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DrumBeat: October 10, 2006
Posted by threadbot on October 10, 2006 - 9:17am
Topic: Miscellaneous
Gazprom Rejects Foreign Bids for Largest Gas Field
OAO Gazprom, Russia's state-run gas company, said it will develop the $20 billion Shtokman field itself, spurning offers from five Western producers to exploit the country's biggest untapped natural-gas deposit....The company will concentrate on shipping gas from Shtokman, Russia's biggest untapped gas field, to Europe via a pipeline being built to Germany, Miller said. Moscow-based Gazprom initially planned to ship Shtokman's output as liquefied natural gas to the U.S. to break into the world's largest energy market.
Russia to Set Oil Prices on Its Own
Russia’s Economic Minister German Gref has presented a concept of an independent pricing system for Russian oil at a meeting with President Vladimir Putin. The Russian Fuel and Energy Exchange in St. Petersburg and futures trading of Russia’s REBCO crude oil are to become key elements of Russia’s pricing independence from North Sea’s Brent brand.
Russian Energy Minister Says Gas Exports to Grow 52% by 2015
Russia will increase is annual exports of natural gas by 52 percent to 257 billion cubic meters by 2015, the country’s Energy and Industry Minister Viktor Khristenko said on Monday, Oct. 9. Khristenko’s words came after the country’s natural gas monopoly Gazprom announced that it has decided to cut off all of potential partners for the development of giant Shtokman gas deposit in the Arctic Barents Sea.
Oil Falls Below $60 as Saudi Aramco Maintains November Shipment
Crude oil fell below $60 a barrel in New York as Saudi Aramco, the world's largest state-owned oil company by output, will ship full volumes to Asia in November.
EIA: Any OPEC cut would be "less than stated"
Gulf oil states ‘keep faith in dollar assets’
Gulf oil producers will continue buying dollar-based assets with their windfall revenues, but not all the money will flow into the US, according to Mohsin Khan, director of the IMF’s Middle East and Central Asia department.
Global Energy Demand To Double By 2030
ExxonMobil predicts global energy demand to grow by almost 50 per cent by 2030, driven mainly by rapidly expanding economies in the developing world and population growth.
Police: Nigerian attackers take facility
LAGOS, Nigeria - Nigerians with assault rifles overran a navy base early Tuesday, taking several troops hostage, and occupied a nearby oil facility belonging to a subsidiary of Royal Dutch Shell PLC, a police official said.
Leak occurs at Bulgaria nuclear plant
SOFIA, Bulgaria - A rupture in a heating device at Bulgaria's only nuclear plant caused a leak of radioactive solution, but the spill did not result in any contamination, plant management said Monday.
Government price controls have pushed India's state-controlled oil refineries into the red.
Kenya: Oil Firms Now Face Mass Action Over Prices
Civil society organisations have warned of mass action if the Government does not compel oil companies to reduce fuel prices.The groups also issued a 24-hour ultimatum, which expires on Monday, to the oil dealers to reduce pump prices or face a boycott of their products.
Venezuelan central bank reports deficit despite oil gains
Spending by Venezuelan President Hugo Chavez's government has exceeded its gains from oil sales this year resulting in a gaping deficit, according to the central bank's latest figures.
Iran is Beijing's key to the Middle East
China's decision to send 1,000 soldiers to southern Lebanon with the United Nations peacekeeping mission is the latest example of Beijing's increased involvement in the Middle East.
Peak Oil: Yet another 'inconvenient truth'
Fossil fuels are involved in nearly all we own, eat, wear, do, and everywhere we go. Rising oil prices, from a growing gap between supply and demand, are rippling through the economy.As the demand for oil grows, pundits quibble over how many decades of oil remain. But even the most cheerful forecaster does not see a long future for the liquid that fuels our lives. The more crucial question is: How will the depletion play out?
Lower gas prices won't last, say UC-Davis professors
Although consumers may be pleased with the price breaks they have recently received at the gas pumps, oil-consumption experts warn that the long-term effects of depletion may result in higher prices in the near future.
John Michael Greer on Economics: Hallucinated Wealth
As last week’s Archdruid Report post argued, prophecies of catastrophe don’t accurately reflect the economic terrain on the downslope of Hubbert’s peak. Mind you, the reassuring fictions of those who insist that business as usual will go on forever won’t fare any better. I’ve suggested that the future we face is an age of economic, social, and technological decline as industrial civilization slides down the long and bumpy slope to the agrarian societies of the deindustrial future. The economic dimension of that decline is crucial, but those who expect it to show up in obvious ways in the markets and crunched numbers of today’s official economics may be missing a central facet of what’s going on....It surprises me how many people still seem to think that the main business of a modern economy is the production and distribution of goods and services. In point of fact, far and away the majority of economic activity today consists of the production and exchange of IOUs. The United States has the world’s largest economy not because it produces more goods and services than anyone else – it doesn’t, not by a long shot – but because it produces more IOUs than anyone else, and sells those IOUs to the rest of the world in exchange for goods and services.
