Guest Post: Oil Juggernaut Unleashed

Submitted by Giordano Bruno of Neithercorp Press

Oil Juggernaut Unleashed

The prevalence of crude is undeniable. You might dabble in
green-think cultism or you might drive an obnoxious monolith of a Hummer
(what I like to call an “overcompensation-mobile”), but neither
philosophy of consumption dares to contradict that this world runs on
oil. Petroleum is used in the manufacture or shipping of almost every
industrial product on the planet, and even many agricultural goods.
Therefore, it behooves the public to seriously consider the
ramifications of oil price and its underlying effect on the entirety of
our economy. Even minor increases holding over an extended period of
time cause economic reverberations that can be felt for years
afterwards. Financial and social adjustments to commodity inflation can
sometimes take decades if the event is historically unprecedented.
Petroleum is a foundation ingredient, it is energy itself; the higher
its cost, the greater the cost of every other product we use, and the
worse off our financial structure is. Period. There is no scenario yet
experienced by any nation in which oil inflation actually benefited the
masses or the overall economy, even in countries that sell oil!

Americans have had a small taste of the tensions involved in an oil
crisis, during the 1979-1980 Iranian snafu, and the massive gas spike of
2008, but these events are nothing compared to the steamrolling
inflation we are soon to see at the pump in the next couple of years.
Let’s examine why…

OPEC Ready To Let Oil Run Wild

At the writing of this article, oil stands at around $91 a barrel,
still below our prediction during the summer of $100 by the end of 2010,
but already a 30% increase over the $70-$75 average we enjoyed in the
middle of the year. Anyone who believes that prices will even out or
fall over the course of 2011 should take note of the heavy press
coverage on the statements from OPEC representatives over the past
couple months. The Middle East has made it quite clear this winter that
$100 a barrel is not just possible, it is a certainty:

http://www.bloomberg.com/news/2010-12-24/oil-consumers-wary-as-some-opec-members-target-100-before-cairo-meeting.html

http://www.reuters.com/article/idUSTRE6BN16A20101225

The illusion underlying the OPEC statements, however, is that the
current price rise is completely under their control. This is not the
case. In fact, the nearly $150 a barrel plateau we witnessed in July
2008 will seem like a quaint memory not long from now, primarily because
the factors involved in today’s petrol valuation are much more systemic
and violent; rooted in a snowballing devaluation of Western currencies,
instead of the traditional influences of supply, demand, or even
speculation.

The recent comments of Kuwait’s oil minister that “the global economy
can withstand $100 oil” are, of course, also disingenuous on a couple
levels. First, the global economy is in dire straights and riding the
wave of a convoluted “recovery” built on fiat and fantasy. $100 oil
will only bring the illusion crashing down as the public realizes the
true effects of long term inflation in prices, and the sales of goods
begin to falter even further than they already have. Second, oil will
NOT stay at $100 for very long, so the suggestion that we can
“withstand” such a price is rather irrelevant. Essentially, OPEC is
losing its ability to reign in or stabilize gas at a reasonable cost due
to the crumbling dollar, and so, they have decided to raise rates to
offset dollar devaluation while attempting to change the definition of
what “reasonable cost” is. They admitted as much back in October:

http://www.bloomberg.com/news/2010-10-15/opec-members-seek-100-a-barrel-oil-as-sliding-dollar-cuts-real-revenue.html

The key here is the dollar and its inevitable demise, which the
establishment is trying desperately to hide until the last possible
moment. Over the next year we are likely to be buried in a deluge of
excuses, half-truths, and lies, all meant to divert attention away from
the word “inflation” as the masses begin to question just what the hell
is going on.

The Real Reason You Were Robbed At The Pump

Many factors can determine the ascent of gas prices, and this is
where confusion arises in today’s market, and propaganda begins to take
root. In 2008, the historic march of oil costs was blamed primarily on
“speculators”, commodity investors who buy up petroleum with no
intention of actually using it, thereby creating a false sense of
scarcity in the market and driving up prices artificially. This was,
for the most part, what really happened.

Another cause of oil increases is the natural reduction of global
supply in the face of rising demand. An American economy running on all
cylinders would necessitate greater supply and a higher price if that
supply is insufficient.

Essentially both triggers are dependent on the fact of scarcity,
engineered or legitimate, in order to cause price spikes. Neither
trigger is applicable in today’s market, where currency weakness is the
central determinant, yet these are the arguments we are hearing and will
hear more of as we are fleeced at the pump through dollar devaluation.
Below are a few MSM articles which promote the supply/demand tall-tale,
including announcements by the IEA (International Energy Agency)
claiming that economic rebound is the culprit:

http://community.nasdaq.com/News/2010-10/oil-rising-as-iea-raises-global-energy-demand-outlook-gold-up-as-dollar-falls.aspx?storyid=40248

http://www.latimes.com/business/nationworld/wire/sns-ap-us-oil-prices,0,6876017.story

http://in.reuters.com/article/idINN1919750020101119

The “recovery” argument in terms of oil demand is obviously laughable
to those of us in the Liberty Movement and alternative economic
research, but to those who base their entire view of our financial
health on the meanderings of the Dow, recovery certainly seems
plausible.

