Friday, May 8, 2015


My wife has been busy producing a number of songs and tunes for use in Documentaries.

I had not been promoting these as I should lest someone confuse them with me... but that issue has past. Here are several links to her work:

"Growing up on the Farm"



"Country Boy"

"Hector the Hero One Woman Band"

Friday, January 16, 2015

"OPEC" is Done, and We are Really Going to Miss Them

"OPEC", the former cartel come trade association, has died and Americans have whooped up a cheer. Me thinks this was a case of "be careful what you wish for, you may just get it" (OPEC - Organization of Petroleum Exporting Countries)

OPEC died a long, long time ago. Saudi Arabia has been "OPEC", or should I say operating in the stead of what was once the cartel that helped control Oil prices for the world economy? That, too.
But Saudi Arabia has resigned as the world's "swing producer" for oil. For those not familiar with the term, the "swing producer" has a great deal of control over a commodity's price because it is able to increase world supply when prices get "too high" and cut world supply when prices get "too low".

Well, they quit. And the new "swing producer" is the American domestic oil production industry!

(Hurray for the Red, White, and Blue! Huuurrrraaay for the Re ed, Why I Ite and Bluu uuu...)

Here's the thing: It is quite easy, as a practical matter, for a totalitarian government that has complete control over the production, storage, and sale of its commodity to increase or decrease the supply of that commodity on a moment's notice. It is impossible for a free market system to do so. IMPOSSIBLE.

So, instead of having a compliant dictatorship willing to oblige a super power in exchange for military protection in control of the price of Oil we now have the free market in "control" - which means there is no control. People I speak to (and the articles I read) seem to think that Oil has been volatile. Well, sort of. I think we people are confusing "volatile" with paying more than we would like. Sugar is volatile. Copper is volatile. On Wall Street we call Natural Gas "the widow maker" (at Bear Stearns it was inartfully referred to as the "career ruiner"). Oil prices, for the most part (but with a couple of frightening exceptions) are rather tame by comparison.

I think that that is over. The American domestic Exploration & Production ("E&P") industry is going to make for an awful "swing producer" (I think we will see $25 Oil and $250 Oil over the next decade, and I don't think it will be something to cheer about). You see, Oil companies' budgeting for Cap Ex (capital expenditures) is infinitely easier with reliably high prices - and that reliability was created by totalitarian Saudi Arabia. The Oil & Gas industry is the most capitally intensive industry in the world. Nothing else even comes close. It is is mindbogglingly capital intensive. How will a "free market" apportion capital as both a consumer and "swing producer"? Not very well, comparatively.  I think we are really, really going to miss OPEC (Saudi Arabia). And, no, I don't think that they will be able to reclaim that position in the future (at least not for very long). The damage has been done.

And there is an even bigger issue on the horizon.

North America is within a decade, and it could be just a few years, away from being "energy independent". Really Oil independent (North America is already coal, uranium, Nat Gas independent). Once those tankers stop running back and forth across the oceans Oil will trade much the way Natural Gas does now.

Natural Gas is a domestic market, and Oil is an international market. Oil trades within several dollars a barrel all over the world, call it 5 or 10%. Natural Gas in Europe trades several hundred percent higher than in North America. Why? Because, as the industry gleefully points out, there is no "infrastructure" to move Nat Gas from North America to Europe, and by infrastructure, the industry means Nat Gas handling facilities at the ports and the vessels (tankers) fitted for Nat Gas transport.

But isn't America almost Oil independent? Haven't import volumes declined by 7 or 8 million barrels a day in only 6 years? You bet they have. If imports continue to decline, what will we need with Oil import infrastructure (you know, tankers and port handling facilities)? Won't that make Oil a domestic market rather than an international market? Of course. Why wouldn't Oil trade in a similar fashion to Natural Gas in North America? It is not readily apparent to me why it would not (but I am all ears if anybody wants to comment below).

Now, for any other nation this outcome would actually be very supportive of the national currency. In the case of the world's reserve currency where the currency got that way because of Oil... well, I need to noodle that some more. A lot more. Because once the U.S. is Oil independent it would seem to me that on the other side of the " = " is the rest of the world is US$ independent. (But again I am all ears on this issue.)

So, here it is: totalitarian Saudi Arabia is out as the "swing producer" for the most important commodity for the world economy and free market America is up at bat. So far, the new "swing producer" has cut Cap Ex by 50% or so. Either Oil rises in price to reverse that or the new "swing producer" will be swinging a limp noodle.

Meanwhile, the old swing producer and their neighbors have increased their rig count by nearly 50%.

