Sunday, August 10, 2008

Shift

In contemplation of the past 12 months events it occurred to me that high Oil prices will NOT bring about demand destruction.  It will bring about demand shift.

High Oil prices will not bring the world economy to a crash.  It might bring the U.S. economy, and much of the OECD nations to a significant recession, but much of what is lost in the OECD will just be moved over to the Oil exporters.

So, what's the answer?  Move to Dubai.  Their economy is going to do just fine. (only half tongue in cheek)  

Sorry, I am back...

Every time you fill up your car, or heat your home with oil, much of the money you paid will wind up in an exporting country - boosting their economy, their auto fleet, the size of the house of the oil field worker in that country along with his heating bill, fattening his bank account with extra cash that is now the basis of his discretionary spending, spent on flights from an Oil field in Siberia to sunny beach in Greece which consumed more of his nations Oil that they now cannot export here. Wheh!

Our pain is their gain.  Isn't that free market capitalism?  Isn't that what we fought numerous wars and slaughtered hundreds of MILLIONS of innocents for?  Isn't that what we wanted FOR them?  To be like US?  Well, we did it.  Only now we don't like it.

I listen to U.S. Secretary of Energy Samuel Bodman, who for the most part is an entirely reasonable fellow in a very UNreasonable position, lecturing the Oil exporters such as Saudi Arabia, Russia, Venezuela, and even Iran, that by subsidizing their citizens gasoline purchases they are putting the world economy, and peace itself, at risk.

Then, I read this.  Let me help you zero in on the offending paragraph.
But House Speaker Nancy Pelosi plans to have the House vote on additional aid when lawmakers return in September from their summer vacation. She believes more is needed to counter higher gasoline prices and other costs.
Dear Nancy:

Aren't you suggesting that the U.S. "subsidize" the public's gasoline purchases?  Isn't that exactly what you just said?  How, exactly, is that any different than gasoline selling for 39 cents in Saudi Arabia?

There is a reason that California will be one of the first financial collapses in the U.S., and that reason is their sh-t-for-brains body politic, the first in Green, most in hypocracy, last in capacity for abstract thought, Jag Offs that decry the environment but can't seem to notice that their state CREATED the American love affair with the Automobile.  Do I have to recount the movies, songs, and TV shows that celebrated the F$#@@!ing car, the very instrument of our impending environmental destruction?  ("Fun, fun, fun, till her daddy takes the Tbird away!") Should I mention that , by the way guys, your airports are among the busiest in the world?  I mean, you guys DID hear that jumbo jets consume a great deal of oil and inject a great deal of carbon into the atmosphere, right?  It was in ALL the papers.

This is what the late, great George Carlin described as being "stunningly full of shit".  

But at least Nancy Pelosi's FOURTH car is a Prius.  So we got that going for us.

How do people fall for this Sh-t?

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Lest you think I am picking on the Jerks on the Left, let point out the latest B.S. from the Jerks on the Right:

Read the above link again.  OK?  Who's job is it to make sure Wall Street doesn't get so drunk that they drive the freaking car off the cliff?  I gotta be careful here.  I work in the regulated securities business and these guys are as mean as snakes when it comes to registered personnel that publicly criticize them.  I will say that the agencies and SRO's that are watching over this spend all of their resources monitoring all the unimportant stuff.  They have a limited budget, and they were busy making sure that Brokerage firms were making copies of copies in triplicate coded red, green, and then blue.

Was that politically correct enough?  

The regulators have NO ONE doing a cost/benefit analysis on any of their activities.  When the Credit Default Swap nightmare takes down the U.S. financial system you will know why.  

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Everything, the U.S. $, the equity markets, the mortgage market, housing, etc... depends on Oil prices.  Oil prices depend on inventories, inventories depend on supplies.  Keep you eyes on the DATA, not CNBC.

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In case you don't think we are in real trouble, here is a little fun fact to know courtesy of Wharton Professor Lawrence G. Hrebiniak:

"We just finished paying off the bonds that were created to pay for the Viet Nam war a couple of months ago."


Yours for a better world,

Mentatt (at) yahoo (dot) com

6 comments:

Anonymous said...

From the non-regulating bureaucrat:

I just watched the video from Dr. Hrebiniak, and while I'm sure the man is smart and he knows a lot of interesting things, his "solutions" are the same old-same old. All the information and background I'm sure is correct. But he's writing a book that is going to be like every other book on government out there -- full of common sense that solves nothing. Our Congresspeople are doing EXACTLY what we want them to do: provide benefits for every group that needs them, keep taxes low or non-existent, if not taxation then borrowing, if the dupes overseas won't loan, start selling government property or charge more fees. The legislatures are doing EXACTLY what we want them to do (Bush did exactly what his party wanted him to do also -- that's why he failed.) Every earmark has hundreds of people that wants the money spent! Everyone demands transportation and power and access, and they will get it, no matter what the cost. There are no big solutions that will solve national problems. You have to ask each citizen to consider what they are doing in their own lives, and hope that peer pressure or divine intervention will stop their wasteful behavior. I myself have cut stupid spending, I carry heavy boxes of stuff thru the streets of Chicago to avoid using the car, I've kept the thermostat down or up depending. And capitalism with its high prices does most of the rest. I'm also a Federal worker. Much of what we do is EXACTLY what the taxpayers want. Don't waste your time trying to change us. Change yourselves.

fallout11 said...

Very good post Mr. Jeffers, and an intrinsic part of Jeffrey Brown's Export Land model.....wealth transferance. As oil prices rise, more and more of our GDP will go towards providing cars, roads, malls, sprawl, and salad-shooter purchases by increasingly "developed" economies of the oil exporting countries. Iran realized this a while back, part of their heavy drive for new-ku-lar power (i.e. oil is a source of external revenue, so better to sell it for income than burn it all up at home running power generation equipment, which is what they do now in many oec's.)
At some magic price point, according to some it's about $230/barrel, the entire GDP of the US will be going out to pay for oil imports. At that point, we'll have become a third world basket case, economically speaking, and probably "in need" of a World Bank or IMF "structured payment plan". Lol!

Anonymous said...

Nancy's Just doing what Nancy does. She's a committed Socialist. The US is too rich, it must be poorer. The "rich" (Combined family income >$75k) in the US have to be poorer. 200Sq ft of living space per person, take the bus and lots of cabbage and spuds. Sure, tax me to subsidize oil for the voters in her pocket. Surely, please, weaken the US. Can't have a worldwide Socialist Government with a strong US in the way. If they don't want me to be poor, THEN WHAT THE HELL ARE THEY DOING????

The US has 270,000,000,000 tons of recoverable coal that can yield 1,000,000,000,000 barrels of oil, if the process heat is supplied by nuclear power. We have 800,000,000,000 Barrels of recoverable oil in oil shale. Shell Oil has an in-situ process to extract the oil from oil shale at $30 per barrel. We have offshore oil to develop. Yet our Congress and regulatory agencies say no coal, no offshore drilling, no oil shale development, no nuke.

Our legislators think its better to spend $600,000,000,000 a year to enrich the enemies of the United States through the purchase of foreign oil than to develop our own resources. They bet on infant technologies that quit when the sun goes behind a cloud, or the wind stops blowing. These are very smart people. This is no accident. They are destroying our economy on purpose.

Of course, no matter how many zeros there are in the reserve numbers, the fossil fuels will run out. Hopefully, long before that time comes, renewable energy will have supplanted them. Now is NOT that time. And they DAMN WELL KNOW IT!

Coal Guy

Greg T. Jeffers said...

Dear Coal Guy:

Thank you for your comments.

Neither the American Left OR Right has a market cornered on hypocracy. Both sides are doing the USA a tremendous diservice.

I just like to point out to the Peaknik community, which is overwhelmingly aligned with the Left, that they are as full of shit as red neck religious right. It is just "cooler" to be Left and full of shit than Right and full of shit.

Funny thing about shit. If you hand me a pile of it, no matter how much soap I wash it with, or how much perfume i spray upon the pile, when I hand it back to you, your hands are going to stink.

That sums up our Left and Right.

fallout11 said...

Oil shale development has been "okay!" since the late 1950's (when the Barnett deposits were discovered), but is never been economically viable, and never will be, as the energy inputs necessary to extract and process it are greater than the value of the finished product (and always have been).

Further, you're way off the mark on your CTL claims.
Based on Sasol's real world experience (the largest coal to liquids outfit in the world) and assuming anthracite coal is used in the first place (something we presently import as we've exhausted our supplies), the best one can hope for is 42% conversion efficiency (discounting all other inputs).

Further, USGS 1996 figures show estimated total US coal reserves are approximately 17.6 billion metric tons, a mere fraction of what you claim to start with.
Thus, assuming complete conversion, we'd have exhausted our entire coal supply in just 6 years. (17,600,000,000 tons * 2000 lb/ton * 42% conversion / 8 lb/gal / 42 gal/barrel / 20,000,000 barrels/day consumption / 365 days/year)

Even assuming they're wrong and you're right, US coal production has never exceeded 1200 million metric tons per year. Again, by the math, assuming you convert every ounce of coal presently being extracted into diesel, it comes up to only 8.2 million barrels a day, quite a bit shy of the 21 million barrels currently used.

I sense the 'desperate optimism of the invested'.

fallout11 said...

Sorry, meant to say short tons, not metric tons .