The New Wealth

Come on folks, have a little fun with the TSA!  Pull a "When Harry met Sally" restaurant scene (Meg Ryan shows how to fake the big "O") when the TSA does their dirty work.

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I read with interest the comments to my post "Ok, you've made your point".  

Life will go on after Oil. The pursuit of wealth will go on, as well. We will always compete for what it is we truly desire most (and we all know, in our heart of hearts, what that is)... no amount of grey-haired pony tails claiming a tye-dyed uniformed worker's paradise is going to change that... and wealth will NOT be defined as a tenement apartment in a city.

Maybe wealth will be defined by gold... but I doubt that, too.  Wealth will be defined as the "means of production" that has always defined it... and nothing "produces" stuff quite like land. Timber, crops, livestock products... these things cannot be produced in a city apartment or suburban home.

The massive cities of today have one tremendous liability - sanitation.  The waste produced by 8 million people is truly of a volume of mind boggling proportions.  Concentrating populations in small areas that will need heat, cooking fuels, a means of making a living, and sanitation with severely constrained energy inputs leaves much to be desired.  Its all about energy inputs - if nuclear, solar, wind, ethanol, etc... can produce consumable energy in amounts sufficient to run any given closed system, then this is not an issue... if not, the outcomes are not terribly appealing.

Of course, the U.S. wastes electricity like we do potable water... and that makes for a great deal of slack within the system... but only for a very short period of time, say a decade - and then one must think about the economic effects of curtailing electricity consumption (and that is a very significant consequence).

No, mega-cities like New York, Chicago, Sao Paulo et al simply could not exist in a severely energy constrained environment... how that unwinds and over what time frame with what unintended consequences... well, your guess is as good as mine.

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Much has been said about "Shale Gas" and "Fracking".  I have read most of it.  As in all things, it seems to be nothing short of "Sex, Lies, and Videotape".  So I go back to the numbers.  The largest Shale contributor to U.S. Nat Gas production is the Barnett formation.  It produces a whopping 6% of the Nat Gas produced in the lower 48.... or about half what the U.S. imports from Canada every year... and to get that 6% required about 20% of the drilling equipment by capital investment. 

The Haynesville play has got to be the biggest disappointment yet in Shale Gas given the hype that surrounded it.  Last year, Haynesville was going to save the U.S. from imported Oil... now, those companies with the largest exposure to Haynesville are moving rigs elsewhere....  Haynesville might make sense at $15 mmf Nat Gas, but it is suicide at $4.25.

Mayb, MAYBE, the Shale Gas extractions can overcome the decline in conventional gas plays for a  couple of years... but no more (and maybe not).  The media onslaught and propaganda from "Big Gas" has convinced the futures market that Nat Gas will never rise again and if we give these guys all of the capital and permitting they request they can save us from $200 Oil with their Shale Gas production - my bet is that the market has been fooled along with the public.

This is not a recommendation to buy Nat Gas futures... Nat Gas is THE MOST VOLATILE FUTURES CONTRACT on the board, and has been nicknamed "The Widow Maker" by futures traders with very, very good reason.

Meanwhile, back at the Oil Ranch....

I look forward to monday's action in the crude futures market like it was "Super Sunday".  This could be one of those moments of truth, or nothing more than just another lie in the markets.

"Come in, Rangoon!"

I signed up for Apple's "Mobile Me", only to have all of the contact info on my cell phone lost.  A number of partners, clients, friends, and family read here.  Please feel free to email me your contact data so that I know where to find you!


My email is:

mentatt (at) yahoo (dot) com

or you can track me down on Facebook.

"Ok, you've made your point"

“Okay, you’ve made your point. So what do we do about it?” John Michael Greer, speaking rhetorically to the Peak Oil "movement", et al.

That's the correct question, isn't it?  Oil has now cleared $89 for every delivery month from February 2010 onward, and is over $90 for every delivery month from July 2010 onward, and this is still technically a "shoulder period" for petroleum demand.  This at a time when nearly 20% of Americans are not working (that is U6 unemployment, not the completely FOS U3).

The debate is over.  Even the IEA has cried "Uncle!" Now what?

Greer was speaking in the rhetorical.  There is very little left to do.  The American body "politic" has shown quite clearly that it is incapable of rising to ANY OCCASION, and individuals have either made their moves years ago... or are going to work around the circumstances that they find themselves in.  As Ruth Gordon of "Harold and Maude" fame (if you have never seen this cult classic, you are operating without a proper education) famously said when asked the secret to aging gracefully - "Money helps".  If you sold your house in 2005 at the top of the market and invested it all in precious metals... good for you!  That does not cover most of us... and for 20% of the population, the "collapse" is already very much here and very real.

