The Carriers are Coming, the Carriers are Coming! (or, Thursday's Open Thread)
Posted by Prof. Goose on April 13, 2006 - 11:46am
Topic: Policy/Politics
Tags: hugo chavez, peak oil, venezuela [list all tags]
I doubt they did it in on purpose, but the title "Beating the Oil Drums of War-Part I" is just precious. [editor's note, by Prof. Goose]and we also forgot to mention this post over at econbrowser. JDH, always a good read.
Africa and the oil price trap
The demand destruction is already occurring...among the poorest first, as expected.
Excellent post! Keep up the good work; you are much appreciated.
my question: what should one invest in?
no one knows for certain, but my belief about the economic future is that the powers that be powers will do everything they can to keep the ponzi scheme going as long as possible, but eventually it will collapse in a kuntsler-esque fashion. that suggests that for a period, imo 10-15 years, the "system" will remain in place essentially as is, but with big winners and big losers, then we all become losers. in other words, for a certain period what one does with one's financial assets is relevant and important, after that real assets (land, tools) and skills will trump financial assets.
so during that bumby but recognizable period, what should one investment in?
i've read leeb's book and generally agree with the premise that it might be a long approximation of a '70's era energy crisis economy, but some of his assumptions do not necessarily make intuitive sense. for example, if there is a real shortage in oil and directly related products, either due to field depletion or refinery capacity or war or whatever, rather than a mere politically caused shortage a la the embargos, will IOCs profit or lose out? how can they profit as everyone seems to think if they can't get any oil, or if the cost/price leads to demand destruction? how will the ADMs of the world (industrial farmers) fare? food will be in huge demand, but the cost of production and distribution will be huge, possibly huger than the demand. what other companies, alt energy companies for example, are good investments? commodities? will gold really skyrocket defore teh collapse? will it continue to have value in the LE/kunstler phase (part of me says no, but then gold has always been valuable, even in the pre-indusrial times).
what are all you smart and informed people doing? reducing debt makes sense, but my mortgage is fixed at 5.37% -traditionally that ain't a debt that should be reduced, but should any/all debt be reduced.
i feel that every day that passes without asset re-allocation is a wasted opportunity, and makes the cost of re-allocation higher, but i am not certain of where/how to re-allocate.
thoughts?
Yes, reducing debt was my starting point. I heard Simmons talk once and one point was that once you realize you are digging yourself into a hole, the first thing you do is stop digging. On a personal level, that means stop spending, and stop buying stuff. Like you, my only debt is a 5.37% fixed mortgage - as long as I remain employed I will be OK. If things really go to hell, then that could become problematic - thus I am trying to build up savings as quickly as possible. If this thing drags out long enough, I can just pay the whole thing off.
I know people are looking for ideas for investment, but I have also worked to reduce energy consumption. A more fuel efficient car, less electricity and natural gas at home, and pay more attention to the stuff I eat.
I have been trying to figure out the inflation/deflation thing myself for some number of months. At least in the short term, I am betting on inflation. The problem is this though - there are a number of others trying to do the same thing, and the question is the degree to which the prices in the market have already risen to take into account some of this stuff. I was talking with someone who was thinking of buying stocks in a coal company, for example.
My main objective here isn't to make a killing - it is to keep from getting skinned alive.
True, you won't have to payback your mortgage, but those whose house value is wrecked by a hurricane, tornado, drought, mudslide, etc will have no incentive to do either.
Max Maxfields's latest comments have probably made alot of insurance companies raise their rates to where many homeowners cannot afford the premium:
http://www.floridatoday.com/apps/pbcs.dll/article?AID=/20060412/BREAKINGNEWS/60412009
Excerpt:
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ORLANDO - Max Mayfield already is hearing folks say no hurricane season could be as bad as 2005.
"I'm here to convince you otherwise," the director of the National Hurricane Center told about 1,800 people gathered today for the National Hurricane Conference.
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Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
I think farmland is a good long-term investment for survival. Not necessarily in a remote area (where bandits might get you), but some farmland near an urban area might be a good choice. Of course as people go hungry, you will probably have to fence it and put a couple of pit bulls in there to keep people from stealing your crops.
for example, if there is a real shortage in oil and directly related products, either due to field depletion or refinery capacity or war or whatever, rather than a mere politically caused shortage a la the embargos, will IOCs profit or lose out?
