"You never need an argument against the use of violence, you need an argument for it." - Noam Chomsky
Think about this: Would you invest in a small petroleum E & P company given what just happened to B.P.'s valuation? Exxon et al are, for the most part, no longer in the exploration business, and will be less so from this point forward. Big Oil are really just large, publicly traded investment banks/private equity funds. They are in the business of ACQUIRING production and reserves.
But from who? Where is the capital going to come from to form these new, smaller E & P outfits?
The U.S. consumes roughly 19 million barrels per day of liquid fuels. Politically destroying domestic production, intended or not, WILL have consequences for our economy and national security to say nothing of our internal politics.
I do not suggest wild changes in policy, only a full disclosure to the American people and a sales campaign by TPTB exhorting us to accept the inevitable and to encourage people to find their way - but I have a better shot at a Pulitzer as a blogger.
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Last week I posted that the Mad Scientist and I had gone net short in the U.S. equity markets, even going so far as closing most of our energy equity positions. The world's political leaders are now, finally, getting some religion in fiscal realities. If so, I would expect a nasty repricing of "risk" and fat whiff of deflation (but I reserve the right to change my mind if the data changes).
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Less than 270 days until California needs a Federal bailout.
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I love Noam Chomsky (see quote above). Not that I agree with some of his politics (what the hell is a "socialist-libertarian") but it is hard to look past some of his brilliant thoughts.
This morning I woke early as usual on the farm to get a start on the chores before the heat of the day. I came into a breakfast of eggs, sausage, potatoes and corn bread with preserves - all grown on the farm. Yes there was coffee and butter and honey (the butter and honey come from a guy I trade eggs for)... and these were not produced on the farm... but in the end this is just me expressing my politics - and there is simply no better way to express oneself than to sustain one's belief system by sustaining oneself... go that? I cannot say if I will always live like this, but it will be one hell of an adjustment if I had to give it up.
27 comments:
It pretty much all follows .. if the oil is becoming harder, riskier and more expensive to find, and it must be found to sustain the global economy, and the established oil companies can't afford something bad to happen when drilling, it follows that oil exploration and production is going to become a small business thing with huge risks, if it survives at all. If the risks are that great, and the costs to drill so huge, the big money centers are going to shy away from funding the production of oil. Smart, big money just wont take the risk anymore. Time for plan B! :) What is plan B?
I just had a dinner last night of pork, potatoes with onions and garlic, new peas and applesauce, all from our land. All right. The Marguerita was definately shipped in but it could have been a glass of white wine which I do make from my land. It's the only Plan B I have. I was just able to buy a share in a milk CSA. It is on a farm that is just up the road. I am willing to bet that I will get a better return for my money than I would from the market.
In this I have to agree with Bureaucrat it will and has already become a smaller business venture with those companies taking a percentage after it has been discovered. A few small exploration companies have gained some big value this year. At least I have noticed these companies maybe they aren't a big share of the industry yet.
I am making new splits on my bee hives this week so hopefully by next year I will be totally self reliant and able to sell some surplus. Luckily my son loves garden produce so it saves me a ton of money during the Summer.
Bur:
Keep going with that process... you stopped too soon.
Hi Kathy! My potatoes are coming in gang busters, the tomatoes just started to ripen, we have cucumber salad every night. I am expecting a decent sweet potato harvest this fall.
All in all the farm is really starting to work. I often complain that it took me till my 5th growing season, but that's not really accurate... I spent half more than half the year in South Florida. I am looking forward to next year when I can live full time on the farm. I want to see just how productive I can make it.
BTW Kathy...
We bought 2 "Jersey Giant" roosters (sometimes called black giants) last year because ourbirds seemed to get smaller every year (we had this one chicken, not a rooster, whose genes DOMINATED on the farm; she and her off spring could never be confined and were excellent mothers, we nicknamed her "mama chicken"... but she was very small. Great layer, but small bird.
I am happy to report that this crop has begun to lay, and the birds are BIG. 1 bird feeds a family of 5 with no problem with some left overs. Also, the roosters are not soooo big that they cannot walk when full grown (which happens more than you might think with this breed).
Pioneer:
I meant to do bees this year and just didn't get to it... and it is such a shame because with all of the rain in late spring we had a clover outbreak like nothing I have ever seen.
Please feel free to show me what you did and have. I need all the help in the bee department I can get.
Can't wait for you to continue my line of logic. :) As I see the long term oil situation ...
1) We will be hard-presssed to replace gasoline and diesel with any form of alternative. The most practical replacement, ethanol (AKA booze), at best can replace 10-15% of it. oil from shale/sands/tar sands, CTL, GTL, natgas, electric, eth-from-cellulose, hydrogen, methanol all suck, suck, suck.