The truth is that the stock market is the LEAST reliable indicator of
economic strength, especially during major fiscal downturns. The Great
Depression was blatant proof of this, but the smoke-and-mirrors magic
show has been elevated to a new level today by the introduction of
quantitative easing measures by the Federal Reserve. Most intelligent
financial analysts have been crying foul for a couple years now over
these monopoly money injections, and have pointed out that a substantial
portion of the funds are being pumped into stocks in order to create a
zombie market; a kind of “Night of the Living Dow”, a market that has
diminished real investment and relies almost solely on constant
formaldehyde-like fiat transfusions from the Fed and the government.
In fact, Charles Biderman of the investment research firm ‘TrimTabs’
recently announced on CNBC (of all places) that after two years of
investigations into capital inflows into stock markets, his conclusion
was that retail investors have quit stocks, and the only thing holding
up the Dow today is the Federal Reserve itself:

http://www.zerohedge.com/article/after-nearly-two-years-searching-trimtabs-still-cant-find-who-doing-all-buying

This shows that the stock market indexes cannot be trusted to glean
proper information about recovery (or a lack thereof), but what about
other indicators? The Consumer Metrics Growth Index, produced by the
Consumer Metrics Institute, is a proven leading indicator of GDP and of
market movements. Its accuracy is owed to its close tracking of
consumer spending, not just in retail stores, but also web sales.
Consumer spending makes up about 70% of the U.S. economy, and is thus a
much more reliable litmus test for overall financial health than
manufacturing data, which is what the government has been using to gage
current growth and future trends since 1937 (back when manufacturing
actually counted for something in this country). This means that the
Consumer Metrics method is far more up to date with the functions of the
modern American economy. According to the CMI index, the U.S. has been
on a negative growth curve since the end of 2009 which is equal in
severity to the credit collapse of 2008, but much longer and more
pronounced:

As you can see in the chart above, whatever recovery we thought we
had in progress during 2009 ended quite abruptly, a temporary jump in
economic activity likely inspired by the printing press free-for-all
initiated by the banker bailouts. How many trillions were pulled out of
thin air and dumped into corporate banks and stocks just to conjure
than one short lived moment of false hope? We still haven’t received
total disclosure from the Fed on this, nor will we until a full audit is
initiated.

Remember housing values? That vital gauge of U.S. economic health
that mainstream media pundits have been calling a bottom on every month
for the past two years? Well, prices still haven’t bottomed yet, and
now they are expected to decline continuously through 2011:

http://aim.search.aol.com/aol/search?s_it=nscpsearch&q=Housing+prices+fall

What about durable goods? That market should be hopping if a rebound
is in progress, right? Nope. Durable goods are experiencing a
substantial decline, similar to that which occurred during the plunge of
late 2008 and early 2009:

http://www.bloomberg.com/news/2010-11-24/orders-for-u-s-durable-goods-unexpectedly-drop-in-sign-of-company-caution.html

So, to get to the point (as if it is not painfully obvious); there is
no recovery! I don’t care how often CNBC, MSNBC, FOX, or CNN, pull
skewed data and automaton analysts from their ghastly dungeon of
disinformation, the fundamental dysfunctions of the American economy
remain unchanged. Therefore, it is outrageous to insinuate that a
“recovery” is to blame for rising oil prices.

The next natural step in the rebound contention is to suggest that it
is actually a heightened demand in the burgeoning economies of
developing nations like China that is driving crude values to the max.
That would be a clever redirection IF one could show that Chinese
economic policy was having a meaningful effect on crude markets. In
reality, the latest Chinese policy changes (which effect the consumption
and demand of the entire country) have had little sway over most
commodities, including oil.

A perfect example is the recent surprise Christmas announcement by
China that their central bank would be raising interest rates yet again
in a vain attempt to combat price inflation. Rate increases usually
signal to global investors that capital flows will tighten, and less
money will be available in the system, meaning demand will fall and so
will prices. Mainstream pundits for the most part called for a negative
effect on commodities, especially oil. No such effect occurred. In
fact, gold has spiked in value and oil has held strong at $91 a barrel.
If Chinese demand was the primary cause of oil inflation, then such an
announcement should have made some kind of visible impression on crude,
but nothing came of it…

Oil consumption in the U.S. imploded in 2008, 2009, and 2010:

http://politicalcalculations.blogspot.com/2010/06/us-per-capita-oil-consumption-plummets.html

Oil consumption around the world suffered a severe decline in the third quarter of this year:

http://blogs.worldbank.org/prospects/category/tags/world-oil-demand

OPEC has stated that there is no supply shortage and that wells will
run at current capacity. The data seems to support their claim. There
is no scarcity of oil, and demand has only fallen over the past three
years. So, what is causing crude values to rocket towards $100 a
barrel?

There Will Be Blood

Since oil is widely traded in dollars, it is perhaps the commodity
most sensitive to dollar inflation. If supply and demand (real or
imagined) are not the acting players in the current oil climb, then we
are left with only one other option; currency devaluation. As we have
covered in past articles, commodities across the board are tearing
towards historic highs, while global demand for goods continues to fall.
Oil is no exception. Establishment economists in the U.S. and in most
of Europe have avoided the dollar collapse issue like Lyme disease, but
other nations around the world will not. OPEC has been expressing
concerns over dollar weakness and openly suggesting dropping the dollar
peg since 2007:

http://www.cbc.ca/world/story/2007/11/18/opec.html

http://www.gata.org/node/5984

http://www.ameinfo.com/138821.html

In 2008, the U.S. government was fully aware of discussions by Arab
nations to depeg from the dollar and move to a basket of currencies
(think SDR’s), and even “greenlit” such decisions by suggesting we “did
not necessarily need Gulf support for our currency”:

http://www.arabianbusiness.com/ditching-dollar-peg-boon-for-region-49383.html

In an investment conference in Saudi Arabia in 2008, Alan Greenspan
himself suggested that Gulf States would be better off dropping the
dollar:

http://english.aljazeera.net/business/2008/02/200852514494345842.html

In 2009, writer for The Independent, Robert Fisk, reported that he
had received insider information that OPEC nations along with China,
Russia, Japan, and France, were engaged in rather clandestine meetings
in an effort to drop the dollar for international oil trades:

http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

Little credence was paid to this report by most of the MSM, but today
China and Russia have already dropped the dollar for all bilateral
trade. How long would it take to position a country to decouple from
the dollar, from planning phase to implementation? Two to three years
perhaps? With the Federal Reserve’s QE2 in full swing, I believe OPEC
nations will soon follow. The dollar peg would otherwise ravage export
dependent countries, especially oil producers.

