DrumBeat: July 6, 2006
Posted by threadbot on July 6, 2006 - 9:45am
Topic: Miscellaneous
Billionaire investor Jim Rogers says Oil will hit well over $100 and stay high:
"We're going to have high oil prices for a very long time. The surprise is going to be how high it goes," Rogers said.Reiterating earlier comment oil prices would hit at least $100 a barrel, he said: "It will be much more than $100 before the bull market is over."
Yes, we had an oil shock in the ’70s. That oil shock was caused by an embargo. The oil shock now is caused by Peak Oil. Is there a difference? Yes, there is: In the former, wages rose to meet rising costs. Are wages rising now because of Peak Oil? I think not.
Saudi Crude Production Falling:
Apparently the story coming from the technical experts in the oil fields is very different than the story coming out of the political types in the royal family and the oil ministry. The ministry says it can boost capacity by 25% in two or three years, when there has been no ability to increase it at all over the last two years despite record prices. The technical types are saying that it will take fairly heroic measures to keep production flat.But others aren't worried:My bet is that the technical types have it right. If the incremental oil to meet growing demand does not come from Saudi Arabia, it is hard to see where it will come from. If so, the bull market in oil is only beginning and we are unlikely to ever see $50 oil again, not in our lifetimes, our children's or our grandchildren's. In other words, peak oil maybe happening even sooner than I had thought, and I have been on the relatively pessimistic side. I hope I am wrong, but fear I am right.
...Every year we have more proven reserves at the end of the year than we did at the beginning, thanks to vigorous exploration and improved extraction technologies. This has been the consistent theme for as long as oil reserves have been calculated. There has never been a time that the oil industry has had less proven reserves at the beginning of the year than at the end, even with the intervening 365 days of consumption being factored in. Odd circumstances indeed for a scarce resource!
Old king coal to reign as fossil fuel continues to fire the future
Malthus was wrong: the world's population has risen sixfold since his day, while life expectancy has doubled. So will contemporary Malthusians prove right about energy?The answer is: No. Moreover, without extraordinary action, the future lies with oil, gas and, above all, "old king coal", the fuel with which the industrial revolution began.
Grain production dropping; fuel thefts rising
Gunmen kidnap guard at Nigerian oil rig
Hit with rising gas prices, boaters are scaling back on trips
Saudi Aramco sees rig fleet at 121 by year end
China, Russia benefit from energy co-operation
Update [2006-7-6 10:39:11 by Leanan]: The EIA Weekly Petroleum Supply Report is out. Oil is dropping on stronger than expected gasoline inventories.
Sales increased 3 billion dollars over June of last year, but it's a disappointment because same-store sales rose "only" 1.2%.
I guess 1.2% won't support the Ponzi scheme...
If so, wouldn't the higher gas prices increase their retail sales?
However, it's becoming more and more difficult for independent retailers to get good prices on gasoline. The gas stations that are connected with oil companies have a pricing advantage, and even large independents like Wal-Mart are hurting.
I mean, think about it. They make 30 billion dollars in sales in one month...but it's not enough because it didn't increase enough over last year? Crazy madness.
Now ... you wanna go on about leverage and risk? Pfft. Retailers have been around since the dawn of civilization. Wine merchants sold product shipped in those amphorae on those little Roman ships. Were some of them leveraged too far, and did they suffer when ships sank, etc.? Sure, why not. That too is as old as civilization.
... but there is a clear difference between a retail business and a paper company.
In the middle we have to distinguish between companies that are merely "overvalued" (quite common) and companies that are running a true scam (somewhat less so).
I recall a computer add-on company of some kind (sound boards?) who was discovered to have taken massive numbers of returned and defective product, and stashed them in a warehouse ... trying to keep them off the books. They certainly veered into scam territory, who knows by what incremental path.
When the music stops, the ones who came in late - the ones at the bottom of the pyramid - are going to be screwed.