I have no idea what to make of that in this environment... other than to say that if that is true there had better be a serious increase in production in 6 to 9 months from that effort, because if that is not forthcoming... and they did indeed put those rigs to use... and have no increased production to show for it... given the data... the Oil markets and the world economy won't know whether to sh#! or wind their wrist watch.

Wednesday, December 24, 2014

Year End Review of the Data

The furious bear market in world Oil prices took market participants by complete surprise. That's how markets work. Calling tops and crashes is impossible. Bottoms and recoveries are much easier.

Saudi Arabia, Goldman Sachs, the U.S. Treasury, The Federal Reserve Bank, Russia, The U.S. Department of Energy et al... all employ cadres of Mathematicians, Statisticians, and Analysts - and not one of them saw this bear market in Oil coming. Zip. Zero. Nada. Bupkis. Ugatz.

I have had nothing to say for most of this year. Speculating in the commodity markets requires discipline - sometimes you have to stay away from the table. When the markets do not jive with ones sense of the world it is better to keep your mouth shut and your hands in your pockets. I fear boom times. The end always seems to come when you least expect it and you are rolling (temporarily) in profits. Busts can be wonderful things - if you have any capital left to take advantage of them, that is.

So what happened with Oil?

In short: Too much Oil at the moment.

This moment will pass. It might take a year or 2... but $50 Oil assures $120 to $150 in 5 years or less.
$30 Oil will assure $200. That's how commodity markets work.

I spent the last couple of months talking with the Mad Scientist & Westexas and others, particularly folks working on the ground in the Bakken and Eagle Ford, asked for and was kindly granted by Darwinian vast amounts of data that he used for his assertions at his excellent site (thanks Darwinian!).

Before I get to my personal anecdotes and the observations from my contacts in the industry here is what the production data says (to me):

  • "Peak Oil" happened to conventional Oil sometime between 2005 and 2010. (Scroll down to graph showing "World Less USA Left Scale). The peakniks - Hubbert, Deffeyes, Simmons, Heinberg got this part right. 
  • There is a lot more non-conventional Oil and other liquid fuels than the peakniks had counted on (enough to move the needle on "peak" 8.3 years for 500 billion extra barrels), and in the final analysis it is ultimate recovery/production of every atom of liquid (or gas to liquids) hydro carbons, right down to ear wax, that really matters. (I bet you didn't know that ear wax is a hydro carbon. It is. No kidding!)
  • There is a lot more non-conventional Natural Gas than the peakniks had counted on (of this the "peak" needle might have a great deal more than 8.3 years to move... though I have not gathered enough data to give me great confidence to say more).
  • There was a great deal more "efficiency" that could be wrung from the system in the U.S. than the peakniks counted on.
  • It was non-conventional Oil production in the U.S. that kept the world from "Peak Liquids", which we may or may not be at or close to. Peak Liquids has happened in the Rest of World Ex U.S. (so far). If someone comes along and figures out some technical solution to really and actually improve fracking technology and recovery (despite claims, this has not happened yet. The technology has been around for a while, and improvements in recovery have been tactical and economic not physical) and raising ultimate recovery of Tight Oil from X to 3X or 5X, well, that will move the needle another decade (or 2).
  • "Total liquids" consumption in the U.S. peaked some years back (2008 give or take 6 months) and subsequently declined by several million barrels - even with the production increase of 4 MILLION barrels per day of tight oil and nearly 1 MILLION barrels per day of ethanol domestically. The economic "recovery" during this period was anemic at best, and we should be "thankful' (not really, but I will get to that shortly) for that and give all of the credit to increased production and consumption of Natural Gas to offset the decline in liquid hydro carbons.
  • Whatever industrial processes that Oil could be replaced with Nat Gas has happened for the most part. 5 years+ of $100 +or- Oil and $25 barrel of oil equivalent Nat Gas has likely been long enough and incentive enough to make what substitutions were economically possible . There will not likely be much more of this (in the near term, say 5 years) as we have increased our production and consumption of Natural Gas greatly - and yet our inventories have not risen. By mathematical necessity the "days of supplies" number must have declined precipitously - and cut our use of coal. Since all new power plant additions have been Nat Gas (little new coal power added of late) the 25% increase in Nat Gas production is spoken for and any discussion of exporting Nat Gas is just political posturing.

OK, there's the supply data. Back to the Oil price crash.