More on a Mitsubishi MIEV
and my personal favorite:
American bike makers eye commuter market with new models
And on the 'how does this all end well'? George Ure has a datum point from New Orleans
http://www.urbansurvival.com/week.htm
New Orleans is filthy. Definitely divided by the have's and have-not's and most of them are the haven't. I saw the future of America depicted as a third world war zone. There are hundreds living on the streets. The despair in their eyes is heart wrenching.
They immediately tell you to not drink the water - even though we did have to shower in it.
I had a moment where I found myself surrounded by a small group of people and we all just '"connected". I went to high school with one of them. What are the odds on that? One of them and her daughter brought supplies for a community church. The church had had no drinking water for two days. She brought cases. They asked "How did she know?" I shouted, "God directed you to them" and there were smiles all around.
The girls (Regina and Mary) and I did walk-abouts. There is still a national guard and state police presence. I don't think people know how to get out of there - and I know they do not have the funds. At night, there are constant sirens going off - police and ems. Not many visitors there and the shops are empty.
Wrong I believe. Note the "I don't think". Everyone back had to make a decision to come back since everyone left at the end was forcibly evaced at gunpoint, regardless of circumstances (some few good). Most still visit first before returning, finding places to stay (often a sofa or sleeping bag in a friends hallway or "one more" in a FEMA trailer).
And "I can't take it anymore" and leaving again is quite common (as are suicides).
But there is also determination and a willingness to help and incrediably high levels of civic involvement. I am in the 20% that was not destroyed (burned out block accross the street) and do all that I can to help. Being "out of the loop' for 1.5 months has hurt.
hen I left 1.5 months ago to help my father, the US Army had removed 70% of the debris. Rats were a problem. Somewhat better today. The tourist areas are clean, 3 city employees were assigned yesterday to put damaged street signs back up. They hope to be finished in a year. "Stop" and "One Way" signs first priority.
There is a determined effort to keep crime down, Nat'l Guard is patrolling the drowned areas with minimal habitation and NOPD does the areas that didn't drown and those coming back strong. Yesterday, NG shot and killed someone. Didn't catch details.
Reopening schools are a mixed bag. Catholic OK, some charter schools (new) are doing well, others are not. State takeover schools are off to a bumpy start but seem headed in the right direction. Remaining public schools can't get their act together but perhaps with time. All in all, education will definitely improve !
Welcoming home a friend that evaced tonight, her first night back :-) She may be 3 or 4 months away from moving back into her drowned home (staying at friends with inflatable mattress). An MD so she is not a "have not" and medical care is perhaps our most important lack.
A shock for those coming from a suburban bubble (we were shocking before Katrina :-), but people can and will adapt. This unique city is well worth the degraded standard of living, pain, struggle and effort ! All those that came back believe this.
As I told my father, I would rather live in a shack in New Orleans w/o indoor plumbing than a mansion in Phoenix !
BTW, I drink the water all the time (coffee a few inches away). I have used drinking fountains in the drowned areas. Potable water leakage is slowly being fixed. 1.5 months ago teh ratio was 2 gallons leak for every one used. Water pressure for fire fighting is slowly being restored.
Best Hopes,
Alan
About a year ago I researched electric bikes and scooters, hoping to make a purchase of somekind. I ended up getting a single speed commuter bike with baskets and fat tires instead. I call it my Cadillac because it's so comfortable. If I were more techno savvy I'd post a pic.
IIRC, you are in eastern Neb, Lincoln or Omaha? How do you find the commuting? I lived in Lincoln for years, and found I could get anywhere by bike in 20 min or less. Moved to Omaha 12 yrs ago, and it's the opposite here, at least in the part of town where I live.
What do these people like to do? From what I've heard there is some good momentum concerning younger people enjoying living in Omaha these days. There are quite a few colleges and universities, including highly rated Creighton and UN Medical Center. The Missouri River area has been developed recently and a pedestrian bridge will be added soon. It has a world class zoo, brand new performing arts center, convention center, art museum, botanic garden and outstanding restaurants. Its Indie music scene has become quite well known and its produced Bright Eyes and 311. It has had 5 fortune 500 companies for many years, quite a few for its size. Buffett money has had a positive influence on it, not because Warren gives his away, but his investors have. Negatives IMO are not enough bike trails and public land, and weather.