Extreme oil prices pummel more than just our wallets; they also
strike our cultural psyche. Those people who found a way to ignore the
signs of economic collapse until now will discover that they cannot
avoid the icy reality of the gas pump. When those digital dials spin
past the $5 mark before pouring out even one gallon of unleaded, I
suspect people will be generally pissed. This is why the establishment
media is oozing with oil disinformation and demand rhetoric now. It is
an attempt to “vaccinate” the masses against inflation in the future; to
redirect their anger towards a false cause and effect scenario. It has
long been my concern that the speculation induced gas spike of 2008
was, in fact, a deliberately engineered event; a staged price vault
meant to condition Americans to passively tolerate the very real dollar
disintegration and hyperinflation which would eventually occur later
down the road. When crude prices race towards $150 a barrel once again,
does anyone really doubt that the MSM will bring up “speculators” as
the villain? And, more importantly, does anyone doubt that the rest of
the world will blame the actual trigger; the fading Greenback?

Comments

[AnAnonymous]

Speculators in vital commodities are little more than murders...

If that were only the speculators... It seems to me that the US ousted quite a lot of people when it established itself in North America.

That is progress and civilization for you.

[Buckaroo Banzai]

Don't blame the speculators, blame the Federal Reserve. The speculators wouldn't have a mountain of dollars to play with if it wasn't for the Fed.

[Seer]

Again, I hear all this "talk" about how it's someone else who is responsible, never do people look in the mirror and see that they're held hostage by all the multitude of forces because they're addicted to the stuff!

Speculators are NOT responsible, no more than gold speculators are responsible for the price of gold.  Spikes can occur, but the markets WILL correct things.  Whenever there's an opportunity to push something as an alternate bet you can be assured that there's someone/some entity that has enough push to do so (such as was demonstrated by the likes of GS, which hedged against their own long position on housing).

As noted, there's no elasticity in oil.  As such, everything is a whipsaw motion.  That motion, however, displays an economic downward projection, one which parallels the fact that there's not enough of anything to spawn growth anymore. Yeah, speculation is a pressure, but it can also be a good pressure, bringing to light concerns over shortages.

[Twindrives]

When the American people riot in the streets Obama will order the Homeland Security apparatus into action to beat down the disobedient masses.  How dare the rabble complain about the elitists' glorious plans!   Charlie Munger and Warren Buffet will again thank Obama effusively for saving the economy. 

[cossack55]

Did you mean "beat down" or "beat off".  DHS contols the TSA afterall.

[LFMayor]

Now that will be the party scene to dance at...
I hold the position that the power that be are in for a big fucking suprise when that goes down.  Especially if the "pain" keeps increasing.  They bought off a big chunk by extending the unemployment payments, but they can't buy it off forever.  these high oil prices might be the proverbial straw.

Think of it as a Wrath Capacitor.  It builds charge, until one day it unexpectantly reaches an unforseen threshold and then dumps that accumulated charge.  And that kids, is why you don't play with old TV sets.

[Seer]

I tend to view TPTB as people lusting after power, and that they're held hostage by the system just like everyone else.  Yes, they have the appearance of basking in "wealth" (though wealth is pretty subjective), but they can no longer escape the collapsing of the system such as took place in previous history: the globe is pretty much developed, and the "wealth" that TPTB might try to exchange for safety elsewhere may not be accepted by the local community.

[topcallingtroll]

I dont know. Oil is sounding a little toppish to me. I am calling a top here.

[Revolution_star...]

+1

for staying on message.

[CIABS]

the stupid word you're looking for is "toppy".  the full stupid sentence is "oil looks toppy here".  then you say "time to get out of dodge."

[MsCreant]

Okay, I'll play. If the price moves beyond $91 will you be a topless troll?

[lewy14]

How long would it take to position a country to decouple from the dollar, from planning phase to implementation? Two to three years perhaps?

No. More like five to eight. I recall Andy Xie said it would take Shanghai about 10 years to become a major financial center. So no, not two or three.

Unless Ben prints another $4T. Then the oil most likely stays in the ground until a new system is worked out.

[blindfaith]

all this talk about dumping the dollar is just talk.  The moment any nation dumps the dollar for something else, the dollar hits the floor and the losses would be catastrophic.  ANYONE who thinks that the communist Chinese money is a replacement for the greenback, is kidding themselves.  As for the Euro, rest in peace.

[Seer]

"ANYONE who thinks that the communist Chinese money is a replacement for the greenback, is kidding themselves."

Who has hinted at this?  The ONLY talk that I've run across is in China and Russia not trading in USD.

Further, what value is it to slather "communist" on "Chinese money?"  Do you think that you're somehow educating people that China is a communist country?  If you feel this need, then be consistent and refer to the USD as "fascist US money!"

[gwar5]

Silver tip-toes  $30.51

[Mercury]

Gee, it's almost like if Obama had thrown his weight behind building up E&P in the U.S. natural gas industry instead of the feel-good fantasy of windmills and plastic windows we'd have less reason to panic right now.

[Buckaroo Banzai]

Huh? Natural gas prices are on the floor right now, we don't need any more of that. It's oil we need, not natural gas.

[chistletoe]

Relatively few americans take physics anymore, not in high school, nor college.

So I guess its understandable how so few "get it".

A gallon of gas is truly remarkable.  That which can be utilized

by an automobile in twenty minutes, contains the same potential energy

as over 400 man-hurs of work, or even of 100 horse-hours.

Transporting it via pump hose, tank truck, pipeline or tanker is relatively painless

(easier than coal, much easier than natural gas).

There has never been anything like it in the history of mankind.

It was not "democracy" or "Christianity" or the enlightened "founding fathers" of the USA which

provided us with the incredible industrialization and growth of the 20th century.  It was cheap, plentiful gasoline.

