2005 - 2020

I got an email link to a fantastic documentary on the world financial and monetary system from a well known guy in the energy debate. When you have the time, this is pretty good stuff... and I'd say reasonably, though not perfectly, accurate (perhaps 88%?). I have much to say on this subject, MMT, Keynesian goofballs, and life in general.... but you gotta watch this first. It really is worth the hour of life that it consumes.

Now... Let's talk OIL, shall we?

Here's the deal: Oil production is still below its monthly and yearly peak(s) of 2008 and 2005 (Monthly production peaked in 2008, yearly in 2005 if I read the data correctly... feel free to correct me) even though Oil is up 700% in just over 10 years.

2010 Oil imports into the U.S. are down 5.1% from last year's disaster... but the AVERAGE decline rate has remained close to .7% per month beginning with the 2006 over 2005 comparison.

Here, in its entirety, is a post I wrote November 28, 200- nearly 3 years ago, in which I argued that the Apocalypse would NOT come as advertised but that a slow, grinding torturous constriction of Oil availability to the U.S. economy would be the more like outcome. With the exception of an inflationary response (in mid-2008 I came around to the Deflationary theme... sometimes your hot, sometimes you are not) I think things are progressing right about on schedule. In any event, let us reconvene this discussion after the repost:

An Apocalypse NOT!

I get a decent amount of email from the “doom and gloom” folks asking me when I think the “collapse” takes place. Collapse? What collapse?

The decline in oil availability will be a slow, grinding process (in my opinion) that will not fit nicely in a 2 hour movie, 3 minute pop hit, or 15 second political sound bite mindset. I hope I can disabuse the doomers that visit here that they need some kind of bomb shelter. Although I fully appreciate your point of view, my commentary is directed toward how one might direct the investments that they have worked so hard for. I sincerely believe that the U.S. oil supply situation will have profound effects on our financial and real estate markets and currency over the next 5 years, but I do not think this will happen on a Tuesday afternoon. Nor do I believe that we will descend into anarchy. Are not resource wars (starting with Iraq), and the prospect of hyperinflation, and stagnant or declining GDP enough? Well, at least I hope they are.

My issue is this: Why should you work so hard only to pour your investment dollars into a leaking bucket? You would have been better off spending those shekels on vacations, expensive wine, and song. (Actually, that sort of appeals to me.) Some might find that pecuniary, but those that do probably did not spend a career doggedly pursuing some level of financial independence. Actually, I am quite sure that on some level the tied dye set is HOPING for a collapse. Teach those yuppie pricks a lesson.

I know that a lot of the peak oil blogsphere is filled with disaster scenarios, but I sincerely doubt this is the most likely outcome. That argument that we will experience immanent agricultural disaster due to declining energy inputs is just not that likely. The markets are efficient enough to redistribute those inputs away from Suzie-Cuzie’s trip to the mall and into the farmer’s tank and fertilizer bin. Yes, food is going to get much more expensive, and yes, this will fall disproportionately on the poor. But the aggregate AMOUNT of food available to Americans is not the problem, but rather how to pay for assistance to the poor.

This is not to say that our agricultural exports won’t decline and harm others. I sadly think that is a rather likely outcome. Those of you that have been following my blog know that I have great concerns in this area. Wheat and corn production will become an increasingly expensive proposition, and that will negatively affect aggregate crop production, just look at wheat inventories, and in turn available exports and domestic meat production, but the lesson of history is that people will be “incentivized” to produce some of their own food. As an avid gardener, I can tell you that a simple kitchen garden can overwhelm your ability to consume all that is produced at harvest time, the surplus of which can certainly be preserved. It will not be necessary to produce ALL of our own food (at least not for 20 or 30 years, all bets are off at that point in the oil production curve) just enough to bring the marginal scarcity food cost down to an affordable level.

I get email from one dour fellow who tells me that we have lost all of the knowledge to do this. What knowledge, gardening? Get a grip, and join my garden club. You would be impressed with what these folks know.

As my friend FireAngel from theoildrum.com likes to point out, if India can feed over 1 billion people with less arable land and far less fossil fuel imports, North America certainly can feed its population.

There is also some slack for the economy in the wasteful way in which we use oil. FireAngel recently pointed out that driving around in circles does not increase GDP.

If it were going to be Armageddon, what would be the point of investing? Better to blow it all on a trip around the world.

No, the Apocalypse won’t be arriving anytime soon, but a paradigm shift is, in my opinion, underway as I write this. In this paradigm shift, there will be winners and there will be losers. Not much different than our current reality. It is the INSISTING that things be a certain way that will get you into trouble. Flexibility and adaptability will go a long way in the environment I foresee.

No, it won’t be business as usual. We are likely to be a whole lot less mobile, live in smaller homes, and consume less frilly BS. We won’t be commuting as far, be more involved in our communities and our children’s lives, and we even might all have a new hobby – gardening. But I ask you: Is that really Armageddon?

Yours for a better world,

Mentatt (at) yahoo (d0t) com

End of reposted article.

So far, pretty on the money...

Here's why I might be right: China's market for new cars surpassed the U.S. by a BIG number this year; imports into the U.S. continue to S.T.B. (S**t the bed); Deep Water Drilling as we know it here in the U.S. is on the ropes (irrespective of the Administration's dopey policies... nobody wants to be put out of business by a blow back, the costs of insurance are insurmountable, fear of criminal prosecution...), and just last week the King of Saudi Arabia said they have no intention of increasing production to keep world oil prices down but are instead concentrating on what is best for their citizens in the Long Term.

Here's why I might be wrong: Iraq's Oi fields might put off Peak Oil by 10 years. I doubt this very seriously, but I would be FOS to claim that it was not a possibility. Other than Iraq, I would give my year 2020 outcome of less then 8 million bpd available to the U.S. as an EXTREMELY HIGH PROBABILITY... and less than 5 million bpd available to the U.S. in 2030.

I tell most people to save more and diversify beyond financial assets... I tell semi rich folks ($3 to $15 million net worth) to enjoy the fruits of their labors and spend some money on the things you always wanted to do because the government is going to enact crazy death taxes and our currency and financial markets will not survive the decade without unreal changes. Take that trip around the world. Spend a month in Israel or Egypt or Costa Rica... wine, women, & song.... You truly rich folks are on your own.