig demand and provide accurate predictions of rig utilization and day rates up to ten years into the future.
Icy Island Warms to Climate Change
A rapid meltdown and fast-sliding glaciers in Greenland could raise sea levels around the world and flood coastal cities and farmland. The infusion of cold water could jolt the Gulf Stream, alter weather throughout the Northern Hemisphere and scatter fish and marine stocks.Yet this sweeping reworking of humanity's global accommodations will likely be fickle. While Greenland has many people who fear what warming will bring, it has quite a few others who reckon they may do quite well by it.
Renewable fuels provision stalls energy bill
Senate Democrats, eager for a vote on energy legislation, ran into staunch Republican resistance Thursday to requiring that utilities use more wind, solar and other renewable sources to produce electricity.
China's refinery runs soar 10%
Chinese refinery runs leapt nearly a tenth in May from a year ago, the fastest growth rate in 11 months, as oil firms picked up the pace to meet accelerating domestic summer demand and tap a profitable export market.
ENERGY-CHINA: Biofuels Eating Into Food Grain Stocks
Surging demand for biofuel is now partly blamed for recent price hikes in the food market and for shortages in grain stocks. Wheat prices are at their highest level in a decade, due to poor harvests in key producing countries like the United States and Australia, while corn prices have surged by up to 20 percent in local markets.Beijing has begun auctioning some of its wheat reserves to halt the rise in crops prices and prevent panic among the public. Despite predictions that this year would see another bumper harvest, Chinese government officials feel compelled to restrict the use of corn for producing biofuel.
INDIANAPOLIS -- Gov. Mitch Daniels does not have the authority under state law to suspend the state's sales tax on gasoline even when prices are high or fuel is scarce, the Indiana attorney general's office said yesterday.
Instead of forcing a costly and possibly unrealistic mandate on utilities and consumers, Congress should expand its list of favored energy sources to include nuclear power.
Swaziland: Petrol Pumps Run Dry
LOCAL service stations are running short of fuel, amidst rumours of an impending crisis in neighbouring South Africa.Interviewed motorists fears attributed the impending fuel crisis to the on-going strike by civil servants in South Africa, which is gaining momentum by the day. Some also blamed the worsening security situation in the Middle East region, which is the largest oil supplier in the world.
Islamabad acts to cope with power crisis
The loadshedding is likely to be significantly reduced in the next few days, following a decision to release more water for power generation and purchase surplus production from private industrial units, besides expected fall in temperatures.In a major policy decision, the government decided to set aside existing laws to allow sale of electricity by captive power plants (CPPs) to power utilities or adjacent consumers. While the generation companies were criticised for forced outages, the Indus River System Authority (Irsa) was asked to release additional water for power generation to reduce people’s suffering.
Tidal energy can help resolve Karachi’s energy crisis
The complex creeks network in the Indus Deltaic region, extending over an area of 170 kilometers along the 990-km coastline that Pakistan shares with the Arabian Sea can generate 900 megawatts (MW) of cheap energy, and adequately meet the power requirements of Karachi, according to a research conducted by the National Institute of Oceanography (NIO).
Power-generating buoys shelter in the deep
They look a bit like underwater mines, but they have a far less sinister purpose – the first of these submarine wave-energy devices should sprout up off the UK coast in 2008.AWS Ocean Energy has developed an underwater buoy that harnesses wave energy from 50 metres below the surface. The British company says that because the entire device is underwater, it does not suffer from storms in the way that other wave-power devices do, and will not interfere with shipping.
Live by the imports or die by the imports. With US refineries continuing to struggle, our fortunes with gasoline supply and price are becoming increasingly dependant on imports. And if we aren’t breaking records we have to rely on our broken refinery system.
Getting to Know: Dr. Eban Goodstein
Dr. Eban Goodstein wants college students around the country to join the fight against global warming, and he’s focused on getting Hispanics and other minorities involved....“What we’re all experimenting with is the creation of a new social movement,” he says. “In 2100, the world could be 10.5 degrees hotter than it is now. It’s a post-peak oil, post-water shortage world, it’s tribalistic politics, and it’s not a place that we want for our children or grandchildren.”
Oil debate's crude for thought (scroll down)
"The problem of the peaking of world conventional oil production is unlike any faced by modern industrial society," said Dr Bezdek, who has written two reports for the US Department of Energy on the economic impacts and risk management of declining oil supplies."Previous energy transitions, from wood to coal and from coal to oil, were gradual and evolutionary.