To me, this is an intellectual exercise.  Something to bear witness to; a spectacle.  I freely admit I have no idea what I would do if I were in the POTUS's shoes (but I do wish him G-dspeed).

(Any REAL Peaknik, the kind of guy that writes a thousand plus blog posts on for zero monetary compensation, that does not have his doomer homestead stocked and prepped is nothing more than a "poser".)


The following is from my October 17, 2007 post on what Peak Oil will mean to Americans:


1. New Orleans will never be rebuilt, nor will any other future major natural disaster of similar scale (are you listening Florida and California?).
2. American children born in 2007 will not need a driver’s license when they are 30.
3. Your 401k will become a 201k, and then a 101k, and then just a k…
4. Social Security and Medicare will fail.
5. America’s farm labor workforce will be 33% of the population by 2030, not the 1.5% of 2007 (Texas A&M might actually be a better bet than Harvard for junior after all).
6. Student loans will be a future credit crisis. (Borrowing $200k for a literature degree will, in retrospect, not appear to be an intelligent investment.)
7. The luxury car you now drive will be a very nice pottery holder in your garden.
8. But, your milk goat is really going to appreciate those fine leather seats, and your chickens will really enjoy perching on the engraved wood steering wheel.
9. You’ll be using dollar bills to light candles on your birthday cake because they are cheaper than matches.
10. Homes will come with only 1 zone heating and AC - your bedroom.
11. You’ll be thin again!
12. Home cooking!
13. Your wife’s depression/personality disorder, junior’s ADHD, and your alcohol problem… cured, with all that fresh air and sunshine instead of driving everywhere.
14. South Florida’s housing crisis will never be resolved.
15. The Southwest water problem will no longer be academic.
16. You won’t feel so rushed anymore. You won’t be spending time going to the gym, filling up the car, commuting…
17. No problem not fulfilling your new year’s fitness resolution as walking and biking will no longer be optional means of transportation.
18. You will care far more about who is Mayor than who is President.
19. You will get to know the neighbors, one way or another.
20. Conspicuous displays of consumption or wealth will not be good for your health.
21. The response time for 911 is going to be a great deal longer than it is now.
22. The end of Feminism, Liberalism, Conservatism, etc… these were luxuries of the cheap fossil fuel era.
23. No more keeping up with the Jones’. Keeping up will be quite enough.
24. Flush it and forget it will be replaced by compost it and fertilize with it.
25. You will never have to mow the lawn again, ‘cause your gonna need that hay.
26. You won’t have any trouble finding a parking space.
27. No more road rage, you will truly appreciate the use a of vehicle.
28. You are going to look fabulous in designer jeans while working in your garden, fixing your bike, etc…
29. Golf courses will become community gardens or farms and that home on the 9th hole will likely become a home in the Spinach field or pumpkin patch... and you will be working on your swing all right – for your hoe, your scythe, your axe…
30. The demand for lawyers, stockbrokers, accountants, insurance agents, realtors, hair -dressers, massage therapists, psychologists, etc… is going to dry up in ways I am not poetic enough to describe (and I own a brokerage firm).

No, this won’t happen overnight, but that is not the point. The point is that it WILL happen. Things will change, and since “for the better” or “for the worse” is an abstract I have no comment on either. Things will change and some people will be the “winners” in the new paradigm, while others will be the “losers” (sorry, more abstractions), and it is up to you to decide where it is you would like to be and what actions you plan to take to execute your plan.


end of re-post

Not a few of those items have already come to pass, most of the balance are on their way... but there will still be cold beer, great food, and fun to be had.

More soon.

Standing in Front of Freight Trains (and other stupid ideas)

Fighting a market is a lot like standing in front of a freight train.  I am far more sympathetic to dopes that say things like "if it goes there it will go there without me"... mostly because I have been dopey enough to have said that once or twice.

Insisting that the very volatile market's like Silver, Oil, Nat Gas... are all wrong... can lead to some painful losses and missed opportunities.  I say this because while a future correction might prove you right in the long run... markets can remain irrational FAR LONGER than you can remain solvent (or even alive).

I was speaking to one of my trader buddies in New York yesterday... I knew things were going wrong when he told me "this doesn't make sense"... sure it does... when a market is going against you in a powerful way, it is usually because the market feels or knows something that YOU are missing.  Calling tops (or bottoms, though bottoms are somewhat easier) in powerfully moving markets is a good way to find employment in another field (would you like some ketchup with those fries?).

The markets don't give a good %$&# what you or I think.