Now, we have reached the point where most wise investors realize

that the "peak oil" theories of Hubbert and Simmons, based on careful mathematics and observations,

are eseentially accurate and in fact have already occured, peak production occurred in 2006

and has been tapering off rather sharply since then.

In the meantime, the chinese are now purchasing more automobiles than the USA,

and in the USA we have a large and growing contingent of homeless people who are literally driving around all day, so that even though the overall economy is collapsing,

the demand for gasoline is still hitting new record highs.

Given that the whole capitalist system is based on

the premise of eternal growth, increasing profits, and "new and improved!",

its not difficult for an outsider to see that the system itself is doomed.

More and more individuals are abandoning the "growth" syndrome in favor of

"hoarding", which is an extremely destructive behavior in a capitalist system.

The only possible outcome is rather easy to predict ....

[cossack55]

I prefer "stockpiling for any eventuallity" to "hoarding".  Sounds more prudent.

[Seer]

LOL!  And "procurement" over "theft!"

[FrankIvy]

Amen brother.  Well written.

[Kreditanstalt]

Dollar is certain to fall?...so when the dollar temporarily soars in the next wave of either deleveraging or Euro-crisis, that would be a buying opportunity in cheap(er) oil?

So...the dollar may NOT collapse, or not fast enough.  Remember, currencies only have to look better than their even-more-sickly competitors...

Gold is a better, surer bet...

[Seer]

USD/CAD exchange rate is nearly par.  This has been one of my economic indicators, and it's done (did) well for me.

[johnnymustardseed]

Simply, there will be a day soon that we will not be able to buy oil with any amount of worthless dollars.

[buzzsaw99]

I don’t care how often CNBC, MSNBC, FOX, or CNN, pull skewed data and automaton analysts from their ghastly dungeon of disinformation, the fundamental dysfunctions of the American economy remain unchanged...

Poetry.

[Contura]

When will we have Peak Natural Gas then ? Never ?

[cossack55]

Only after the entire planet has been fracked.

[zeusman]

Within 15 to 20 years.  Production curves on nat gas wells/fields fall off a cliff unlike petroleum which is much more a gentle decline curve.

Major oil producers that have peaked:  US, Norway, Mexico, Russia - nothing they can do about it.  Its the Geology Stupid

[trav7777]

generally true, although Cantarell would refute half of the 2nd assertion.

It's very important for people to realize the peak behavior of NG.  NG wells really do fall of a fucking cliff post-peak.

These days in oil, though, and this is something the cornucopian idiots don't get, we have all that miraculous technology going into sucking the oil out faster in order to maintain the growth rate of the oil supply.

If you drew fields down over longer periods of time, you'd have lower production rates but longer lifespans.  If you try to pull all the oil out in a short period of time you have high production and a cliff at the other side of peak.

[Seer]

Reminds me of the Drill, Baby, Drill! crowd.  Dr. Albert Bartlett refers to this (someone else's description I believe) "strength through exhaustion."  Yeah, if I shoot up with MORE heroin then MORE will appear!

Thanks for pointing out the decline curve of NG.  As someone living in the rural countryside and dependent on propane this is constantly lurking at the forefront of my brain.

[DaveyJones]

more straws in the drink and a lot of stupid drunks

[That Peak Oil Guy]

As a bonus, each well frack pumps millions of gallons of fresh water far into the ground where it will take millenia to return to the water cycle.  What is able to be recovered is contaminated with fracking chemicals. 

We do not yet fully understand the magnitude of these costs to our water supply and pollution sinks.  Were we to do a full accounting of these costs the energy investment scenario would likely be much worse than we account for at this time.

TPOG

[WTF2]

High oil prices are cured by high oil prices.  We have not hit that point yet.

[zeusman]

Really?  Nice theory but the data didnt back that up.  High prices led to record amount of active well heads, drill rigs in operation etc in 07/08 yet conventional liquid petroleum peaked in 2005 globally.  The marginal production brought on by high prices is not offsetting the decline in mature huge oil fields.   Bottom line:  The oil companies have gone after all the low lying fruit over the past century.  Getting harder and harder to find big stuff that would offset future declines.

[Rodent Freikorps]

No worries. Obama is building windmills to save us.

GE has to be the galactic poster child for crony capitalism.

[proLiberty]

I hate to state the obvious, but we do not burn crude oil in our cars and airplanes, nor do we mold plastic toys from it.  We use products that are made from reassembled hydrcarbon molecules.   At present, it generally costs less to use crude oil as the feedstock for that refining process, but any source of hydrocarbons will do, and the only factor is the cost of the end product, whether it is diesel fuel or plastic pellets.

The truth is that we are awash in hydrocarbons that can be converted.  A study produced by Dr Theodore K Barna for the Clean Fuels Initiative of the Office of the US Secretary of Defense [1] shows that the US has approximately 2 1/2 times the hydrocarbon resources of all of Arab OPEC combined.  Apart from this we have the future resource of methane hydrates, a source that the US Geological Survey states is "worldwide amounts of carbon bound in gas hydrates is conservatively estimated to total twice the amount of carbon to be found in all known fossil fuels on Earth." [2]

There is no substitute at present for using liquid hydrocarbon fuels for aircraft.  While we can build small vehicles that are powered by batteries, and thus by electricity generated elsewhere, at present we choose to use coal for about half of that power generation.  So, electric vehicles are really coal-powered ones.   And energy policy in this area has real-world consequences.  Smaller and ligher vehicles have a much higher rate of severe injury and death when involved in collisions, especially trucks.

If anyone is worried about rising levels of CO2 in the atmosphere, replacing coal-burning generation capacity with nuclear capacity would be the most productive, yet it seems to be almost ignored.  If we used thorium-cycle reactors, we have enough thorium to last over a thousand years.  

We did not fret when overhunting of whales caused the price of whale oil to rise and substitutes were found in oil made from coal.  We didn't fret about "peak whale".  Neither did we fret when a lamp oil made from petroleum was found to be superior to coal oil.  In both cases, the peaceful transition from one to the other took place over decade-long timeframes.  