"The world is facing an imminent energy discontinuity that will be abrupt and painful," said Dr Bezdek.
The shape of the world economy: Is a global economic crash such as the one that occurred in 1929 possible?
Warren Buffet once said - "It's only when the tide goes out that you learn who's been swimming naked".Is it possible that the global tide of financial inbalances today will at some point fall like dominoes and expose governments and ordinary citizens that are financially over-exposed to indeed be naked?
Council backs people-friendly transport tunnels
Lord Mayor John So said transport projects, including the tunnels, were vital for Melbourne's future liveability, and would "solve our current problems and give Melbourne room to grow without choking on its own traffic. Our suggestions are driven by the realities of peak oil, climate change, road congestion and Melbourne's continued growth projected at 3 per cent out to 2020."
Citizens fight Nestlé over town water
Increased consumption is an environmental concern, especially with climate change being an important environmental issue in Canada, and recent dialogue on peak oil. Fossil fuels are used for packaging, for transporting bottles and running both the industry and recycling plants. Polyethylene terepthalate (PET), derived from crude oil, is commonly used for water bottles. More than 1.5 million barrels of oil are used to supply the annual American demand for bottled water. As stated by the Earth Policy Institute in 2006, this is “enough to fuel around 100,000 U.S. cars for a year.” Globally, this figure totals 2.7 million tons of plastic used for this market each year.
Hyperion plans first U.S. refinery since 1976
Little-known, privately held Hyperion Resources Inc. said on Wednesday it plans to build an $8 billion oil refinery, the first in the United States since 1976, at one of several sites under consideration in the U.S. Midwest.
The Day “Peak Oil” Became a Household Word
Matt Drudge has just taken Peak Oil mainstream.Up until today, you could randomly ask 10 people on the street what “Peak Oil” is and you’d get a blank stare from at least nine of them. I’d wager that as of yesterday, Drudge himself would have been among that vast majority.
ExxonMobil spending less to find oil than in 1981
Count on high gas prices sticking around: ExxonMobil turned a $39.5 billion profit last year on sales of $365.4 billion - more than any other corporation ever.Yet it isn't making the investment in finding new oil that it did in 1981.
New York's Bloomberg takes SUV to green car event
It's not easy going green.Just ask New York City Mayor Michael Bloomberg.
He arrived at a green car initiative on Thursday at the American Museum of Natural History in a small motorcade of fuel-guzzling sport utility vehicles.
Fuel plan backed by carmakers offered in Senate
Congressional allies of major automakers put forward a proposal on Thursday challenging the leading Senate plan to force the industry to make vehicles that go significantly further on a gallon of gasoline.
Al Gore: G8 agreement on climate change a "disgrace"
Former U.S. Vice President Al Gore denounced a deal by world leaders on curbing greenhouse gases as "a disgrace disguised as an achievement," saying on Thursday the agreement struck last week was insufficient.The dedicated climate crusader, whose 2006 global warming documentary won an Oscar, said leaders at last week's G8 summit in Germany had not risen to the challenge to respond to what he calls a "planetary emergency."
Could some win with global warming?
It's not in Al Gore's PowerPoint presentation, but there are some upsides to global warming.Northern homes could save on heating fuel. Rust Belt cities might stop losing snowbirds to the South. Canadian farmers could harvest bumper crops. Greenland may become awash in cod and oil riches. Shippers could count on an Arctic shortcut between the Atlantic and Pacific. Forests may expand. Mongolia could see a go-go economy.
On the "Could some win with global warming topic":
I used to work at the university campus next to where they were constructing the Greenhouse Gas Research Technology Centre in Regina. Construction here goes year round, regardless of weather.
I was watching the crew put on the metal roof in February, four stories up in -25C with a 30km/h wind. I was wondering if they interviewed the construction crew what their personal research into the effects of Global Warming would be at the moment.
I would imagine you would get a two word research report and one of the words would have 4 letters. :-)
Could some win with global warming?
Some of these articles are so devoid of substance, it makes them hilarious:
Yes, the man's an economist. Bright ones, those.
The only people arriving by the end of the century will be invading hordes, not tourists. You can tell by the fact that they come on foot, and carry guns.
Wow, 220% in only ... 93 years??
