Tuesday, March 1, 2011

No More War for Oil

I hope to good G-d that the U.S. does not involve itself in another War for Oil.

I want to doubt that this administration would be that daft... I hope and pray.

The end of America's addiction to Oil is at hand. You can see it from here. Maybe its not what we had in mind.... but there it is.

The public relations machines are cranking full tilt. There is little to no truth anywhere in the media - a lot of guessing, a lot of lying, and a lot of hoping... or more accurately, "wishcasting" is cropping up everywhere in the media.  The facts are this. Oil went from $10 to well over $100 over the period 1999 - 2008. After Oil's subsequent crash (along with everything else) the pitch was that that episode in the price of Oil was a once in a lifetime event, a matter of speculation, a "bubble". Jump cut nearly 3 years hence: The MENA are awakening to the facts of their demographics, inability to grow food, and declining natural resources... and the average price of crude oil on the world markets is well in excess of $100.

In the past I mentioned that the oil for food trade will be interesting to watch to see how it balances out. I think that that is now coming to an inflection point.  The impacts on employment, tax collection, the deficits (federal, trade, California!), social security/medicare/medicaide/food stamps et al are going to be on the order of "Shock and Awe".

The last thing we need is to waste more treasure, and worse - American lives - on another War for Oil.

18 comments:

Anonymous said...

The ground work is already being laid for a major war into the next crash.

Best,
Dan

Donal Lang said...

In a way, the very act (or even the threat) of insurrection in the M.E.is a partial solution to their problems of lack of food, etc. It creates uncertainty in the oil markets, prices go up, profits go up, so the transfer of wealth to the oil producers increases (because production costs haven't risen in the short term). Insurrection is profitable!

Therefore the regimes can pay for more food and benefits, or more armed police and suppression! No wonder David Cameron (UK Prime Minister) was there with a trade & arms delegation last week. Or am I being cynical again :-)

kathy said...

But wouldn't that just lead to the price of food soaring and therefor a vicious cycle of inflation? There is only so much wheat (or corn or rice or soy) and if more dollars are chasing it poor nations are once again unable to feed themselves. Nobody wants to see us stay the heck out of a war but I agree. The ground work is being laid. We are one terrorist atack away from big trouble.

Donal Lang said...

Kathy; yes but the oil producers can afford it.
Of course, for the rest of the developing nations......

Greg T. Jeffers said...

Donal:

There is a feed back loop to the oil producer's food conundrum...

While the producers subsidize Oil in their societies, the governments of the food producers do not. As fuel is THE primary direct and indirect expense of agriculture production, those prices are reflected back on the poor living in (oil) producer nations.

Kathy:

I assume by "terrorist" attack you mean on oil production facilities within producer nations? I think that's an issue... I think it even worse for the West should these nations reorganize themselves and have their new governments recognize that perhaps selling Oil AT ALL is not in their best interests.

kathy said...

That's exactly what I mean.

Anonymous said...

The MENA countries have to sell oil to buy food. In the short run, revenues increase, in the long run (if you consider 5 to 20 years long) both oil and revenue for food run short for most of these countries. There is no hope between now and the time their populations shrink to pre-oil levels. The USA needs to buck up to the oil shock and stay the hell out of it. We can't fix it. We'll have too many problems right here.

Regards,

Coal Guy

Greg T. Jeffers said...

Coal Guy:

That's pretty much it in a nut shell... and we can do even less on a micro level.

Oh, I might make money on trading oil that I then buy farm land with... but that is a micro solution. I think that there are ONLY micro solutions.

Donal Lang said...

CG; you're right, and there are only short term and micro decisions and short term solutions. Let's not forget thet part of the M.E. problems relate to 50% or more of the population under 30 (or age 24 in Iran), all of which are about to have kids and create their own baby-boomer generation. Just as oil revenues decline.....

Why do the words 'fan' and 'shit' come to mind?

Anonymous said...

Donal,

Absolutely.

Regards,

Coal Guy

Dextred1 said...

War is coming, I think better to prepare. The dynamics in this are with no equal in the modern era. You really think if gas goes to 6, 7, 8 or 9 dollars a gallon anything else could happen? What if Israel gets hit by Iran, Syria or Egypt? This has been in the making for a long time and is really predictable. If it does not happen now, it will soon enough.

Greg T. Jeffers said...