Oil prices are not sufficient to provide profit incentive to the U.S. Tight Oil production market. Ergo, these folks are going to lay down rigs, and in so doing they are, for now, going from the Well Manufacturing Business ("WMB") to the Pump and Collect ("PAC") business for a year or 2. Maybe 3. This means that Oil prices could literally go down to the cash flow costs of pumping and collecting - doubtful, but certainly possible. Which means Oil COULD go to the $20's! But fracking WILL come back to whatever extent is physically possible, and that will require $100+ Oil. For people with capital, foresight, and courage this is an important moment. Bear markets in Oil typically last 20 weeks. This Bear market is already 28 weeks old. Remember, the commodities futures market is a "zero sum game" - for every winner there is an equal and opposite loser. The folks selling or "shorting" oil have made a killing. At some point they take their football and go home. We are close to that point in time (if not in price).

How much is ultimately recovered from the Tight Oil fields? Is it 20 Billion barrels or less, as the critics contend? Or is it 200 Billion, as the Oil industry contends? Good question. I don't think it matters over the next 5 years, but I do think that that question will be answered in that time frame. I rather doubt the industry's assessment - for as long as the U.S. is not a command economy. (Think about the possibility that I am hinting about there.)

(BTW... all of these conspiracy theories of the U.S. and Saudi Arabia conspiring to destroy Russia/Putin... or Saudi Arabia purposely destroying the U.S. tight oil production... whatever... are all complete nonsense. Rubbish. No one saw this coming. This price decline caught EVERYONE by surprise and EVERYONE is running around trying to optimize their outcome. Nothing more. Nothing less. And in the process of trying to optimize their outcomes the powers that be will negotiate internally and externally and change their mind several times. That's just the way it is. 

Now, the unintended consequences of  all of this, and the parties abilities to benefit from these are another matter altogether.)

Cap Ex budgets of the North American Exploration and Production companies are being cut deeply, and North America is (or was) responsible for ALL of the growth in world Oil production for the past 5 years. This will not be undone overnight. Production growth in North America is going to come to a halt. The longer (and lower) the price of Oil stays the higher the inevitable rally will be. Peak conventional crude Oil is here. If Peak Non-Conventional Oil is here the ride back up will be the stuff of legend.

Peak Oil is NOT the end of the commodity price cycle. So far, Peak Oil has meant that the commodity price cycle for Oil is far more pronounced. I think that that will continue, if I may make use of understatement, for at least one more turn of the cycle.

Oh, and for those of you that think "Peak Oil" has been discredited, I would like to say that I have thoroughly reviewed the data from the US Department of Energy's EIA and the European IEA. The data completely supports the theory. The political and financial media, having not even bothered to look at the data, disagrees.

Here life long Oil man T. Boone Pickens takes CNBC journalists to task, telling them to look at the data (they don't) and further reminding them that he is an Oil man and they are a bunch of talking heads wearing pancake makeup. You can skip to the 4 minute mark. By the 6 minute mark Pickens looses his patience and reminds them, "I'm the expert, you guys, not you."

This is your media at work. Its not the price cycle of a commodity... its the proof that Peak Oil is a failed theory irrespective of what the data that that U.S. Department of Energy compiles might say

But let me take Pickens to task now:

"The world got along fine with $100 Oil."

People like me got along fine. But for the people occupying the lower 25% income strata in the U.S. $100 Oil was an unmitigated disaster for their economic and financial well being - but ONLY because we have constructed a system whereby people that cannot afford to own and operate a car are "non-citizens" (I just read Kuntsler's "The Geography of Nowhere". That was his term.) The world that these people occupy was not "fine" at $100 and will be even less "fine" at $175 - which is sure to come. Not that I have an answer - I don't. I do suggest that "we" think about a new living arrangements for people that will absolutely, positively be even worse off "non-citiznes".

And for the "drill baby drill" crowd - Here is your world:

Not exactly heaven on earth.

More soon.

Wednesday, April 23, 2014

Everything you have been told about your Health is Wrong?

For decades now the American public (and by extension the West and the OECD nations) have been bombarded with "information" regarding what one must do to maintain their heath. Eat right and exercise! Yet the industrialized West experiences hormonal cancers (and colorectal cancer) at 2X to 5X the rate that non-industrialized societies experience (the difference in breast cancer for a woman living in New York City and a woman living in the least developed parts of the world, say the mountains of Peru, is well over 5X. Pretty much the same for men and prostate cancer. Suddenly Peru has a certain appeal, no?). It gets worse for "shift workers", nurses, police officers, fire fighters, and others that work day and evening shifts. Hormonal cancers for this group are estimated to be 40% higher than for non shift workers.

This is true even though our diet in the Wealthy West is much more varied and nutritious.

What if everything you have been told about maintaining your health has been absolutely freaking wrong?

20 years ago we were admonished to never go in the sun. NEVER. There was no such thing as a "healthy tan". Now we know that the hormone Calcidiol and its resultant Calcitriol (commonly known as vitamin D, even though it is not a vitamin) is one of the 2 most important hormones in the human body for the regulation and support of our immune systems.