Just think of all the money to be made in Canadian tourism with an astonishing 0.85% annual growth rate.
Dr. Albert Bartlett, where are you?
http://globalpublicmedia.com/dr_albert_bartlett_arithmetic_population_an...
I emailed Dr. Bartlett some of my stuff on the Export Land Model. He is mailing me an article he did on the topic 21 years ago. (Good thing that I never claimed to be doing original work on the topic.)
Jeffrey,
That sounds interesting. Please share. Read a fair bit of the nutty professor, but don't recall this.
He's sending it snail mail. I'll try to post a summary.
HeIs: I live in Toronto, one of the warmest cities in Canada. The temp increase necessary to make this town bearable from Nov to April would put the entire state of Florida underwater (along with other nasty surprises). Sounds like an economist.
"The temp increase necessary to make this town bearable from Nov to April would put the entire state of Florida underwater (along with other nasty surprises)."
That could happen.
Prediction of "business as usual" includes +5 C by 2100.
That's 9 degrees F. And that 9 degrees includes the global average over the entire planet, including the 70% of water.
We know that land will change more, obviously, so Toronto will change more, and we know that with GW the polar latitudes will heat more than the equatorial ones (roughly), and that winter temps will increase more than summer temperatures.
Consider the possibility of a 20 degree F change in winter temperatures---on average---and now include some extreme warm events---that's a pretty big difference.
Florida might not be all underwater, but could be depopulated of permanent residents because of the occasional Category 8 hurricane and the unwillingness for any insurance company to write anything.
Besides, it would be unbearably hot and humid--110F with 100% humidity for 6 months of the year.
Is there a difference between Economics and Astrology?
Economics can predict simple systems, but scales very poorly. The world is complicated, so complicated noone understands it all (maybe Buffet but probably not, i guess he concentrates of specific areas and signals).
Yes.
Astrologers (successful ones) have a good insight into people and what makes them tick.
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.”
-Laurence J. Peter
Richard C
What I don't understand about these positive prognostications on the effects of GW on colder climates is how narrow minded and out of touch they are with what the reality may be. The possibilities are that we will see more severe storms and droughts and temperature extremes that would not benefit crops, and would not attract tourism (assuming there were much tourism left). There is no way to predict what locations might see any net benefit, if there is any to be had. It may be possible that some areas are better off, but I think the probabilities are slim that areas the size of Canada or Russia see overall benefits.
Worst of Drought Spreading Across South
http://biz.yahoo.com/ap/070615/farm_scene.html?.v=2
Seems adverse climate conditions around the world are putting pressure on food production, along with economic and energy factors.
We had torrential rain here in France yesterday. Whereas the rain caused no real problem for our vegetable plot, it seemed to encourage the deer and rabbits to come and help themselves to our plants. Even net protected plants got eaten. Looks like a major fencing project is going to be necessary for next year... sigh!
Triumvirate of collapse - Economy, Ecosystem, Energy
Good thing we're using all of that farmland to grow foodstuffs instead of using it to grow corn to make ethanol to put into gas guzzlers. :)
Oh wait, they ARE growing corn for ethanol. Hm. Stock up on your rice and beans this month! lol
But I thought the Ethanol was supposed to be for us.
"Shaw said the industry expects to export ethanol this year to markets in Asia, representing the first significant U.S. ethanol exports in several decades."
This article is from 2005 before Bush's push for Ethanol and before they got their story straight.
http://www.palmbeachpost.com/news/content/shared/news/nation/stories/05/...
When food becomes unavailable because the ACREAGE used to grow it has now been converted to crops for ethanol production, people starve. Currently, they are now in poor nations that could not afford food exports from the US, but it will get closer to home. Currently in the US, the poorest segment of the population is at the going hungry/malnourished stage. With ever increasing food prices that will climb the economic ladder. With people having to spend a larger proportion of their pay for food, that means little to spend on other things. It is impoverishing the nation. The worse part, Ethanol producers selling Ethanol to overseas markets because they can get a better price. In other words, Americans go hungry for nothing. No fuel price benefit, only more profits for ADM and other Ethanol producers.
http://www.earth-policy.org/Transcripts/SenateEPW07.htm
I work with several people in my county that help the Homeless and hungry folks in the area. Miss Jeese, ( I don't know her last name, but she has had a Documentary done of her life and she is writing a book of how an elderly Black Women can influence the Status Quo. ) Helps the Homeless in the Little Rock River market and Downtown areas. Yeah just a few steps from the Clinton Library and Glass House thingy they made it look like. She and I have been talking about what we can do she is working with state and local Poli-ticks to get things done. I work on a one on one basis and do food and bread pick ups and Ferry a few homeless to places they need to go. Usually when my wife is hanging out with old friends we do a lot more ferrying work. She ( My third wife )was homeless when I met her. She was not always thus, and dislikes those that are homeless by choice. Yes there are a few really totally lazy bums that just hang on the fringes of the world and like the freedom of homelessness.