Oh and the botanical garden can't even compare to the one here due to ours being like the 3rd best after one in France somewhere. I took a college class in stl history and there's a lot here that's left over even if the rest of the city went to $hit. I'm sure the Oracle effect isn't bad though.
I forget what prompted him, but he asked why the local club had no Jewish members. The response came back that it had never had Jewish members.
Buffett announced that since it appeared that the club had an informal discriminatory policy, he didn't feel any need to continue to be a member of the club.
Needless to say, the club now has Jewish members ;-).
Sometimes the world can be changed, one small step at a time.
Yes, I'd agree that you can bike anywhere in about 20 min. in Lincoln though it's a city of 250,000. Bike trails and designated streets are reasonable though there are critical links missing here and there. The city has done a pretty good job of continuing to add and improve paths for many years. My personal favorite is the rail-to-trail MoPac which continues 26 miles east of town. What a missed opportunity in the early 80's when the state legislature voted down joining Lincoln and Omaha with that trail. Now half of it is a lost opportunity forever. And, Omaha, for some reason has been very slow in developing trails, though it seems they're trying harder in recent years.
I guess the price of asphalt to repair a single pothole has gone too high: four people dead, and three injured.
At the opposite end of the spectrum: youths chopped up a 100-year-old banyan tree in central Jakarta to prove it did not have mystical powers.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Now I would like to discuss the issue of gasoline stocks. In June I read an article on Bloomberg about blending components. A pity I can't find it on the site again. One of the interesting things in the text was that the author said that what really matters with gasoline stocks is the finished gasoline stock and not the total stocks which include the stocks of blending components. Since then I've tried to monitor more closely the finished gasoline stock. While the global data seem to say "everything is Ok in the oil economy", I believe the finished gasoline stock tells another story. All the data referenced here comes from Figures from the EIA.
Ok, the total gasoline stock is high. But the finished gasoline stock is really very low. See here the trend for the month of September from 2004 to 2006 (from the weekly data set expressed here in million barrels) :
year finished gas
2004 130.512
2005 125.509
2006 118.527
Just to be sure here's a graph over the last five years (the y axis diplays kb and not mb). Believe me, finished gasoline stocks have never been so low since January 1981 from when they were first reported. Here the data source are the monthly files from EIA.
The absolute minimum has occurred in August 2006 at 114.397 mb.
See here the trend from EIA's more accurate monthly data for the month of July from 2004 through 2006 (finished gasoline stock) :
Year finished gas y/y change
2004 140.525
2005 135.074 -4%
2006 118.344 -12%
Let us see why the finished gasoline stock has decreased so much. Here is the data from the monthly data files. The table displays the sum of gasoline supplied, imported and produced from refineries and blenders from January through July (finished gasoline, million barrels) :
Year supplied imports production
2005 1,932.453 123.889 1,758.339
2006 1,944.091 111.103 1,748.518
0.6% -10% -0.5%
Gasoline consumption has increased, production and imports have decreased. Production has decreased but the maintenance season has been intense. What will be the future ?
See the trend for the month of September 2006 compared to the month of September 2005 from EIA's weekly data :
Year supplied imports production
2005 309.106 23.044 289.905
2006 326.109 14.672 319.354
+5% -36% +10%
This last data set shows that finished gasoline stocks have increased mostly because of healthy production of gasoline versus last year when a lot of refining capacity was lost because of Katrina. But the total imports and production volumes are not yet enough to restore the stocks to a more comfortable level. I believe that consumption will be higher than last year because there are no shortages. Refineries will soon be diverting production to distillates and won't be able to work above 90% for a long time because of glitches, upgrading and maintenance issues. So the big unknowns come from the imports of finished gasoline, Canada being the major supplier followed by the European union. With reduced refining margins as R Rapier said will they provide ?
One thing is sure, these figures show the tightness of the whole system. Do you still think investors/managers should look at total gasoline stocks more than at finished gasoline stocks ?
About 10 days ago, I believe you commented that there seemed to be a lot of crude available to the refineries. Is that still the case?
Any views on the physical supply/demand picture over the next several months and the likelihood and/or impact of an OPEC production cut?
Thanks!
- Peak oil is here.