I have given this a lot of thought. Barring government intervention, Peak Oil will be a windfall for the oil companies. They will be sitting on an incredibly valuable asset. Look at the aftermath of Katrina. We had immediate shortages, and prices shot up to stem demand. But oil companies made a lot of money in that quarter.
However, I think the government is likely to intervene as oil companies reap huge profits while people are struggling to keep the lights on. I just can't decide in what form that intervention might be.
Finally, many people don't seem to consider that Big Oil can very easily move into the alternative fuels business if they think the time is right. They have the infrastructure to buy up every ethanol plant in the country if they thought the economics were good. So, Big Oil won't be dead, even when we do run out of oil. They will just be providing some other form of energy.
RR
Your Quote: "However, I think the government is likely to intervene as oil companies reap huge profits while people are struggling to keep the lights on. I just can't decide in what form that intervention might be."
The only viable alternative is for govt. intervention to build large biosolar habitats as explained in my previous posts and further explained in this EnergyBulletin link:
http://energybulletin.net/14902.html
The question is: will the unwashed masses chose this Powerdown option or go whole hog for the "3 Days of the Condor" scenario?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
A permaculture community is the exact opposite. For it to work people must SHARE resources! What a concept. Cubans were taught to share and cooperate, hence the Cuban adaptation is working somewhat. Note in honesty people try every method short of rocket to escape the island, so it's no utopia even if taught to share from birth.
As far as agriculture. Once someone figures out how to take air, water, and solar to make ammonium nitrate they stand to make money on the resulting fertiliser. My bet is a post-oil terrorist will figure it out, not to fertilise a field but to add biodiesel to make ANFO. Wonderful. An eco-friendly bomb!
Thxs for responding. This is admittedly speculative, but imagine how popular the Biosolar Shire might become if those families that chose to live there had their children exempted from the Military Draft. Powerdown to enhance your children's future survivability.
Those detritovores so addicted to 'ancient sunshine' would be forced to ante up their children's BLOOD FOR OIL if they still desire the easy-motoring, drive-thru, suburban existence that Kunstler writes so often about. This Detritus Delusion is then bitch-slapped in everybody's face as they realize why the world is headed for resource wars.
From Matt Savinar's LATOC archives:
http://www.lifeaftertheoilcrash.net/Archives2006/March-28-2006.html
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When I used to give talks on this subject, I would say to the crowd (usually made of politically active Greens and progressive liberals):
Who here remembers Dick Cheney saying 'the American way of life is not negotiable'? Naturally, most were aware of this statement and none too happy about it. I would then say:
"Well, like it or not, Dick Cheney is correct and I can
prove it to you right now. Raise your hand if you're
against going to war for oil. (All hands would shoot up.)
Now keep your hand raised if you drive a car. (99% of
the hands stay up). Well there you have it folks. Your
soundtrack says you're against war for oil but your
actions tell a different story. As they say, "talk is
cheap" and "actions speak louder than words." Shit or
get off the pot people. Either get your physical actions
in line with your verbal soundtrack or shut the f--k up
cause right now, I feel like I'm watching an Arnold
Schwarnzegger film with a speech from Gandhi or MLK
dubbed over it. There's a bit of a disconnect between
what I'm seeing and what I'm hearing here folks. If those of you in this room aren't willing to negotiate their car dependent way-of-life, how can you realistically expect anybody else to do so?
As you can imagine, this didn't go over too well with the crowd(s), mostly because what I'm saying is true and people only get upset with something if it's true.
This is one of the primary reasons why I have stopped giving talks for the most part. I've found that people just wanted me to stand up there and tell them what a great job they're doing because they've installed energy efficient light bulbs in their $500,000 home and can afford to drop $30,000 on a brand new hybrid car. (What type of dumbass would you have to be NOT to buy the most fuel-efficient vehicle you can afford?) Basically they wanted me to show up and kiss their asses, not bitchslap them across the face with a dose of reality. Oh well.
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If this could be implemented the world over: Powerdown would be a done deal. I think most Americans are against the re-imposition of the Draft. It would be an excellent national referendum on if we really want to continue our present exchange of BLOOD FOR OIL.
Otherwise the Three Days of the Condor prevails.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Not quite, but have you seen my lifesize cut out of a fire-breathing Jesus with flaming red eyes? I bust it out at the end of the talk and admonish the crowd to "repent siners!!!turn or burn! turn or burn!"