I have Fellow Chef's and Food stores that gather old products up on a daily to weekly basis and I take them to where they are needed.
I know of one place to get free breakfast, 3 places to get free lunch and If you need free dinner there is always the Local Sally ( Salvation Army ). Several Homeless shelters work with the homeless to get them back on their feet and some of them are like small prison's. Heck even the State Mental Hospital has a few Homeless people living off the fruits of the land, The bill for my 10 days there back in Jan 2007, was 9,000 bucks, 900 plus a day and I knew at least 3 guys and 2 gals that had hit the 3 month mark and were just never going to leave, 3 square meals and one snack a day.
The other Mental Ward at Living Hope, tied to the Little Rock Branch of St. Vincent's Hospital cycles them in and out pretty fast, but there were at least 3 that had been there for over 30 days, if you have no place to go too on the outside they tend to hang onto you. I have not gotten my bill for my 8 day stay. It really was a bogus stay this time, no brain tumor or nothing just me acting like the slightly crazy guy I am when I near the end of writing project and walking in the heat without water to re-hydrate.
As the USA's housing market bites the big one, I will let you know if I see suits out there getting food from the free food places.
Charles E. Owens Jr.
http://www.dan-ur.blogspot.com
Core Inflation
I find this so funny, but then again Im not an economist.
I still think it is more noteworthy that little is said about the expansion of money supply in reporting on inflation. Particularly given how much of that that has gone on in recent years.
--
When no-one around you understands
start your own revolution
and cut out the middle man
the dow is up 100 pts on tame inflation news. sound like a blow out ? "investors" (apparently) reacting to reports on inflation instead of real inflation ?
Yeah - exactly... bizzaroworld again
Now, IANAE, however in my layman's understanding if you increase money supply, chasing a world of finite resources, that is by definition inflation (i.e. the ratio of money to resources increases) - this sometimes manifests itself in price increases directly, sometimes there is a disconnect.
Like the character Mugatu plaintively exclaims in the great intellectual tour-de-force that is the movie Zoolander: I feel like I am taking crazy pills!
--
When no-one around you understands
start your own revolution
and cut out the middle man
You're using the Austrian definition of inflation, which is technically correct but not the definition most people use, which can be phrased as "things important to me got more expensive". Obviously that's far more vague mathematically than measuring an increase in the money supply, hence things like the questionable definition of core inflation.
The two are related however. If fuel and food get more expensive, this is not Austrian-style inflation at first, but people are more likely to get into debt to try and pay for them which in turn grows the money supply diluting the value of an individual currency unit, making those goods even more expensive.
It's for this reason that runaway inflation is such a great threat, especially under a fiat fractional reserve system like the one we all use today. Hyperinflation has destroyed societies before.
Now I don't think this will happen to us because the causes of inflation are much better understood now than they were in the past. But it's worth bearing in mind.
"The two are related however. If fuel and food get more expensive, this is not Austrian-style inflation at first, but people are more likely to get into debt to try and pay for them which in turn grows the money supply diluting the value of an individual currency unit, making those goods even more expensive."
I think you have it backwards.
MONEY IS SUPPLY INCREASED(+12% increase for M3 Lately), THEN, as more money chases few goods, PRICES GO UP.
Mise where are you when we need you.
jc
No, I don't have it backwards. The system is linked in both directions, that's why it's confusing.
Yes pumping extra money into a closed economy will cause prices to go up in general across the board. This is inflation Austrian-style. The point is that if a few prices that people are sensitive to go up, this doesn't technically mean an increase in the money supply (presumably prices went down elsewhere as people reallocated their resources and demand slackened), but the increase in borrowing that people and businesses will do to afford these essentials *does* trigger increase in the money supply, which in turn raises prices. So it's cyclical.