We could just as easily make diesel fuel from refining coal instead of refining crude oil.  The only issue is cost, as investors in the South African company SASOL can tell you.   We have allowed so much ideological nonsense to intrude in the free market of energy that we cannot make rational decisons any more.   And that is the biggest energy problem we have today.  We are so confused that we think it is better to leave our ocean of coal unmined and to burn corn instead.  

The leftards who pushed this policy used to be concerned about the degredation of our precious farmlands are happy to sweep  those concerns into the corner so they can have their way with "sustainable" fuels.   The left loves to scold the rest of us on "sustainability" yet not a single one of their demands is ecnomomically sustainable.  The US taxpayer will get tired and exhausted at funding these subsidies and the who leftard "sustainable" energy initiative will collapse like a house of cheap solar panels in Spain.  (but wait, didn't I read how Spain's government just cut solar subsidies?)

[1] http://www.westgov.org/wieb/meetings/boardsprg2005/briefing/ppt/congress...

[2] http://marine.usgs.gov/fact-sheets/gas-hydrates/title.html

[jomama]

you had me up until 'leftards'.

[FrankIvy]

Funny.  I thought the whole post smacked of ignorant, wishful thinking, but I did like the Leftard slam.

[hedgeless_horseman]

Apart from this we have the future resource of methane hydrates, a source that the US Geological Survey states is "worldwide amounts of carbon bound in gas hydrates is conservatively estimated to total twice the amount of carbon to be found in all known fossil fuels on Earth." [2]

I like what Kunstler said about hydrates in The Long Emergency; something about the fact that the amount of gas hydrates successfully sourced from the sea floor to date is zero.  May we someday find a way to utilize this energy?  Sure!  But...

On a long enough timeline
the survival rate for
everyone drops to zero.

[rwe2late]

jomama

agreed

Cheney, who set energy policy in secret,

and Bush who promoted corn ethanol,

and Bush, Cheney, Obama who all promote global militarism, invasions, and occupations to secure petroleum and pipeline dominance --

none of them are "leftist"

[wackyquacker]

buckwheat, never hate to state the obvious. It's for the naive, lest they be swayed by the true believers. 

[luigi]

When whales peaked global economy wasn't based on whale's oil and ploughs were still pulled mainly by horses...

[FrankIvy]

proLiberty wrote:
I hate to state the obvious, but we do not burn crude oil in our cars and airplanes,

What can be said about anything you write when you start with such a poor untruth?  Crude is distilled into gasoline, diesel, and jet fuel, among others.  The gasoline, diesel, and so on are constituent parts of the crude, for the most part.  So saying that we don't  burn crude in our cars is like saying we don't eat carrots and peas in our vegetable soup.  Get your head out of your ass.

[proLiberty]

But we don't burn crude oil! We burn a very technical and exactly manufactured fuel, called #2 diesel, Jet-A, gasoline, etc. And yes these fuels are presently made by refining crude oil, but my point was that we could make these fuels out of other hydrocarbon feedstocks as well. The Germans did it in WW II, the South Africans did it during the world embargo against their apartheid state, and we are doing it right at this very minute with "biodiesel". The only issue is cost!

In the single data point of cost, the market decides what source to use. When a raw feedstock gets too expensive, the market adapts and invests in other, more economically viable, alternatives. Some of these transitions take time, while others are quick. These factors all reflect back in the market price of the finished product at each stage in the chain of production towards the finished fuel product. But this is basic Austrian economics that I am sure you really already know.

[tmosley]

South Africa STILL uses artificial oil.  http://en.wikipedia.org/wiki/Sasol

Peak oil is NOT here.  If it were, oil would be leading everything else up.  But it isn't.  Precious metals are (see 2000-present prices).  This is a 100% monetary crisis.

[trav7777]

take it up with IEA, moron.

gold peaked in 2001, retard.  As you were saying?

Also, oil production declines will mean less mining going forward.

Please, again, STFU

[That Peak Oil Guy]

I think you have too much of a short-term perspective of the matter.  The present crisis has its roots in the 70s when US oil production peaked and dollar was taken off the gold standard.  It has been extend and pretend ever since.  Look at any chart of US debt creation and you can see this.  This has been an extremely slow-moving crisis, building slowly but assuredly over forty years.  Which of course means that when the crisis breaks it will be of epic proportions.

The rise in the real cost of oil has been hidden by debt and the fiat money system.  But there ain't no such thing as a free lunch and here comes the waiter with the tab.  I hope you're good at washing dishes.

TPOG

[trav7777]

for the TRILLIONTH TIME, it is NOT ABOUT RESERVES, it is about RATE OF PRODUCTION and its shadow, EROI

[Seer]

You were sounding somewhat knowlegable until this point:

"If we used thorium-cycle reactors, we have enough thorium to last over a thousand years.  "

You're advocating growth (increased consumption), but failing to account for the fact that growth means a reduction in long-term availability (given an increase in use).  FAIL!  Pointing out quantities is meaningless unless one includes consumption/extraction rates.

For improved critical thinking ability I recommend watching Dr. Albert Bartlett's presentation "Arithmetic, Population and Energy," and reading about Jevons Paradox.

[David99]

FED's are criminals

[Rodent Freikorps]

Ethanol starves brown people. Why does congress and EU hate brown people?

[AnAnonymous]

Because Congress and EU represent their population?

[malikai]

Where have you been the last few years? Don't you know that Racism is dead? The US is now fully vested in starving all people, regardless of race, creed, religion, political allegiance, and socio-economic class. Emancipation for everyone! 

[CitizenPete]

Hmmm.. because they are brown?  I give up.

[trav7777]

because their IQs are well below 100 on average?

[hardcleareye]

Trav, you just trying to piss off/insult everyone today, kinda like Mel Brooks in Blazing Saddles...