Dex:

I sincerely hope that you are wrong... or should I say of course you are right but I really hope that it is not a nuclear event... you've read my view on the aftermath of that....

Stephen B. said...

It's funny, when I was a kid during the first oil shocks circa 1974, I recall thinking that some day "the Arabs are going to run out of oil and have nothing left but sand, while they slowly starve to death" and I took a certain pleasure in that thought. (Sorry, but I did.) Now fast forward 37 years later and now that the reality of that is upon us, I actually kind of feel sorry for them.

Now I suppose the affected Mid East governments have it coming. I mean, it's not as if they had adequately taken all those petrol-dollars they collected all these years and invested them in something more productive than palaces, private jets, and weaponry. In reality, though, was it ever realistic to think that anything or anybody could adequately prepare for this inevitable (near) post-oil time over there?

Well, there is the case of Dubai, investing all that $$$ in building a tourist mecca, complete with a mega indoor ski resort that nobody will be able to get to shortly (or *dare* go to.) What a f'ing waste of resources.

It wasn't until about 10 years ago that I also became aware of the ticking time bomb that is their exploding population demographic.

Oh, well, as one of my idiotic roommates used to say all too often: "sucks to be them." (Stephen B rolls eyes.)

I hope we can isolate ourselves, at least somewhat, from the mayhem that is about to befall the MENA.

Dextred, I hope we manage to stay far enough away......but I have to largely agree with you.

Donal Lang said...

SB; I'd disagree with you there. Although they may have passed or be passing Peak Oil, and the remaining oil becomes more expensive to find and extract, as the price rockets the ME producers just get richer and richer as the Western nations send them more and more of their money.

What's happenning now is that the population is pissed at the inequality and, if they succeed in the current regime changes that will be partly solved, at least for a while.

You're right about investment decisions but beware what you wish for; a diversion of oil revenues from Western banks to domestic regeneration and investment (with the remainder going to BRIC's)would drive Western interest rates through the roof.

But they won't just be left with sand if they invest wisely; already Egypt and Morocco are building concentrating solar power stations and Europe is planning underwater D.C. cables to feed huge quantities of solar electricity to Europe. A spinoff can be desalinated water. Imagine a huge empty country with both oil and solar power, lots of water to make the desert bloom (like Israel) and great ports on the Med, and a young, generally well educated population with their own investment money, all eager to build their country! (hey, sounds a bit like America used to be!)

As for war, its always a possibility; they're all well armed with the almost-latest American and European weaponry (wasn't THAT a good idea!). But the big fallout will be southern Europe, as we're already seeing, with thousands of refugees.

Interesting times!

Donal Lang said...

Dex, Stephen, here's an alternative viewpoint;
http://www.ted.com/talks/wadah_khanfar_a_historic_moment_in_the_arab_world.html?awesm=on.ted.com_Khanfar&utm_content=awesm-bookmarklet&utm_medium=on.ted.com-static&utm_source=facebook.com

PioneerPreppy said...

War is certainly coming. Muslims respect power and the situation across the Muslim world will continue to degenerate until someone holds enough power to command respect. Once a clear victor is decided and he begins to stir Islamic aggression towards Israel and the West the real war will begin in earnest.

Let's just hope it takes a long while to develop.

Greg T. Jeffers said...

Pioneer:

I don't see it that way...there is a BIG difference between the MUSLIM world and the ARAB world... they are not one.

Egypt dominates the Arab world with over 25% of its population. What happens in Egypt will LIKELY (not definitely) spread to the rest of the ARAB world.

Shia Iran and the eastern Muslim world is an entirely different story.... and in the final analysis its really about what happens in the Gulf nations.

PioneerPreppy said...

Greg

I will admit I am no expert on modern Islam and any direct experiences I have are twenty years old more or less. I hope your right but let me explain my reasoning.

Shia Muslims are not really the ultimate threat in my opinion. Oh they happen to be the most radical I guess and more than likely the most inclined to "terrorism" maybe. Do Shia Muslims even have a real leader anymore? One who can claim a true lineage?

The Sunni however have an open door to support an emerging leader without a lineage ala Saladin. The Sunni's seem to have no problem attacking Coptic Christians within Egypt either so I question their more "moderate" label.

And if a leader could emerge that would unite the two? If that is even possible this far down the time line it could be real trouble.

I just do not see real democracy in the MENA future.