Best,
Matt
Best,
Matt
Now there's an idea. We could tax cars to pay for the war. Only we don't call it a tax, of course. Taxes are bad. We call it a "user fee." User fees aren't bad, they're good - "responsible." Those who benefit should pay, right? ;-)
Call it a Nonrenewable Paleozoic Resevoir Depletion Fee.
Since it is described as being nonrenewable the fee will be accepted as a good thing because it will never be repeated.
Needless to say, quite risky assets. Don't bet unless you can afford to do so and really believe in peak oil.
It's what propping us the whole system, our love of our portfolios. Nothing will change until we lose our assets. Then will lose our asses killing each other -- if the worst scenarios play out, which I hope against hope do not.
So it wasn't just one single thing or a single cliff I saw, but a host of things and a series of cliffs and jagged gulches that made me yank my money out and spend it on something else. And believe me, it was a hard sell to the wife - women are ALL about securing their future, and to get her to let me move ahead, I had to force her through awareness/acceptance/grieving/reconciliation with what is going on. Sure, we could all be wrong - but planning for the bright side isn't what you do long term.
I think when she saw me putting in the water catchment system and the heat pump she finally realized I was deadly serious. And she's ok with it, because all our bills are dropping, which she enjoys. And now we have that country place...
http://www.energybulletin.net/11695.html
Published on 13 Dec 2005 by Fortune. Archived on 14 Dec 2005.
The Rainwater Prophecy
by Oliver Ryan
Richard Rainwater made billions by knowing how to profit from a crisis. Now he foresees the biggest one yet
Excerpt:
Back on the farm that night, he (Rainwater) and Moore discuss future projects with their landscaper, Jenks Farmer, over a glass of wine. Farmer, who has a master's in horticulture and lives on the property, maintains Moore's extensive gardens, including vegetable beds that produce all year round. That morning Rainwater had been surfing the web, researching greenhouses in his quest to further ensure a steady flow of food through the winter. At his prodding, Moore has installed an emergency generator and 500-gallon storage tanks for diesel fuel and water. When Rainwater says that he's thinking about opening a for-profit survivability center, it's not entirely clear that he's joking.
Later in the night Rainwater returns to musing on how different his lot is from the residents of Lake City. And then, returning to the debate in his head, he gets a serious look on his face and says: "This is going to get a little religious. I ask why I was blessed with this insightfulness. Everyone who has achieved something, scientists, ballplayers, thinks they were given their talent for a reason. Why me? Was I given this insightfulness at this particular time? Or was I just given this insightfulness?" He pauses. "I just want people to look out. 'Cause it could be bad."
Home-Economics being largely a (small c) conservative game, to even present the idea of drastic changes [possibly/probably] coming around the bend is some tough pillow-talk. We have a 3 year old child, and have been looking for an additional income property (Portland, Maine) as part of our 'portfolio', which in the recent past has been a solid investment. Last night I started that one with my wife, suggesting that we try to understand the potential impact of energy costs before we extend out over more acreage/rental units.
If we do dive into that next building, one plan I'm exploring is to get Solar Hot Water going on the roof, for about $10-15k and actually 'include' heating in the rent as a stable number, which could give us a clear rate-of-return on the investment (which would be financed with the building), and an incentive to Maine renters who are increasingly required to heat their own places, as Heating Oil is already locking in (?) at around 2.70 for next winter. (*we paid 1.19 last year).. as long as heating costs keep rising, our financials just get better.
As far as other Hard Assets, I've gotten my first couple PV panels, against the possibility that those prices will skyrocket when energy issues Really start getting attention again, and I'm building a 'Winter fridge', which will be an insulated box with a small thermostat-run heat exchanger for grabbing our Winter's Cold, and see if we can't turn the fridge off for 1/2 the year.
Bob
They are still using tetraethyl lead (TEL) gasoline!
One reason I don't buy fresh vegetables from the local farm, hard along a major European north/south route.
Some other interesting facts from the article -
'The use of TEL in gasoline was mostly dominant in the US while in Europe alcohol was used instead. However the dominance of the US oil companies eventually led to a switch to leaded fuel. In most Western countries this additive went out of use in the late 20th century, chiefly because of the realization that most of its lead--which is toxic to humans and other organisms--ended up in the exhaust fumes and became a major health and environmental problem. The need for that additive was also lessened by the introduction of harder metals for valves and valve-seats, a general reduction in engine compression ratios and the introduction of other anti-knocking additives. The deployment of the catalytic converter (which TEL contaminated and rendered ineffective) further reduced TEL use. TEL remains an ingredient of aviation gasoline and is also still available from a limited number of outlets as a fuel additive, mostly for owners of classic and vintage cars and motorcycles. A more environmental friendly additive is composed of contains 10 ppm potassium (sometimes sodium), solvents and 75% diesel, and is added to unleaded fuel to boost the octane rating by 2-3 points.'