Except your not as funny.....

[Ignorance is bliss]

Bernanke is printing to cover outstanding U.S. debts and interest payments. If he stops the printing press then the U.S. essentially roles into bankruptcy as the world reserve currency. That sounds like the beginnings of Armageddon. So the printing press will continue and the govt will continue to put into place the infrastructure needed to manage the resulting turmoil that followshyper-inflation. The end game for an empire is never a pretty site. There are no good alternatives at this stage of the game. I have lived in S.A. for quite a few years. Populations move their savings into other asset classes such as Gold, alternative currencies, etc. The people of the U.S. will adapt. The U.S. will become a much more dangerous place to live, and will resemble Venezuela more then the land of our forefathers. There will be major ramifications which we are starting to see now. I am blessed to be a reader of ZH and have an opportunity to prepare my household for the upcoming changes.

[SheepDog-One]

The 'printing' cant pay anything off because its backed by nothing.

[Snidley Whipsnae]

"The people of the U.S. will adapt. The U.S. will become a much more dangerous place to live, and will resemble Venezuela more then the land of our forefathers."

The 'land of our forefathers' WAS a dangerous place to live! Overexposure to revisionist history has led the last few generations of Americans to think that everyone lived in a house like those in the community of Williamsburg, Va...when the truth is that the majority lived in mud huts or tiny log cabins with sod roofs.

...and our best loved 'forefather' raised a larger army than the one that fought the British in the American Revolution in order to eradicate the whiskey distillers on the American frontier (Western Pa) to eliminate competition with Mr Washington's own whiskey distillery.

If you would like to find out what 'the land of our forefathers' was really like I suggest you read Howard Zinn's 'A People's History Of The United States'...it continues to be the largest selling US History text ever written...and, it will rattle your fond view of what it was like for 'our forefathers and foremothers'.

Happy New Year!

[hardcleareye]

+++++  Howard Zinn, what a "fine piece of work" that man was.....

[Raging Debate]

Good comment. I believe America more closely resembles Russia in it's federalism era and turning into the current nationlism era. The Russians I speak with have told me to have Forex as well as tradeable commodities and luxuries.

They tried to cheer me up when I discussed my anxiety over the changes in 2007 by telling me the women looked great by the late 1990's but now were losing that Euro super model look and getting pudgy again.

[Seer]

"The U.S. will become a much more dangerous place to live, and will resemble Venezuela more then the land of our forefathers."

That strikes me as a bit ironic, in that the Bolivars Revolution's vision actually resembles Jefferson's- an agrarian society with more localized political control.  But, I suppose, it is far off of Hamilton's centralized govt and more corporatation-centric view, which is what won out here in the US.

[malikai]

Do not argue with a propagandist.

[IslandMan]

The article tip-toes around Peak Oil.  Wake up, author !  Yes, the rush for real assets is a factor.  But hey, there is a REAL OIL SUPPLY PROBLEM, and it's called PEAK OIL.  We will never be able to suck out more than 70 million barrels of (conventional) oil per day, EVER. 

Get over it, get used to it, the rest is just noise.

[wackyquacker]

yeah, right.....new ice age, global warming, population bomb, blah blah blah

[FrankIvy]

Ice age, global warming, and so on, theories with disputed evidence.

Oil being finite - as true as the sun being hot.  The only question is <i>when</i> will oil begin to deplete in earnest.  If you have any doubt about how important oil and energy are to your way of life, don't use any energy for a week.

[absinthejo]

Those who don't understand peak oil therefore just like Gonzalo Lira and Peter Schiff [&many others] will be proven wrong in 2011. Free-markets dogma can only take you so far.Oil will go to 120 [for now, my graphs give me that for March] but likely higher and 20-30 bucks by the end of the year.

I repeat, no hyperinflation until there are actual oil shortages. Hoping the austrians get the idea about the lifespan of the dollar.

[tmosley]

There weren't any shortages leading up to any of the hyperinflations of the 20th century.  Why do you think the laws of economics are suddenly going to change to accommodate your pet theory?

And what was that crack about free market dogma?  Are you saying you want government to step in and limit oil use?  If you are, then you are a fucking shithead, and need to do your part to remedy this energy crisis and kill yourself immediately.  

Look, if this crisis were caused by peak oil, prices would have been lead higher by oil.  Look at some ten year price charts.  That is clearly not the case.  Prices have been lead higher by precious metals.  That implies a crisis that is caused 100% by bad monetary policy.  

[trav7777]

Wrong.  It implies that you are stupid and should STFU

[zeusman]

Trav7777 - I feel your pain dude.  Dealing with these cornucopians is hopeless.   Doesnt matter what information, science, data from reputable sources etc they just dont get it.    I am still waiting for a cornucopian to tell me why the oil price spike in 06 to 08 didnt bring on any incremental global supply although drilling and well activity was at an all time high and OPEC was maxed out.  Please tell me.. Please

[hardcleareye]

++++++ I second that...... PLEASE TELL US WHY THE SUPPLY DIDN'T INCREASE WHEN THE PRICE DID???????

And if you can't do that, then maybe Trav has a point.....

[absinthejo]

I will be proven right. Why? Because it encompasses supply/demand and the philosophical ideas behind a fiat currency, this time being the world reserve currency. What drives growth? Oil. Oil is priced in dollar. Therefore oil shortages will destroy the dollar. It will happen this way.

Without sounding pompous, what I'm most happy about is that this theory destroys the idea of infinite growth/abundance at the same time. Free-markets capitalism will die with oil shortages. Count on it. Not before.

[Seer]

So, no matter how much oil we need we'll be able to extract it?  Forever?

Fact: we're in an inter-glacial period; these periods last roughly 10,000 to 12,000 years.  We're a bit overdue.  But, go ahead, bury your head in the sand/snow/ice; I may not feel inclined to kick it as I walk by...