- Its a big world, likely to be a plateau for some time (5-25 years)
- Oil businesses (KSA, OPEC, Commercial interests - drillers, integrateds, Autos?) too rich and influential. (As someone said $1 trillion is available for drilling more holes but one cannot get a few bucks for renewables). In addition our use of oil is very profligate. Therefore we will continue to use oil until the flows become small
3.1) The world will use less at higher prices but given excessive waste in current usage that will not affect economic growth.- Oil/NG/NGL (&coal) will be burned - climate change be dammed.
- Plenty of renewables - Biomass derived liquid fuel (likely to come from a synthetic conversion cycle) burnt in an ICE (internal combustion engine) - mated with a plug-in hybrid (battery, ultracapacitor) will be the ultimate transportation solution. Electricity to come from renewables (Wind, solar). Expect that most energy will be from electric drive - biomass fuel for long trips only (this would be ideal environmentally)
- We can make just one compound with extreme purity in synthetic reactors - to make a bunch of burnable liquid fuels in arbitrary ratio for the sake of "burning" - not a big deal, but needs institutional support. That will be forthcoming when oil has declined substantially that efficiency gains still leave shortages. Also Oil interests control the current infrastructure (pipelines, gas stations) and will not share it until the oil cow is fully milked. This is also the problem for current VCs (e.g. Khosla et al) who can make fuel but cannot distribute it.
- In summary - running out of oil is not a big deal. However, climate change and environmental destruction is a big deal.
- Plenty of folks who are on the pay of the KSA (& ilk). One of whom is the fellow who is so anti #6 above.
All IMHO only.My early morning thought is that the pain in that might come down to the uniformity, or volatility, of the price curve. If there are sudden and dramatic swings, we'll see more people caught on the wrong side of an economic trend (as GM and Ford recently have been).
True enough. Unfortunately without government intervention (e.g. sliding subsidy proposed by Khsola) it specially kills the renewable guys who need predictable cash flow after putting up a capital intensive plant.
--
Aside Ford/GM/Chrysler (C bailed out by DCX) - their problems are related to high oil but not totally so: UAW, retiree health care, management incompetence and bureacracy built up over 75 years as a successful organization also play a part.
After all Toyota, Suzuki, Honda, and some others (Tata Motors, Maruti-Suzuki, Hyundai) are doing quite well.
To take the second first, Ford and GM do have "structural problems" but those unfortunately tie them to the same SUVs that sufferred market reversals. Their high costs force them to bet on high margin vehicles, and SUVs have traditionally borne those margins.
The double-whammy in a move to small cars (now or later) is that they are simply less expensive, and support lower margins.
On the first ... that's not where I come from at all. I think we should be taxing fossil fuels but keeping our hands (subsides) completely off the production of renewables. Create a level playing field, and let the best solution (even if that is efficiency!!!) win.
I have to agree with the fossil fuel/subsidy issue also. However, conventional wisdowm is (& this may be more due to politics) that a tax on fossil fuels will not fly so the "sliding" subsidy was the other option. Perhaps it could be designed to be technology agnostic as long as the solution was renewable.
All it will take is for a critical mass of investors to understand that economic growth will no longer be possible as total energy availability declines in the world. Then they'll take their money out and that's all she wrote for "the economy".
Seems to me the current run-up in the Dow is money fleeing real estate. Looking for the last refuge of profitability. And of course the Dow is propped up by defense contractors spending gov't money that was created out of thin air.
When I first encountered PO I had the thought that "it's over, as soon as "everybody" realizes it". And given the amount of effort being expended to keep the problem covered up I doubt I'm the only one who realizes this.
Money can't sit, so it will back something, and likely that something will be a story of growth under the new conditions.
That story may even prove true.
How actually, in a world where bank accounts are nothing more than rows in an Oracle database, does money stop moving? The banks certainly are not going to stop doing deals (though a return to higher standards of regulation is likely).
The average American thinks they are safe from "runs on the bank" now, because of the FDIC. But it hasn't really been tested.
When the tide goes out, we could all find we've been swimming naked.
And, since it is disadvantageous to keep your money at home if you know you can always get it from the bank, you can be reasonably sure that any bank runs will be very limited. As far as I recall, the only significant runs during the S&L crisis were against S&Ls that didn't have Federal insurance.
The other thing is that it is unlikely that any large bank will be allowed to fail at all (they didn't allow Continental Illinois to fail, and it was a pipsqueak compared to the current banks).
See http://www.erisk.com/Learning/CaseStudies/ContinentalIllinois.asp if you are interested.
With the consolidation of the US banking system over the past 25 years, the bulk of deposits is in the large banks.