I heard it was;
"Cat rescued from Tree, Dow up 100 points"
jc
Core Inflation. Yes. It seems stupid at first. But it works because when food and fuel are separated out then it's easier to see the effect of increasing cost of food and fuel *on* all the other categories. Providing it's NOT smoke and mirrors I'm glad we can see that.
I think the name of the metric is wrong. But if most people understand what the metric is trying to present I don't see a problem.
Actually, core inflation should be food and energy, the lifeblood of our economy. Longterm inflation will be significantly affected by energy and food prices. The concept that the price shocks for food and energy are temporary seems seriously outdated. As far as the other stuff goes, the stuff that is part of "core" inflation, I can mostly do without it.
While I am a perennial sceptic of measuring inflation disregarding the money supply, the core inflation method is valid in that the cost of the core goods is partially dependent upon energy and food, thus over time will reflect those items as well. By eliminating them from the 'metric' - we used to just call them measurements - the rapid oscillations are damped out much like shock absorbers [dampers] on a car suspension.
Core inflation is a much maligned concept, but is one of a number of metrics that are intended to be used in determining the amount of benign lobotomy by interest rate that the economy requires. I don't like interest rate volatility in principle, but given the basic structure of the system we have, it is what, albeit crudely, has been shown to work. Like a crude medicine with ugly side effects, but the only one we have been able to come up with.
What is of greater concern may be the amount of borrowed money in the stock market. If the interest rate becomes higher than the rate of market rise, borrowed money exits. Once that triggers .....The amount of borrowed money and margin is apparently, even as a percentage, at a recent historical high. Fun while perfection lasts. Good luck.
While I agree that removal of the food & energy components may reduce volatility from the index, the problem arises when those two components become persistently high. In this situation we are not merely factoring out volatility, we are factoring out a prime component of inflation.
I'd submit that it is pretty difficult to make anything without energy, and food is a form of energy. The cost of raw materials is usually high in energy component as is pretty much every other cost factor. That's why energy cost is such a major factor. Just because we don't get a breakdown of the indirect cost factors - even labor cost has an energy component - we don't see it as such.
But that's the reality. By measuring the delayed effect of energy/food costs rather than the immediate prices, we get a smoother and damped out indicator. While this doesn't give a snapshot of current conditions, it gives an averaging of the recent past. If these costs - energy and food - become persistently high, and persistently high by definition becomes the new normal, then they will show up in the core rate.
Anyone looking for an instant reading from core rates is looking in the wrong place by definition. I totally agree that energy costs are a main driver of inflation especially if attempts are made to mask reality by increasing the money supply. Sound familiar?
As we discovered - we should have known - in the 70's, you can't print oil. That debacle gave us the best part of a ten to one inflation of the currency and the demise of the ten cent cup of coffee. That's my core indicator and cheaper to buy and healthier than The Economist's 'Big Mac Index'.
At the moment we are skirting with wage undershoot in the US, so prices will go down or wages up as the debt palliative is pretty much pooped out. Not a healthy situation and very little if any room for error. Again, good luck.
given that the "core" inflation is supposed to eliminate volitility and as you state .... an instant reading from the core rates is looking in the wrong place... well, why not use a moving average ?
of course, that would give an inflation reading substantially higher than "core" rate and i suspect that has more to do with the invention of "core" rate than volitility.
No, it doesn't. When food prices go up, more of people's money go into food, reducing the inflationary effect on other goods. The same efect happens for energy, but weaker: when energy prices go up, people spend more of their money at less energy intensive products, reducing the inflactionary pressure on other goods.
So, core inflaction turns a long time problem of inflation measuring (how to weight the prices of different products) into a short term one. That makes its measurements near useless. I really don't understand why you don't accept that inflation is seazonal, like the rest of the world.
I'll have to agree that you are right in theory. I also stated that I'm not enamored of the core inflation concept from the get go; I was merely attempting to make a case in its favor that wasn't being made.
What is interesting is that the response you have mentioned that would be expected doesn't seem to happen in practice. This is because, presumably, the cost of food and gasoline has been so small in relationship to other expenditures that the fluctuations don't affect consumption much for the vast majority. Those to whom gasoline and food have been major expenditures don't sem to have been buying much anyway as a percentage of the whole economy. Even Wal Mart seems to be weathering the high gas price storm. As has been pointed out in earlier threads, we may reach a point where a triage occurs between discretionary spending and food and energy expenditures. Statistically it doesn't seem to be happening en masse, as yet.