2) If there's no replacement, we will have to drill w/ government serving as the insurer, and they/we are overstretched already.
3) The world economy drops world oil demand, and if oil demand falls faster than oil supply, there isn't going to be any "peak oil."
I don't see any long term happiness here.
We have to raise winter hardy birds or their combs freeze. What's the hardiness of this breed? We raise New Hampshire or RI Reds or Orpingtons. I love the Orps. They are a good multi-purpose bird with lovely disposistions. We have put a cpouple of RI Reds in the stew pot early because they were so aggressive.
You gold and gun nuts should be thrilled by Mish's latest today .. we're definetly in a deflationary depression ....
Copy and paste this to your Internet browser (Explorer, Firefox, whatever) ...
http://globaleconomic
analysis.blogspot.com/
2010/06/consumer-
confidence-
takes-dive-treasury.html
Oil prices are going nowhere for awhile.
Not a whole lot to tell yet Greg.
I picked up two hives from a guy who got ill and let most all of his hives starve off over the Winter.
After moving them and caring/giving them some bee food to carry them through the hives positively exploded this Spring and I been making splits in the hopes of getting enough hives to actually produce some honey.
Almost everyday someone stops by asking if I sell honey just from spotting the hives in my back pasture. So I guess there is a demand. I even had 2 local towns contact me because they heard I had hives and want someone to sell at their town markets.
I am now up to 6 hives with the other 4 split off in remote areas to keep the split bees from going back to their original hives. This new split I am doing this week or next week (depending on when my queen is shipped) will be the last so the hive has enough time to grow and bring in enough supplies for Winter.
I really try not to feed sugar syrup as it causes stress which may lead to CCD so I plan on leaving more honey for the bees than most producers do. Which is why I really don't plan on harvesting any honey this year.
Bur said: "3) The world economy drops world oil demand, and if oil demand falls faster than oil supply, there isn't going to be any 'peak oil.'"
Sure there will be a Peak Oil.
Peak Oil, as defined, is the day or time that oil production reaches a maximum, never to attain that production level again.
If the world economy crashes oil demand faster than supply, causing prices to crash, causing future exploration and drilling to be starved for the necessary cash, then that's still Peak Oil. Whether Peak Oil happens at $150 a barrel, $300, or $95 doesn't matter to validate M. King Hubbert's theory. Either way, whether the peak happens at a "high" price because there is little oil to be found, or at a "lower" price because the economy cannot properly fund future exploration and drilling, oil production still falls from a peak because, either way, the "cheap" oil is gone.
Interesting parallels between deep-sea oil and the nuclear industry of the 1970's and 80's. They too were producing energy in a potentially dangerous manner, but the public accepted the risk because of; faith that the industry knew what it was doing, had failsafe safety mechanisms,and the Gov't had their eye on the ball.
Three Mile Island, Windscale and ultimately Chernobyl (not to mention the influential China Syndrome film) all educated the public perception of the real risk, and subsequebntly blocked nuclear in many countries.
I think the same is going to happen with Deep Sea Oil.
Professor Lang:
I think you are correct in that it will block much deep sea drilling in Liberal Democracies. I doubt this for the other forms of government, but you never know...
Stephen, hi there!
The term "peak oil" has several components to it. Hubbert didn't divide up his graphs into "conventional" and "unconventional" (wasn't around during Hubbert's time like it is today) oil components. While I myself consider "peak oil" to be "the running out of CHEAP oil," we will never run out of oil in some form -- Canada and Venezuela have another trillion barrels+ of unconventional oil (on top of the trillion barrels of conventional oil we have left). It is all oil.
Oil will never be at $100 for any length of time in the near future. Everytime the price spikes upward (a la 2008), it kills the economy, dropping oil demand and simultaneously dropping the oil price. Oil has its own self-regulator. I think you are way more likely to not have oil available at ANY price versus this $300 per barrel nonsense. Economics doesn't work that way.
Hey Jeffers, since you didn't participate in that phony rally since March of 2009?, do you feel better now that the stock market is tanking? :) I do. I feel great getting out in 2007!
So it seems pretty clear that inflation is off the table in the short term, but do the people here believe the US is immune to hyperinflation? That no matter what is done in the US, gas prices will never get very high due to hyperinflation--currency debasement/loss of faith? This seems to be what your saying Bur, if you believe that Oil can't stay at over $100 for long, so far this does seem true, but hyperinflation is theoretical possible here as well, or perhaps Zimbabwe and their non-productive economy and pre-war Germany are isolated cases that can't possibly happen to the US?
-Meiyo
Bur said:
"While I myself consider "peak oil" to be "the running out of CHEAP oil..."