The other is Melatonin.

Vitamin D is only synthesized by the skin when exposed to mid day sunlight. Melatonin is only synthesized by the pineal gland in the absence of light (complete darkness).

The data is simply overwhelming, and the data says that you can veggie-juice yourself after your yoga-anti-stress class as you Namaste the universe while you cover yourself in pink ribbons and "March for the Cure" - but are at extreme risk of developing deadly, terminal cancers unless you get sunlight (or ingest Vitamin D, but there are some other benefits to sunlight - in particular the release of Nitric Oxide - that you will not get by relying on supplements) and turn off the lights completely for 10 or more hours every day. When I say "turn of the lights" I mean it in the extreme. No streetlight streaming in. No blinking router lights in the corner. No clock radio light. Darkness. As in the kind of dark that existed before the advent of commercial electricity generation.

This information is starting to leak out into the MainStream Media. In fact, you can't go near a Doctor now without getting a vitamin D shot, but the Melatonin thing? The need for darkness? If factual and accurate, and I think the data is powerfully convincing, the implications are simply mind bending. Articles covering this issue are now everywhere.

The question is this: Are we willing to turn off the lights to prevent cancer, MS, and other diseases? Are we willing to move from northern latitudes to prevent cancer? Or are we going to continue Marching for the Cure, getting Mammograms and Prostate biopsies?

If you knew that wearing a suit to work while living in brightly lit New York City was going to kill you, or cause you to lose your breasts or a working and operable penis, would you remain there?

I see the post "I F***ing Love Science" quite regularly. The internet has put the entirety of human knowledge at our finger tips - and now we know it is not the "Paleo Diet" but the "Paleo Circadian Rhythm" that governs most of our immune system. Hey, the Paleo guys were in the right church, just the wrong pew.

You can use search engines as well as I... I like "Google Scholar" but any one will do. How much reading time - and then action - is your life worth?

More soon on the mental health impacts of messing with Mother Natures natural rhythm of light and dark.

Tuesday, April 1, 2014

For What Its Worth

I am going to wander off of the subject of energy and muse a bit about health.

I LOVE my Life. This one. Not some wished for existence of perfection. I love the Life I have. Grey hair, flat feet, crooked teeth, only one chromosome or 2 away from Neanderthal... and I am good with all of it.

Life is not perfect and not all of us are going to get old, grey, and wrinkly. Those are the rules, but there is absolutely no sense in killing yourself slowly or permanently damaging your health and the quality of Life for the finite time we have for questionable objectives. 

Read this incredible article "We are giving ourselves Cancer". Its not directed at smokers or the obese. It is directed at the healthcare industry. The truth of it all can be found out there in articles like this.  And this.

For better or worse, and like it or not, there has been an ongoing "natural experiment" in "cancer" outcomes. While there are several forms of "cancer" with high cure rates - testicular cancer, anal cancer, leukemia, and Hodgkins lymphoma - there is precious little data to support any assertion that all of the other treatments for the 200 some odd other cancers extend the life of a cancer victim by a single freaking day. This does not mean that some people might not experience a "cure". Surgery in certain cases can be effective in removing localized malignancies. Chemotherapy? Not so much. The math simply says that some cancers are highly aggressive and they kill us no matter what treatment plan we take and others are not aggressive and won't kill you no matter how hard the healthcare industry tries to kill you. And it is impossible to tell which from which.

If it was about "money", "status", or "access to health care" Steve Jobs, Jackie Kennedy, and Hugo Chavez would still be here.  That means means that there is no point in "fighting" cancer. The point is to fight to not get cancer if at all possible.

Well, there is another point. NO ONE is getting out of here alive. You can go to Lourdes, douse yourself in holy water, doven at the Wailing Wall... and the outcome will not change. There will, however, be all sorts of folks willing to lighten your estate for a chance at a "cure". Worse, they may well be shortening your life unnecessarily. The brutal reality is that at any time on the north side of 40 you may get some very disconcerting news from a gent or lady in a white coat. If you are over 50 its no longer even a tragedy. If you are over 60 its to be expected. The only solution, or perhaps I should say the only rational response is to have fun. Right now. (Well, that's my response... I never concerned myself with "being happy". I figured if I was having fun the rest would take care of itself.)

There are a great many people that will do their damnedest to get you killed - even if they seem like they are "on your team". An old college team mate of mine has been stricken with cancer. I have not talked to him since our college days, but I mailed out a note to him this morning. He was always a nice fellow and a genuinely good egg. I could not help thinking about the fact that the Buffalo Bills owner just passed away at 95 while the players on the field are absolutely destroying their health, with literally dozens of CT scans and hundreds of X-Rays for those with long careers. 