Fucking stupid-assed cornucopians!  From Wiki:

A cornucopian is a futurist who believes that continued progress and provision of material items for mankind can be met by similarly continued advances in technology. Fundamentally they believe that there is enough matter and energy on the Earth to provide for the estimated peak population of about 9.22 billion in 2075^[1]. However, this would imply there is already enough for the current world population, but as starvation and fuel poverty have not yet been eradicated, the argument therefore is that the problem is not a lack of resources but rather inadequate distribution through the current economic and political systems. Looking further into the future they posit that the abundance of matter and energy in space would appear to give humanity almost unlimited room for growth.

---

Yeah, skittles and unicorns!

[SheepDog-One]

People extracting oil DO have to drill far deeper and do it in ever more remote areas. How about Russias plan to drill at the north pole? Anyone want that miserable oil rig job? The GOM is tough enough, at least the weather is pleasant. Try doing it in constant 0 degree weather no thanks.

[High Plains Drifter]

Stansberry & Associates Investment Research
LLC. 1217 Saint Paul Street
Baltimore MD 21202

This guy claims he has called everything as it
has happened. Have any of you ever heard of this man?
He says the stuff is about to hit the fan.

He sounds like he has been reading Zerohedge.

http://www.stansberryresearch.com/pro/1011PSIENDVD/PPSILC38/PR

[SheepDog-One]

Thanks, HPD.

[High Plains Drifter]

He talks like Tyler Durden. Ha ha

[the not so migh...]

nice

[CitizenPete]

"Anarchists" setting off bombs in Italy at foreign embassies: http://www.youtube.com/watch?v=7wy3ZjcPqws&feature=sub

The global "security" hierarchy gets a box of chocolates and a can of tobacco to nosh on. Prepare to have the juice spit in your face.  You or your neighbor are an Anarchist if you don't agree with the state, so be careful what your thinking!

Strictly Confidential, Rothbard: http://mises.org/books/strictly_confidential_rothbard.pdf See Chapter 2, "Political Theory", Part 1: "Are Libertarians Anarchists?"

Stick with the collective brother.  Know your place, shut your face.  Stay in the food line and we will take care of you, do not worry.  When the buses come to your neighborhood to take you to the secure areas for your protection, do not take more than one medium bag each.  All is in control.

Anarchists are delusional fragmented unorganized individuals preforming random acts of unjustified terrorism.  If you see anything strange or questionable, report it immediately to your local friendly Fusion Center (http://www.dhs.gov/files/programs/gc_1156877184684.shtm).  Your next door neighbor (you know the one on unemployment with loud pickup, and the blonde wife with big tits) may not be the good Amerikan you think he is.  What if his TV stopped functioning and he read Rothbard or Rockwell (http://www.lewrockwell.com/) and woke up? -- it could happen to anyone.  All we are asking is for you to keep an eye out.

Big Brother does exist and he's always here to protect you, so be certain to let us know if you see anything out of the ordinary.  End of message.

Meanwhile in other news: Bank of America is offering a great rate on 3 year CDs beginning January 1, 2010.  B of A bank executives, appearing at a United Way event, stated that the premier bank wanted to give back to the community saying: "Instead of anonymous giving, we believe that offering 3 year CDs at a full 1% rate higher then the average current rate will help those struggling with their investments and provide for their children's future".  The rate is set at 2.6%.  Congressman Barney Franks, speaking at a school closing, praised the announcement as "spontaneous good will" stemming from a free market system we can all believe in. 

Now for more good news brothers: Choco and tobacco rations are being increased ...

http://www.youtube.com/watch?v=LOy5xGS3UQg

[Seer]

The State often spurs violent actions and blames them on "anarchists."  It's pretty well documented that that's been the case in Italy (the origin of fascism).

[CitizenPete]

I trust you understand the total sarcasm 

[MobBarley]

So I ask you is it a conspiracy? To bankrupt America, to impose draconian controls over movement and liberty and employment? When DHS is in charge of allowing employment? When TSA is in charge of all highways and buses and planes? When every citizen will indeed have to show the Stasi their papers to move about? When protection is the pretext for transparently oligarchic rule?

 Is it a conspiracy, my fellow americans, when a voice vote is used to implement a food control bill making it impossible to grow your own food, to feed others charitably, to sidestep the increasingly obvious chain of control whereby only the obedient to the state shall be fed, clothed, housed? Is it a conspiracy when members of a Secret Society consistently rule and impose rules not in accordance with the democratic wishes of a society? When in the off chance that someone not a member of this society ascends to the throne they are murdered?

 Is it a conspiracy when the american dream is truly just a dream because you'd have to be sleeping to believe it?

 Yes it is.

 It's called a conspiracy.

[FrankIvy]

If you're going to quote G. Carlin, you ought to cite him.  But agree with the rest of your post.

[SheepDog-One]

Spot-on, MobBarley! Im glad to see a lot of people around Zerohedge calling it all for what it really is and not just whether a stock might move up or down today. It is a global conspiracy they want a prison planet with 1 world govt and a cashless slave society. Bingo!

[CitizenPete]

How can the TSA be in charge of all the highways?  The PA Turnpike tolls are owned and run by a Spanish Company.  The TSA would have to pay them for access.  Oh, and don't forget that Chicago's parking meters are owned by some guy in AbuDabi, so the TSA would have to pay them to park in Chicago.  The TSA will be guarding an infrastructure owned by other governments, protecting you from yourself. 

[monopoly]

Excellant article and spot on. Quite the crowd here today on ZeroHedge during a slow holiday week. Nice to see.

[PolishErick]

Oh, I really dont know what all the fuss is about- I already pay 6 dolars 30 cents per gallon here in Poland (In soviet poland- fuel burns you)... The PLN is falling against the USD (yes it is possible) and our government just hiked the taxes on moast fuels- they do it for the lulz...