The cost of automobile ownership has so outstripped the fuel costs that the replacement period was the governor of auto cost. Food as a percentage of restaurant bills is not great either, yet the number of meals eaten out has surged - don't you love that word - in the last two decades.
It appears as though we are indeed heading towards a point where oil and food prices will become dominant factors in econometrics but at the moment we may be jumping the gun. The gun is now loaded.
people who dont live within their means have no problem, generally, in paying more for gasoline, it just shows up on their bank of america statement. the minimum payment may go up a little, maybe 1% plus finance charges or some goofy amount like that.
The focus on core does have to do with volatility of energy and food. For example, in the most recent run on inflation, energy prices were down. The other problem with food is that price changes cause so much substitution by consumers. From an inflation standpoint there is no difference between beef, pork, chicken, or beans. The basket changes so readily. It is true though that there is this persistent gap between inflation figures and money supply, and the gap indicates the inflation numbers are understating inflation.
With so much at stake, there is some other factor at work as well, because the markets tend to be the most accurate - albeit fickle - arbiter of data. The only indicator that accurately predicts recessions time and time again is the markets, and the same goes for recovery. This last decline and recovery of the markets also preceeded the decline and now likely recovery of the economy.
Is a period of peak oil imminent. Probably. But right now the markets appear to discount that yet. Maybe the problem gets solved when we are ten feet from the wall. Who knows. I know there are about 50 start up companies in solar electric power at least, and I could imagine the price of solar falling well below the cost of fossil fuel electric. I can think of hundreds of solutions, all of which can be implemented very quickly in the United States.
My issue is whether in response to peak oil, the first world pulls in all the lifeboats and leaves the second and third world in a state of disaster, as appears to be the strategy now. I do not believe the first world can separate itself in that way. The solutions have to be global in scope and not just regional. It is not enough for Denmark to be 100% carbon neutral (which it appears they will be in ten years time). Equally contries like Swaziland have to be provided with the same equal opportunity. A child in South Africa, or Lesotho has as much right to a decent life as one in Texas or New Jersey.
ResponsibleA. has it right, mostly. The money supply increase is not more interesting, though, it's the same issue. By skewing inflation numbers downward, that increase remains hidden. And that's the purpose of the exercise. Ditto for not publishing M3.
What people experience as inflation is that they pay more tomorrow for the same items than they did today. Taking out food and energy is a veiled attempt at hiding that, or confusing them.
There is an instrument the B(L)S uses that is even smarter than the core CPI index, namely hedonic regression. Simplified: if you paid $1000 for a computer 2 years ago, and you pay $1500 today for a similar one, you would seem to pay more. No, says the BLS. Today's machine is twice as fast, so you should expect to pay $2000. They then count this as anti-inflationary. Really.
The underlying problem of course is that nobody knows what the real inflation numbers are. John Williams does a great job at Shadowstats, but even for him it remains a matter of guesstimating.
I would say we can make this very simple, and go the Austrian way: Inflation equals money supply increase. John Williams sets 2007 inflation at 6%, vs the official 2.5%. But he puts M3 at around 11%, and that should really be what we call inflation.
And then we could go into the new money-creation instruments developed in the private sector, the derivatives vehicles, estimated for 2006, by FT's Gillian Tett, at $470 trillion. But, as the number indicates, that could easily become too scary.
I would say we can make this very simple, and go the Austrian way: Inflation equals money supply increase. John Williams sets 2007 inflation at 6%, vs the official 2.5%. But he puts M3 at around 11%, and that should really be what we call inflation.
The Austrians are wrong, because what's measured as "money supply" isn't at all like physical currency (paper bills), where you could conceivably count up all outstanding money and divide by the number of goods.
Money is not created in fact by the Federal Reserve---it is created by the banks who are in the Federal Reserve System when they loan out money to private people and companies.
The Fed does change the *profitability* and *ability* of those banks to make loans and therefore the desire to create money (increase loans outstanding) or destroy money (decrease loans outstanding), by changing the interest rates (price of money, wholesale) and reserve requirements (banks deposit a fraction of outstanding assets {loans to public} with the Fed, and earn no interest on it).
And the actual effect of the money supply depends very specifically on the 'velocity of money', and also on where the money is being used. As recently much of the money is going into financial assets, and sure enough there's inflation in all of them.