Note that I am not saying anything about the safety of the banking/financial system here--it is entirely possible that there could be serious disruptions that would cause all manner of problem, and the owners of banks could be at risk--but bank depositors whose deposits are under the $100,000 FDIC limit, aren't going to be the (direct) victims.
People may not trust the banks. Or the government. As it is, people post regularly at PeakOil.com about supposed secret Homeland Security plans for barring withdrawals. Dunno if there's any truth to it, but obviously, there's some anxiety about it.
My worry is the opposite. With banks so large these days, will they be able to bail them out? If, say, Citibank fails?
Stormy weather ahead for the dollar? With the very-real impacts of Peak Oil, not to mention GW and assorted international conflicts I have little confidence in the dollar. I feel I got out while the gettin's good.
Now, about those printing presses...
Even if you're over the $100K, most times all monies are honored since another bank assumes the portfolio minus the BS that the FDIC does pick up (bad loans) or adding some cash to grease the wheels. In general they rarely ever simply payout your cash, instead focusing on letting a stronger bank manage the branch and if they want to close it later, then fine, but the push is to clear it up asap.
If so, and if there's a threat of a bank-run, the Argentina model worked: limit withdrawals to maybe $100 a week per capita. If need be, include plastic, limit spending to $100. Since most is plastic these days, that problem is not the key one. Empty ATM's will do the trick.
A bigger issue for banks is repossessing assets. Housing property is the first big one. And they will repo, bet on it. They let New Orleans folk bleed, and they will the rest of the poor.
The US economy depends on growth, it can't exist without it. That growth has been artificailly facilitated by M3 and other forms of creative money creation. If people's labor can no longer create growth, the game is over. The taps will be closed, and all you have to your name is debt. Maybe not you persoally, but a whole lot of others will.
There may be plans to abolish the dollar, and turn to the AMERO for instance, but would all those foreigners who hold trillions in dollar-denominated assets accept that?
Moreover, such a move is useful only when there is some kind of renewed growth on the horizon. There isn't. For one thing there's too much debt that needs to be paid off, for another there's no manufacturing base left. Society has been utterly gutted.
More likely, the debt will be paid off, albeit partially, out of the pockets and the property of the people. Prepare for a lot less of a lot of things, first of all energy.
If you mean personal: why do you think that was made nearly impossible?
If you mena natinonal: that's the de facto reality since 1971.
I mean as a country. I'm sure you're aware of this paper...
http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf#search=%22kotlikoff%20bankrup tcy%22
We need to declare it to the world and start over.
No such problem exists for the the US. US banks may fail in some way, their investors may be wiped out, but depositors under the FDIC limit will be made whole.
And yes, as someone else mentioned the FDIC may well honor deposits over $100,000. They did in the Continental Illinois example I mentioned above, where not only did all the depositors get their money, but creditors not only of the bank but of the bank holding company did as well. The stockholders, on the other hand, were toast.
I guess my point is that historically the reason for bank runs has been people being afraid that the banks were not solvent and that would not be able to get their money out--either in a reasonable amount of time, or ever. This is just not a reasonable fear in the US, so I doubt that there will be serious bank runs by insured depositors. But even if there are, the banks will be provided with the funds needed to make the depositors good.
There are two limits that you ignore.
1/ A bank run is a physical phenomenon. One or two people that lose faith in the bank and/or currency will not pose a problem, they'll get their money and go home contented. But that is not a bank run. That means, let's grab an example, 100-1000 people who all want their money at the same branch and at the same time (rumours travel fast).
If they each have $20.000 in their account, the bank won't have the cash to pay them. The manager will try to close the door and tell them to not worry and come back the next day. But that doesn't help, on the contrary. They are there because they're worried. Never tell a worried person not to worry. If you have this at one branch, more will follow.
It makes little difference whether you think there is a "reasonable" fear. It's not about reason.
2/ There is no insurance that covers 20 million accounts that each have those same $20.000 in them (let alone $100.000). Like a branch of a bank has limited cash, so an insurance too has limits. It wasn't made for these situations. It'll cover the first few thousand accounts, if that, and then close the door. And maybe even tell people not to worry.
Yes, the government could go to the Fed and ask them nicely to print a few hundred billion. But don't count on it. The "insured" depositors may not either.
Besides, it's not the government's role to prop up the banks. They're private institutions.
There is a strong correlation with gold and fiat dollars. When in the 1960's US creditors demended the US pay its outstanding debts in gold, Nixon said no.
Like those debts didn't have a true value in gold, so your holdings in a bank may not have a value in real dollars.