That said, Oil did not break today... the melt up is on, at least for another day.

Oil Tested by Jobs

Today's disappointing non-farm payroll data is an excellent test of my "no-spare-capacity" theory, and of the recent rise in energy prices to their near term resistance point.

Please keep in mind that my "theory" is based entirely on the price action in the commodity and the fact that this is happening with inventories at multi year highs... you see, I have started to see those inventories as the first wave of hoarding - and that is a very, very serious accusation on my part.  Please keep in mind that I reserve the right to change my mind on a dime, I don't stand on ceremony... "if I am wrong I am gone"... but hoarding, IMHO, would first show up in inventories - NOT with John Q. Public showing up at gas stations, filling his containers and hiding them at home.... but we shall have to wait and see.

My 1030th post.

I like to celebrate odd (or in this case, even) numbers. This is my 1,030th post!  What's so special about 1,000, anyway? (This site averages 7,500 to 9,000 unique visits per month, and unlike many of the other peak oil sites most of the commenter here actually make sense.)  And what is so special about $100 Oil?  I think the important number for Oil in American $$ is 88.  Yep, $88 per barrel on the front end is my magic number. And we hit it again today ($87.99 for you sticklers), for the second time in a couple of weeks.

At $88 per barrel, Oil crosses the imaginary line where it begins to grind on the American economy... not a hard, decisive grind the way $120 does it... just the withering, torturing kind of grind. Can Oil make it to $120 in 2011? I think so, though I doubt it will average that high... to do so would mean that imports really, really imploded.

I think Nat Gas is the more interesting of the 2... there is this common wisdom that the U.S. has entered into a permanent glut.  I doubt this very, very much.  I also doubt that prices will remain at $4.2 or so for 2011, given the Fed's propensity for stimulus and the BTU comparison with Oil.  Nat Gas at $6 - $8 and Oil over $100 are very possible... and while Nat Gas is almost entirely produced domestically, all of the money the Fed stimulated in this round will leave our shores within 18 months via paying for imported $100 Oil... and $8 Nat Gas would be a nice near double from here... (disclosure: I am long Nat Gas futures contracts... and no, this is NOT a recommendation... Nat Gas isn't known as the "widow maker" and the "career killer" without good reason).

This could get really, really interesting politically. What if Peak Oil Imports does not wait until the 2012 elections to make its presence known?  Goldman Sachs says OPEC exhausts spare capacity by 2013... Greg Jeffers says they exhausted spare capacity in 2010... that's why the price is $88.  Waiting for $147-Oil to confirm this is kind of defeating the purpose, me thinks.

Oil has been in a "melt-up" for the past coupe of days... if this is the real thing, Oil will break $90 almost immediately, in a matter of days (if not, Oil will correct almost immediately, too)... if so, look for triple digits... Simple. Like. That.  If you don't know how to sell if it goes against you, don't go long.

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My hat goes off to the Federal Reserve Bank.  While we cannot know the propriety of their actions, there is NO DOUBT that they succeeded in driving up the price of assets, particularly the U.S. stock market.  Whether they can hold it is irrelevant... they have bailed out the establishment, kept society's classes static, and all is right with the world... I only wish I had participated more in the market's gains... unfortunately, on balance energy has lagged badly... may the worm turn.

Big Brother and the Federal Bureau of Intimidation

Think you have "Rights"?  Sorry, that's propaganda.

How can you possibly have "Rights" if the government can charge you with a "crime" on actions they have condoned for decades, that will be tried in a forum that will cost you several million dollars to defend, against a foe with the resources of a government and the willingness to do ANYTHING (their standard immoral weapon is suborning perjury) to win?

The Masters of the Universe that control Goldman Sachs, the U.S. Treasury, Bear Stearns, Lehman Brothers, et al, nearly brought the system down... and it probably was not a "crime"... but now somebody has to pay for their sins, and the nice folks working for the S.S., or whatever they call themselves (there is no difference between a KGB agent and an FBI agent.  These people exist in EVERY society and in every age... they are the muscle for the government - and they are absolutely necessary, after all they are OUR gangsters that society hires to deal with the gangsters in "private practice"... but don't think for one moment that any FBI personnel has any high minded view of the Constitution or your "Rights" as an American, or a fair and just outcome of your case) are out there using TERRORISM in order to force people to confess to crimes they may not have committed.

Welcome to the American Inquisition.

Well, in this case, somebody stood up to them.  Not only did he stand up, he went public. VERY public.   I pray for his continued freedom, and hope that this act of bravery is not overshadowed by the Wikileaks folks.  Americans need to take back the Rights that are our birthright.

G-d bless John Kinnucan!