My old 1978 R100/7 (160k miles before finally becoming parts) actually did have valve pitting/valve seat recession from unleaded fuel, but buying newer valves and doing a bit of general polishing/porting certainly improved performance over factory delivery, for minor cost in any terms. And the octane did make a difference to the motor - though 98 octane Amoco was fine from the mid-80s to the later 90s.
Changing over to another fuel mix, however defined, comes with costs which tend to be subject to on-going concrete analysis, as long as the facts are collected and spread for full discussion, not suppressed or simply left unexplored. Or in the case of MBTE, look at California, ca. early to mid 1990s and oil company/refinery concerns about maintaining a closed market through fostering 'environmental' concerns which could be resolved by adding MBTE (or another additive - I am no longer that interested in American oil company/energy policy SOP) - profit is never about long term concerns, though society should be.
This is part of what makes this site an interesting experiment. Lots of facts, and at least a few people worth listening to after they explore/collect those facts. And the sharing is important - people do share in practice, for a number of reasons. In this too, people are smarter than yeast.
The Wiki was pretty informative (taken with a small dash of salt).. I wondered if anyone could clarify an URBAN LEGEND that I was told when my daughter got Lead Poisoning, 2 years ago. >> AND her BLL, blood-lead-level just read as 'undetectable' last week!! <<
We know fairly well that it was Lead Paint Dust from renovation work that probably got to her, but I also told that our "UNLEADED" gas in the US has really only had 50% of the Lead removed, not all of it, as "UN-" would tend to suggest.
Does anyone know how much, if any lead still remains, as our 'Fleet' burns so many more gallons with such poor fuel-economy today?
Bob
Lead is out of gasoline, but residues remain EVERYWHERE. Usually not enough to be easily detectable, but more than we evolved with by a large factor.
Lead paint is a major residual source, as are old gasoline fumes and lead pipes (some utilities have not replaced the lead pipe feeders from the mains to the houses).
Other tidbits -
The R100/7...that's a BMW Motoraad, correct? If so, I am very surprised you only got 160k out of it. I thought those things ran forever. The reason I ask is that I currently own a BMW Dakar F 650 GS, and is my only means of transport. It's a great bike, both for on highway, around town and off road, and at 70 miles to the gallon is cheap to run.
Subkommander Dred
I had left the bike in America, and bringing it to Germany, considering its numerous modifications (from things like teflon braided steel brake lines, aftermarket ignition, and a number of other modifications well known to old boxer types) would have been a huge effort for a well used machine.
I have ridden on BMWs of the same year and make with 300,000 miles, but quite honestly, it is the sort of thing which a BMW shop can afford to do to keep a loaner or two around very cheaply.
But to add that mandatory mythmaking lustre of eternity - the bike, after charging the battery, always started easily after the needed couple of turns of the motor to get gas into the cylinders, even after 18 months of standing in a garage. And older BMWs were quite easy to maintain, so they did tend to last, essentially on the remains of the ones which had become beyond practical repair - I am sure that a number of bikes are still running with parts from mine.
I have a fairly boring 750GT Kawasaki here. It has actually lasted 12 years till this point, but it does lacks something my first motorcycle had - not that either was anything but a machine.
And for a strange note - I could never, and I mean never, push start (including a warm motor and 50 yards of sloping hill) that R100/7. Other BMWs or motorcycles, no problem, but that one never. I carried jumper cables.
-G
http://www.thenation.com/doc/20000320/kitman
In any case...whether Bush believes in peak oil or not, he's going to be a lot better off than most of us, with his solar heating, geothermal heat pumps, 40,000 gallon rainwater cistern, wastewater recycling system, and manmade pond stocked with bass and baitfish.
I know a former gas company CEO in my neck of the woods who has a large acreage with orchard, large garden, wind generator, and "hardened" (steel doors, "hunting" guns, seperate well) wing.
Classified under "things that make you go 'hmmm.'"