Also, a large amount of this money supply increase is going overseas to countries and people who use it as substitutes for their own currency, and others who just sit on it. And this increase in money supply does nothing for domestic inflation.
Monetarism as central bank policy was attempted in the early 1980's and failed its pradtical test, despite good theoretical attractions. Fed went back to controlling the price rather than the quantity of money, because it is the price which is what directly influences relevant human economic behavior (loaning money) just as it is the price which influences relevant economic behavior with gasoline.
And similarly, for inflation---the most effective way to get some idea of 'inflation', even if flawed, is to measure general price rises because everything else is worse.
And then we could go into the new money-creation instruments developed in the private sector, the derivatives vehicles, estimated for 2006, by FT's Gillian Tett, at $470 trillion. But, as the number indicates, that could easily become too scary.
All those private derivative contracts have two sides to them. Assuming that the relevant parties obey their contracts and they clear transactions, somebody wins and somebody loses. People have been worried about this for a bit too long and looking at the headline number (notional value) is not very relevant.
Example: currencies are traded in nominal units of zillions, but the underlying is quoted to 5 decimal points
(e.g. 1.3457 EUR/USD) and traders look for profits of dozens to a hundred basis points, e.g. 0.0100 is a big deal.)
It's trivial to trade $1M euros---and with a strong daily market move, e.g. 100 points, make +/- USD$10,000.
The nominal amount was a whopping '1.35 million dollars', the relevant amount is the +/- $10,000.
And bonds can change even less---so face value (nominal amount) of the derivatives are even more frighteningly higher, it seems. But that's not the underlying economic reality.
The Day “Peak Oil” Became a Household Word
I read this article from Whiskey and Gundpowder yesterday and was somewhat sceptical. Last night I watch CBC's "The Hour" (www.cbc.ca/thehour/), a pretty popular show here in Canada. The show's host, George Stoumboulopoulos referreed to the article from The Independant and actually said the words "Peak Oil". Who knows, maybe the Peak Oil debate will become a household word.
The host then went on saying there are "people who have been talking about Peak Oil for years", such as David Suzuki, Al Gore, and his next guest.......John Kerry. That cost me some fine booze and a new set of clothes.
Funny enoiugh George did a very good piece on peak oil in 2005.. I guess he is your typical news bimbo who doesn't even hear what they are saying themselves. Of course his brain could be pickled from the days in Much Music. I get the feeling the MSM has been enlisted to softly introduce peak oil into the collective awareness. Boil the frog slowly.
I wish we could afford the life we are living.
""Who knows, maybe the Peak Oil debate will become a household word.""
Monkey Paw time.
Most of us here will likely regret the day Peak Oil becomes a household word.
"Timezzz UP !" Says that crazy, hairy, ancient Bitch we all know and love so dearly.
Some people are just not understanding that the world is going to end soon:
FORD MAKES HISTORY AS DEMONSTRATION FLEET OF ETHANOL-FUELED HYBRIDS HITS THE ROAD
Don't they read the Oildrum?!
Building vehicles to run on ethanol has never been in doubt.
The question that remains is simple: can ethanol as a transportation fuel support an American lifestyle that is minimally different than that of today?
As far as grain sourced ethanol I think the answer has been fairly represented as No.
Whether any kind of biofuel will provide a Yes answer is questionable but in my mind is not totally ruled out.
So the issue is not whether Ford can make hybrids that use E85, it is from where will the ethanol be sourced?
InJapan writes: "The question that remains is simple: can ethanol as a transportation fuel support an American lifestyle that is minimally different than that of today?"
So when we big 'Murican' guys press the pedal to the metal and notice that we're only going 85% as fast as when we pressed to the metal using gasoline, what are we big 'Murican' guys going to do? Press the pedal 15% father down than the floorboard allows? LOL.
The issue is if enough ethanol could be made, from any source. I believe the answer is "no". We can't grow enough biomass, and if it's made using fossil carbon it will run out. The crux of the issue is that the carbon is dumped and diluted into the atmosphere, which makes it hard and expensive to get back.
This keeps coming back to electricity. If we can capture and convert enough energy from any combination of sources, we will not run out of electrons to move it.
"The issue is if enough ethanol could be made, from any source. I believe the answer is "no"."
Especially if we're exporting a big chunk of it to Asia.
