Thursday, April 16, 2009

Wrong State, but right idea...

If you have been reading my stuff for a while, you know that I think some pretty unthinkable things could happen politically - I have written several posts about the possibility of States in the West, and in particular California, seceding from the U.S.

(Please keep in mind a don't write about what I "hope" will happen.  I write about potential outcomes and their varying probabilities.  I love and value my country and our freedoms and rights. -  I merely bring to the attention of people (the LEFT for the most part, but the RIGHT, too) that don't think that some of their policy drives might have some very unpleasant unintended consequences another point of view.)

California and Texas will, in my opinion, not last the century as members of the U.S. in its current representative form from a combination of historical errors (the Missouri and Connecticut compromises) and demographics (DNA wins ALL wars, eventually).  The Framer's could not have envisioned a population distribution that would lead 1/8 of American's with 2 Senators (California), and 1/12 of American's with another 2 Senators (Texas).  

Hopefully, a Constitutional Crisis can be avoided through some future compromise.  Hopefully, too folks on either extreme of the political spectrum will grasp that their activities may work in ways not intended.


We now have just a bit more than 1 quarter's data on oil imports and domestic production.  The picture is getting clearer and is no prettier than last year.  "Total net Imports" have declined 2.3% during the first 99 days of 2009 when compared to 2008, and were down over 8% in 2008 when compared to 2007.  "Total Products Supplied" is down 4% for the first 99 days of 2009 from 2008.

This is how investment in productive capacity in commodities is supposed to work.  The price went down, and domestic production went down even faster than imports.  After all, we are the high cost producer.

Regardless of how "its supposed to work", the reality is that our economy, as presently constructed, cannot "grow", irrespective of who is doing the counting, if energy supply/consumption is declining.  

So which came first?   The chicken or the egg?  The recession has had its starting date recast as December of 2007.  What a coincidence.  Peak oil imports into the U.S. were either Q3'07 or q4'07, depending on who you want to listen to, the IEA or the EIA.  Did the imports decline as a result of the economic contraction, or did the contraction result from decreased oil availability?  Probably not a black or white kind of thing, but grey, and that would indicate that Oil, or lack thereof, contributed to our economic circumstances.

To my mind, all commodities, with perhaps (and only perhaps) the exception of Gold, are led in price by the real cost of Oil.  Want to know where corn is headed?  Look to oil.  Wheat?  Look to Oil.  Copper?  Look to Oil, etc...

But back to the above link... Notice anything funny about the break down of total products supplied?  Gasoline is relatively unchanged, while Jet fuel has had its back broken and distillates (diesel) has been rocked as well.  It would seem to me that American's have not cut into their driving just yet, but have cut back on travel and consumption (diesel moves goods).  Of course, not all of these numbers jive with the Vehicle Miles Traveled number or inventories.  (That's what makes this job so much fun - tongue squarely in cheek).  Ahhh, but then you scroll down Table 1 to the area headed "Petroleum Stocks"... notice gasoline is first totaled, and then broken out into reformulated, conventional, and blending components?  Anybody care to bet me that "blending components" are mostly made up of ethanol?  (If you doubt this just look up to  "other liquids new supply" in paragraph 2 of Table 1.  Up 71% year over year.  You know of anything other than ethanol that's supply could be up 71% in a year?  Yes, the government could make this data far more transparent, or at least not so purposely opaque, but then they would not be being the government, now would they?)  If I back that number out, it would appear that we are not really so flush with gasoline, after all, perhaps even dangerously low considering that now is the time to be building inventories for the summer driving season - if you CAN, that is.

Stocks of the industrial fuels, diesel (distillate) and propane are rising fast - which, to me, would again point to a continued contraction in the U.S. (and world, the U.S. is 25% of it) economy.

Lastly, the decline in domestic production of 17% for Natural Gas Plant Liquids would dovetail nicely with Matt Simmons argument that last years surge in production was the blowing off of "gas caps" in superannuated wells.

It is pretty amazing, when you stop and think about it... just how much data is out there at your finger tips.  Now connecting the dots is whole other story...


That's just to make people feel better.  Truth is, they will NEVER be rebuilt. 

And that is a shame.

I was in the towers on September 10, 2001 and caught a flight out after midnight from LaGuardia on September 11 - one of the last flights out for over a week.  I was with a handsome young man and his lovely fiance at a funeral that weekend (9/11 was a tuesday) named Mike Armstrong - unfortunately, Mike worked for Cantor Fitzgerald and was killed in the attack.  Wall Street is a small community.  I knew a lot of guys from Cantor and Sandler ONeal that did not survive that day.  The story might be in the past for many Americans, but for some families it is the defining moment in their lives.

Perhaps just another example of the unintended consequences of policy decisions that echo for decades.

Mentatt (at) yahoo (d0t) com


bureaucrat said...

I'd take all these numbers more seriously if I could find their effect anywhere. People are driving just as much as before (including myself), they are easing off purchasing things they didn't need anyway (travel, clothes, upgraded computers, chinese junk, etc.), there is a whole lot of oil and natural gas in storage (making it possible for supply to exceed production). Yet my natural gas cost at home does not reflect the full savings -- it's down but not that much (I wrote a letter to Peoples gas on this subject). Pump prices are still on the high side, w/ $2.49 being the high city price. If something is going on in the background with energy supplies, the world seems to not be affected by it .. so far. Heck, even Obama is willing to talk to Chavez in Venezuela. All systems normal.

Anonymous said...

Bureacrat says-
"All systems normal".

GEAB says-
"The perspective of a US default this summer is becoming clearer as public debt is now completely out of control with skyrocketing expenses (+41%) and collapsing tax revenues (-28%), as LEAP/E2020 anticipated more than a year ago. In March 2009 alone, the federal deficit has nearly reached USD 200-billion (way above the most pessimistic forecasts), i.e. a little less than half of the deficit recorded for the entire year 2008 (a record high year). The same trend can be observed at every level of the country’s public organisation: federal state, federated states, counties, towns, everywhere tax revenues are vanishing, suffocating the whole country with spiraling debts that no one can control anymore (not even Washington)."

oOOo said...

Bureacrat says-
"All systems normal".

The bad news is that we nevertheless remain one of the most controlled peoples on the planet, especially regarding control of our consciousness, public and private. And the control is tightening. I know it doesn't feel like that to most Americans. But therein rests the proof. Everything feels normal; everybody else around us is doing the same things, so it must be OK. This is a sort of Stockholm Syndrome of the soul, in which the prisoner identifies with the values of his or her captors, which in our case is of course, the American corporate state and its manufactured popular culture.

Greg T. Jeffers said...


Your experiences are anecdotal, the numbers I link you to are empirical. There is no question that Oil availability in the U.S. is down by 6% in TOTAL over the past 18 months. Hence the contraction in the economy. Or is it that the imports declined because the economy contracted?

Stay tuned. We will get to the bottom of this.

bureaucrat said...

Per the awful Mish :), we are in a deflationary depression. That would explain any drop in energy supplies (you don't need what you can't sell). The building inventories of oil and nat. gas simply means no one is buying, as is to be expected.

As far as life goes, I went on my "fuel-buying" loop this morning, recording 16 gasoline station prices (all a littl,e elevated, but stations were open). Then this afternoon I walked in the 70 degree and clear weather along the lake with hundreds of other Chicagoans. We were indeed being controlled -- to leave our offices and homes and go outside and enjoy. :)

Anonymous said...

On a side note, I've noticed most filling stations in the southeastern US are now selling a 10% ethanol product, where just two years ago you would be hard pressed to find a single such station within 100 miles of each other. Lot more ethanol being used, lot less gasoline.

sharon said...

thanks for sharing.......

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