The "Healthcare Industry" will happily irradiate you to death, pass you hospital-acquired infections, perform unnecessary surgeries, and "treat you" without benefit - and we are worried about who will pay for that? Seems something is amiss in that line of reasoning.

The ancient Spartans aspired to a "good death" (of course, their idea of a "good death" seemed to hold a great deal of bloodshed.) For some odd reason, a good death is no longer in our lexicon. We are no longer Spartan warriors. Now we are cancer "fighters". 

"Your arms are too short to box with G-d."

The system has worked hard to scare the living sh#! out of people regarding illness and old age - and in doing so has ruined the many moments of our lives when we are healthy and young. 


Wednesday, March 19, 2014

Malaysian Flight 370 Scenarios

While there is still little public hard evidence, that has never stopped us here at the AEC from going over possible scenarios...

I don't think that the pilots intended to crash that aircraft into the Ocean. The information released is that that Flight 370 climbed to in excess of 45,000 feet shortly after shutting off their inflight transponders. I think this was to render the passengers and crew helpless (dead) as part of the plan to steal the aircraft for use in a future terrorist operation (in 10 - 20 seconds at the altitude human beings are rendered unconscious... and very dead in the space of 3 minutes).

That does not mean that the plane landed intact someplace. Much could have gone wrong leaving the whoever was piloting the aircraft no other option with fuel running out but to accept the end, but I think the authorities are absolutely freaking out about the potential of having a Boeing 777 sitting around waiting for the next act in this tragedy. I would have little interest in spending time in some high value target in certain regions of Asia until it has been determined with certainty what happened to that aircraft.


The American administration and its European counterparts are wondering what the heck to do about Russia annexing a semi-autonimous region that overwhelmingly voted for annexation?

Perhaps they should "do no harm".

Thursday, March 13, 2014

Ukraine (Crimea) was about Oil, and its ALWAYS About Oil

To put the U.S. Oil circumstance into its proper perspective please take a gander at the following graphs:    

    24 months of data starting January 2012 and ending December 2013

Data from the U.S. Department of Energy's EIA website pages Here and here.

I make no representation here as to whether these trends will hold, but as they say on Wall Street: "the trend is your friend". My money says they hold even if my mouth won't commit.

Total U.S. domestic production and imports remains at or under 14mm bpd for the past 2 years, and had been as high as 18mm bpd in 2005. The downtrend of the last 4 months in net petroleum imports has overwhelmed the increase in domestic production that had kept this metric static for the past 2 years. A peak to trough decline of 1.7 million bpd.

As I have asked before: Where is the Oil that did not show up in the U.S.? Did the exporters cut exports? Or did the other importers import more than they had been? Every data point I read tells me, in so many words, that the other importers did not increase their imports (though everything cite's another source that cite's another source, etc... which leaves me cold. Of course, the EIA leaves me cold, too, but that and the IEA are the only sources we have).

So what's this have to do with Russia/Ukraine/Crimea?

Putin made a remark in the press that he could ruin the financial system of the West with a wave of his hand (pen). At first, I thought he was talking about the US$ and Russia's customers in Asia. Maybe. Or maybe Russia agreed to cut exports to keep the price high enough so that the fracking boom does not fall on its face. The U.S. actually finds itself in the position of desiring high oil prices! If Oil is $70, still very expensive historically, the fracking fields in North Dakota and Texas go bust and billions of $$ in capital equipment rusts in the rain. Was Putin reminding the U.S. of some such deal? Such a deal would be in both parties' interests... but far more so for the U.S. in the short term.

I cannot see how it is to Putin/Russia's advantage to undue the U.S.$ trade settlement for Oil at this moment or in this fashion. I can see how increasing domestic Oil production could collapse West Texas Intermediate prices in Cushing, OK, due to their unique pipeline and storage issues if helped along by international prices. I could see that outcome very easily. That would not be in the U.S. OR Russia's interests - but it is Russia that holds, and deals, the cards in that game.

The U.S. economy has proven that it can handle $100 Oil, even if 40% of the population cannot. (Not a single f**k is given in the U.S. about those people, and some of that attitude is rightly so: that population is busy consuming heroin, meth, and tattoos; does it really matter if they don't have enough fuel to get back and forth to the tattoo parlor? Lest you think I am being elitist... I am a product of the lower portion of the working class. The way up and out of that is not drugs and tattoos - but that is another issue for another time.) What the U.S. economy cannot handle is a collapse in domestic production caused by low Oil prices.