Not to be difficult, but I have to differ. Peak Oil is not about "running out" at all. Rather, it is about production peaking, and it's this latter situation that will prove difficult enough for the world economy, never mind "running out."
Unconventional oil, while plentiful, won't affect Peak Oil because, as most everybody agrees, this oil is so difficult to ramp up production enough to offset the conventional oil declines. Sure, there's 100s of billions of bbls of tar sands, but because the production of tar sands will never eclipse more than a few million bbls a day, tar sands production really won't affect or push back the total production peak much at all. Rather, it will drag out the downslope side *after* the peak a bit.
"Isolated cases" BINGO! For any country to print currency with reckless abandon requires some very special circumstances. That's why it happens so infrequently, cause after all, hyperinflation bankrupts all the rich people of the country, and the rich people RUN any country.
In the case of Weimar Germany in the 1920s, Germany was required to pay the victors for losing WW1. So why not just print up a bunch of Duetschmarks and send them to crying France and England. Who cares if they get recycled back to Germany. Germany had little more to lose, so they threw out the baby with the bathwater. As a result, the aftermath of WW2 was handled VERY differently. No Treaty of Versallies that time.
in the case of Zimbabwe, a lunatic and his lunatic associates were running the country, and were doing everything to turn this productive part of Africa into a dictator laughingstock.
I think there was a hyperinflation in 1940s Hungary, or something. If you have an example of a country that hyperinflated without such odd situations existing, please let me know.
I watch the graphs of oil production as well, and I would have to say we have been on an oil production plateau for the last five years. Perhaps a peak. But, all we need is an invasion of Venezuela (it's happened before -- all we need is a cover story), and then all that wonderful unconventional oil (a trillion barrels) becomes a LOT easier to produce -- with competent engineers running the show -- thereby shooting the whole peak oil thing to hell, at least for another 40 years. :)
If China didn't do anything about Iraq, why would they start a war over that knucklehead Chavez? They would rather tolerate the rape of the Darfur Christians for Sudan's oil.
I think there was a hyperinflation in 1940s Hungary, or something. If you have an example of a country that hyperinflated without such odd situations existing, please let me know.
Didn't the Soviet Union hyper-inflate as it was falling apart or while it was breaking up? Which was mostly due to defense spending but hey spending is spending in that regard.
Bur, we are NOT going to be invading any more countries at any time in the foreseeable future, especially Venezuela as we're broke and grossly overextended already.
As for Chavez' country, I'm surprised Obama hasn't invited him to dinner and thrown a big party for him.
Hehe, conquering Venezuela would take a long weekend, a couple of divisions, 1-2 planes lost, tops. That continent is partying and having cosmetic surgery way too much to bother with a "national defense."
Besides, where else you gonna get the oil from? We own canada already. Maybe NIGERIA???? :)
What if it takes longer than that, Gen. Bur?
Then I'll invade them myself. :) Have some faith.
Jeffers, with regret, the oil imported into the U.S. has started to rise again (after a multi-year drop), though where they are going to store it, I have no idea ..
http://tonto.eia.
doe.gov/
dnav/pet/hist/
LeafHandler.ashx?
n=PET&s=WCRIMUS2&f=W
Hyper inflation is an unintended consequence of other monetary policy. If the world gets the jitters about the soundness of the dollar, and interest rates rise, we may just see it.
Regards,
Coal Guy
So after a 28 year ban on handguns in Chicago, how did that work out? Gee, it seems that criminals don't actually follow laws, go figure.
So Mayor Daley, makes a long list of rules for gun ownership, which of course the average thug or gang banger is going to read in the paper, and go "golly gee, we best not carry guns anymore, we can get fined, lets just keep only one in our apartment with a trigger lock on--and go become an upstanding citizen."
Well, the 20th century is awash in gun violence, genocides and mass murders by nation states vs. their own populations. Do the cops in Chicago still get to shoot little girls for TV specials, instead of arrest people in a non-show of force arrests? Just because something is legal by TPTB doesn't make it ethical/moral. The Chinese are good at murdering/pillaging and they don't break any laws eh?
And what's up with your hard-on for taking out Venezuela Bur? Your just really frustrated that they don't do a good job extracting oil there? I suggest you start your own blog, you post here so often, it usually feels like its your blog not Mr. J's.
-Meiyo
History is simple .. find out who has the oil (Venezuela has lots), and if they won't sell it to you, invade. Been doing it throughout time with all kinds of resources. I don't like to beat around the bush.
We'll see how the gun thing works out here. I'm gonna get a gun just to see how the process works. There won't be any gun stores in Chicago tho .. for now.
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