Ethanol doesn't need to replace all gasoline, it will augment the fuel supply. The hybrid/e85 car is an excellent transition technology that uses currently available know-how to help us avoid problems related to peak oil.
The carbon is dumped and diluted into the atmosphere but the beauty is plants are good collectors.
Plants are good collectors AND releasers of CO2.
Unless their carbon is buried for geological time, i.e. does NOT undergo normal aerobic decay like nearly all dead plants today do,
Reforestation is but a minor temporary fix to greenhouse gas emissions, unless we embalm the logs and dump them in the deepest ocean, providing fossil fuel for the intelligent cockroaches to evolve in 200 million years.
...unless we embalm the logs and dump them in the deepest ocean
Or we put them into long lived housing and furniture.
The carbon in the 1890 home that I live in was captured up to 200 years ago (and at least 118 years ago) and should have an additional century or two. Longer for the 1849 home across the street.
Multi-century capture is long enough to get past the global GHG peak and well into the downslope (where [speculation] the release of CO2 may slow Global Cooling back towards the norms of 1900).
Reforestation is but a minor temporary fix to greenhouse gas emissions
The deforestation of Iceland after Settlement is estimated to have released 6 billion tonnes of carbon. All fossil fuel emissions globally were about 7 billion tonnes of carbon
Reforesting Iceland with larger trees could capture at least twice as much carbon as was lost by cutting down the shrubby Icelandic willow and Icelandic birch.
Reversing GW by over a year is a worthwhile goal. And Iceland is not the only possibility.
Best Hopes for Carbon Capture,
Alan
Why not? The USA's annual 140 billion gallons of gasoline accounts for about 1.2 billion metric tons of CO2 emissions. The gasoline alone is more than we can emit and keep atmospheric CO2 levels stable.
It does a poor job of that. Engines able to run well on pure gasoline are inefficient on high-ethanol blends. A fuel supply which includes gasoline does not accomodate ethanol blends well.
The 1.2 billion tons of CO2 can make about 730 million dry tons of herbaceous biomass (45% carbon). Problem is, you lose about half of that in conversion to ethanol; you'd need to grow about 1.5 billion tons of biomass to recapture all the carbon from engines plus the carbon lost in conversion.
The "Billion-Ton Vision" paper only found about 700 million tons/year of biomass in the US today, and 1.3 billion tons in the optimal scenario. This is won't recapture the carbon from gasoline, let alone diesel, industrial petroleum, fuel oil, coal and natural gas. Any system which requires you to throw away half your energy and carbon in conversion from raw material to finished fuel is going to make the problem at least twice as hard as it needs to be.
We need to push the internal combustion engine to second place, behind the storage battery. When we do that, the carbon–capture and ethanol issues mostly resolve themselves.
We need to push the internal combustion engine to second place, behind the storage battery
We need to push the storage battery to second place, behind the grid connected overhead wire and 3rd rail.
Best Hopes for Electrified Transportation, with a concentration on rail,
Alan
Thus falling prey to the "If we can put a man on the moon, why can't we..." fallacy.
Putting men on the moon was an engineering problem; so are most of the difficulties of electrifying light-duty vehicles. Getting people to move to places served by streetcar lines is a multi–faceted social, financial and regulatory (among other things) problem. We are likely to see a resurgence in streetcars and the like, but the trillions of dollars invested in real estate outside even the hypothetical reach of such systems (plus the American dream of freedom in the personal auto) will push even harder on that one, relatively simple, engineering problem.
Guess which one I think will crack first and fastest?
About 30% of American want to move into TOD (per polls posted by Laurence Aurbach), Build to satisfy that unmeet market demand and then see what happens after that#.
The USA transformed it's urban form in ~20 years (1950-1970) with gov't aid and policy support. I think it can do so again.
Best Hopes for the "other TOD",
Alan
# Once 30% move in, well past Peak Oil, I strongly suspect that another 30% to 50% will be waiting to follow them unless social and economic breakdown is well along.
To quote Kunstler, American Suburbia was the greatest waste of resources in human history.
It does not logically follow that just because we invested $XX trillion in building it, that it has any substantial long term residual value. People can, and do, make very bad investments.
I think I read another headline:
FORD MAKES HISTORY AS 37.000 FACTORY WORKERS HIT THE ROAD
People do stupid things all the time, Keithster. I mean, you are walking proof of that...
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett