I think we have to reconsider that eventuality.
Recessions wring the excesses out of economies and markets, sowing the seeds for the next round of economic growth. But is that growth possible without growth in energy supplies? Total petroleum products supplied to the U.S. is down 4.4% in 2008 from 2007, with most of the decline coming from falling imports. How can a recovery take place if this trend continues? How sure can we be that this trend will or will not continue? How many times have you heard this considered in the Mainstream Financial Media? Never. Well, then its potential cannot possibly be discounted (priced in) in the current market or economic forecasts.
Who knows? Maybe compressed natural gas will come on strong as a transportation fuel. Maybe we will build a bunch of nuclear plants in hurry, drastically improve the electrical grid, and develop truly viable battery technology. Maybe we will be able to do all of this in less than a decade. Making strategic plans based on "who knows" and "maybe", like "belief" and "hope", does not engender a great deal of confidence in me.
Not that I am particularly confident of anything at the moment. With all of the above, and the dire importance of our energy complex, the markets KILLED the energy producers and servicers, a sector I had considered a very safe haven, right along with the banks.
Go figure (and get gold).
Mentatt (at) yahoo (d0t) com
7 comments:
>Maybe we will build a bunch of nuclear plants in hurry, drastically improve the electrical grid, and develop truly viable battery technology.<
Cash please. Oops forgot we are now REALLY bankrupt now. But not as bad as after our foreign creditors pull the plug.
Any bets on BOC buying more than a token bunch of the 800Billion bailout auction?
Somewhere I read (a few months ago) that the US only has enough nuclear engineer types to build one nuclear reactor at a time and THEY TAKE ABOUT 8 YEARS.
This is not great news (for "knocking out a few power plants" in a decade)so I hope someone can prove me wrong on this.
Why would you be buying oil servicer companies? If the peak is going to happen fast, these firms will be without work soon enough.
Yes, sounds about right, 2007 was probably humanities peak, the credit crunch will in lead to a global depression. Subsequently oil use will decline sharply BUT investment in new and more expensive sources of energy will decline as well. This will mean that when the recovery period starts many years into the future, that the oil/ energy prices will skyrocket bringing about a nasty recession again. Thus we will have cyclical recessions and small peaks but all less than the previous peak, the highest of which was reached in 2007.
>Why would you be buying oil servicer companies? If the peak is going to happen fast, these firms will be without work soon enough.<
I worked in the domestic oil business for many years. My wife is still employed on the geophysical side of things.
Our view is that although oil supply is dropping, there will be LOTS and LOTS of work and profit opportunities for domestic energy firms- there are LOTS of small oil and gas fields around that would make a nice income for a small energy company. And the need for oil and gas will be much more serious for priority usage ie agriculture, military, public services, prioritized transportation etc.
However, finding and producing these smaller fields will not solve the big problem in any way.
Good article today at the oil drum.
Herman Daly on the Credit Crisis, Financial Assets, and Real Wealth
An excerpt:
The current financial debacle is really not a “liquidity” crisis as it is often euphemistically called. It is a crisis of overgrowth of financial assets relative to growth of real wealth—pretty much the opposite of too little liquidity. Financial assets have grown by a large multiple of the real economy—paper exchanging for paper is now 20 times greater than exchanges of paper for real commodities. It should be no surprise that the relative value of the vastly more abundant financial assets has fallen in terms of real assets. Real wealth is concrete; financial assets are abstractions—existing real wealth carries a lien on it in the amount of future debt. The value of present real wealth is no longer sufficient to serve as a lien to guarantee the exploding debt. Consequently the debt is being devalued in terms of existing wealth. No one any longer is eager to trade real present wealth for debt even at high interest rates. This is because the debt is worth much less, not because there is not enough money or credit, or because “banks are not lending to each other” as commentators often say.
Can the economy grow fast enough in real terms to redeem the massive increase in debt? In a word, no. As Frederick Soddy (1926 Nobel Laureate chemist and underground economist) pointed out long ago, “you cannot permanently pit an absurd human convention, such as the spontaneous increment of debt [compound interest] against the natural law of the spontaneous decrement of wealth [entropy]”.
I think what you're saying is that there is nothing at this point valuable enough to invest in. Replacing foreign oil is. But, we've got to stop focusing on technologies that take a 25 to 50 year infrastructure build to become practical. By these I mean solar, wind, geothermal, etc. These will supply a steadily increasing percentage or our electricity over time, but don't have a snowball's chance in heck of replacing nuclear and fossil fuels on the power grid for a long long time.
Electric cars will always be inferior to gasoline or diesel simply because of the volume and weight of materials required to store a reasonable amount of energy in a battery. Hydrogen fuel cells may work. They are efficient enough to partially compensate for hydrogen's poor volumetric energy density. But that's an infant technology and there is no distribution system for hydrogen.
Anything that can possibly help us in the short or even medium term must be built from proven, well-understood technology. As well, it must feed into existing distribution system and be usable by existing equipment.
A man in Florida has a clue. None of the technology he proposes is less than 25 years old, and the products are usable in today's vehicles and can be brought to market in today's distribution system. This is extremely profitable. The obstacles are completely political. Please visit his website:
www.liquidcoal.com
Thanks.
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