Of course this sounds strangely similar to our US Social Security system.
Does it correspond to other parts of our "system"?
What other parts are built on mis-information and fraud?
Seems to me that the Ponzi scheme idea is only partly true and only on a long time frame. Product is being delivered as long as we have the cheap energy for creating it. As cheap energy wanes off, the Ponzi component of the whole shebang gets larger because more is promised and less delivered.
It's really more of a 'Squander' scheme, with the empty promise of being able to squander endlessly into the future.
In the market 5K years ago:
Trader: I have these jars of excellent imported wine, I will sell them for just 6 coins.
Merchant: They smell like they're starting to go off to me. I'll be lucky to move them before they go sour. 3 coins.
Trader: Are you serious? I should take these to the palace, for they are truly suited for kings ... 5 coins.
Merchant: You know, the local stuff is getting much better. My customers are starting to prefer it. 4 coins.
... and so one.
If you ask me, they "analysts" on CNBC in the afternoon are just playing the role of "Trader," one (again) as old as civilization. They are putting the best possible face on their products.
We've actually decided (as a society) what constitutes a scam, and embodied that in a whole series of laws and institutions.
Some people want to throw that over and say it's all a scam ... while I think it's useful to distinguish from things that are merely overvalued or oversold.
Maybe we have enough generations history dealing with swarmy salesmen to develop neural countermeasures.
You do. I do. But advertising still has some sway with us. And a large fraction of society's neural countermeasures aren't nearly as well developed.
Heck, my university educated mother can't resist buying a new household product after a new round of advertising hits the television. And I don't think she's atypical.
Honestly, if it didn't work, do you think companies would spend billions on advertising? Check out No Logo by Naomi Klein.
"There ain't no peak oil, it's just them dang oil companies gouging us!"
While the Cuba powerdown is romanticised, an alternative situation can exist in the form of North Korea. Not good! As if Cuba wasn't bad enough, North Korea is a micro-case of America but with capitalism - only making things worse. Get ready for a looooong ride doooooooooooown! We are misappropiating resources to the military NOW. To be honest, I don't want to see that wreck from a cockpit!
Things will not be good during ANY "powerdown". It seems that a powerdown does require a "command economy" but the way it's done make a giant difference. Fidel did maneage a "powerdown" though admittedly not optimally. Much more likely our own powerdown will be way sub-optimal. Democracy, like capitalism takes a powerup case, so all bets are off.
It's no wonder why doomers love the oil peak topic! PO allows for doomers to have fun. It is up to us and people to remediate it like Y2K but it will be harder by far. Can PO be remediated? We will sure find out, most likely the hard way, as TSHTF.
BTW I keep putting "growth" in quotes because the only thing that truly grows is the throughput of nonrenewable resources and the destructive impact on the planetary environment. When economists learn to subtract as well as add, the externalized costs will show that the "growth" is a loss to most of us.
Growth for it's own sake is the ideology of the cancer cell.
Like Kenneth Boulding said, "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."
While fossil fuels last they will provide (in combination with technology of the day) a "harvest" or "return" or "growth."
We like to point out that oil shale has the energy density of mere baked potatoes. Well, if there were a few billion tons of baked potatoes out there (even inedible) somebody would probably mine them too.
Ultimately, on the long timeline, we will be working with resources lower in energy density, but with a higher technological lever. It's science fiction to say, at that far distant point, what the outcome will be.
Then that's where we disagree. I don't think we'll be able to maintain our technological complexity on a diet of inedible baked potatoes.
And I think our past is a pretty good signpost of what our future will be like.
Can you tell me what the best shale technology will look like in 100 years?
It stikes me now that both "cornucopians" and "doomers" are making the same mistake and counting chickens. The cornucopians see infinite chickens, and the doomers see zero chickens.
;-), moderates wait until they hatch.
Shiny reflective surfaces (i.e. solar ovens) are a recent invention. Bu