But apart from the reasons of 100$ oil (be it depleating oil fields, or moast ceirtanly the bernanks printer) shouldnt we be realy looking for a nice substitute, or at least trying to devercify the scource of power in transportation and everywhere else? Yes I know Im comming across like a tree-shagging hippie... But I dont mean forcing everyone to buy a soap box prius. Im thinking more in the direction of hydrogen fuel cells (maby cracking or electrolysing wather in nuclear plants and such).  Branching away from oil and gas might not be economicaly sound at the moment (the technology is not factory ready yet) but with the price volatility it seems a necessary insurance.

Ofcourse Im not talking about an Obamanist, centraly directed, "five year plan" ... maby just a nice tax brake for companies that develop such technology...

[That Peak Oil Guy]

There is no substitute for oil.  Nothing else has the combination of convenience (easily transportable), energy density, and relative abundance.  Absolutely nothing.  It is the product of millenia of concentration of energy inputs from solar, biological, and geothermal sources.  Any substitutes will be inferior.  This is the real reason we have not created good substitutes; there are none.

Eventually extraction will cost so much that other technologies will appear as good substitutes.  But that will be in comparison to the cost of extraction at that point in time, not cost of extraction in the mid-20th century.  We are unlikely to ever again experience such a golden age of energy as we did in the 20th century thanks to oil.

Here is a good take on the subtitution problem:

http://www.theoildrum.com/node/6641

TPOG

[tmosley]

You don't need energy density for anything other than fuel.  You can synthesize fuels for that, and you can do so from plentiful and renewable resources if you like.  http://en.wikipedia.org/wiki/Sasol

For centralized production, you don't need things to be easily transportable.  

For abundance, there is plenty of energy all over the place.  It is just a question of when it becomes economical to go after it, including investment in capital and research.

As a for example, recent research has shown that it is possible to create perfect sheets of graphene (ie next generation solar panels) using a reusable metal foil, any carbonaceous material, and a flow of nitrogen gas at 800 degrees C.  This material is easily doped, extremely durable, and with the process, suddenly as cheap as newspaper to produce.  The efficiency of conversion of solar power will be slightly less than silicon, but it will be so cheap, so light, and so strong that it can be deployed anywhere at practically no cost.  This is ONE technology.  We are talking about making a home grid neutral at a cost of less than a hundred dollars, including the grid tie inverter (which will become much cheaper with the rollout of new production facilities).

With enough energy collection facilities, oil becomes nothing but a high energy density battery.

[trav7777]

god damn you're a polyanna.  You forgot the unicorns.  gotta have unicorns

[hardcleareye]

He didn't forget them, it's a given, we all know that without unicorns we don't have Skittles.   Skittles exist, therefore unicorns....

[That Peak Oil Guy]

Perhaps the hot air you emit as such nonsense could be bottled and liquified and turned into oil as well!  We could keep you tied up in a small pen and shove beer and pertzels down a tube inserted in your stomach while showing you peak oil blog posts so you have additional fuel for your perpetual-motion engine brain. 

As you rant and rave against the uncomfortable reality of reality and dream up your fantasy scenarios we could bottle it all up and sell it back into the Smart Grid!

TPOG

[zeusman]

Oh so you are suggesting we can scale up alternative transportation liquids on a global scale.  Fuckin ridiculous and misleading.  This is why I am convinced the world is heading for a fucking cliff... Cornucopians lead people to believe a magical replacement for crude will make for a seamless transition

[Seer]

Two big issues in your view here:

1) The existing limited energy sources will have to be siphoned off in order to develop and produce any new shift;

2) Concurrency of systems, you can't just scale up a parallel system and switch over the previous one as one might think (I spent time in the computing industry and learned the difficulties in bringing on-line new systems replacing currently-in-production system).

Oh yeah, and add this one as well (for a third issue):

3) While doing all of this the existing and the new system development MUST provide for growth.  R&D pulls from production, in which case it's pretty much impossible for increasing capacity which is necessary to provide for continued growth.

Please note that just because something can be done that this doesn't mean that it can scale or that it SHOULD be done.  US sent men to the moon, but that doesn't mean that all 6.5 billion on planet earth could make it there.

[hardcleareye]

This is the link to the article regarding graphene "solar panels"

http://www.sciencedaily.com/releases/2010/07/100723095430.htm

"......with the process, suddenly as cheap as newspaper to produce."

is what you said, now please compare it to what the article said

"But what graphene OPVs lack in efficiency, they can potentially more than make for in lower price and, greater physical flexibility. Gomez De Arco thinks that it may eventually be possible to run printing presses laying extensive areas covered with inexpensive solar cells, much like newspaper presses print newspapers."

Please note the words, "potentially" and "may eventually be possible", very different than what is implied in your post.

Now, if you read the article and "understood" what you were reading you would have noticed how inefficient this material is in comparison to our current "inefficient" solar panels (nor does the article discuss how the efficiency will drop with temperature and angle of the sun)!!!  DO YOU APPRECIATE THE MAGATITUDE OF SCALE!!!!!!!!!!!!!

I would also recommend that you take a little time and research the concept of "Energy returns on Energy Investments",  before you submit another "foolish" post like this one!

[proLiberty]

My point exactly.  In a market where the various levels of consumers are free to adapt and to innovate, the supply of anything is irrelevant!  What counts is the price of the finished product and that price is the signal to all further stages of production what is more available or less plentiful. 

Supply and demand are always in balance when the price can be freely set.  In saying that, I am not in any way ignoring the tremendous demand for oil, even at $90/bbl,  but over a year ago I read an article of a coal-to-liquids plant being built with a projected break-even point of $75/bbl.  And US has more hydrocarbons in the form of coal and shales than in the form of oil.   Yes, it would take time and a lot of capital to transition to providing gasoline and Jet-A from coal, but the Germans did it during WW II and we can too, if we need to, and given the quantities involved, I imagine that the retail consumer would not see very much of a price difference when things settled down.

[That Peak Oil Guy]

You are talking yourself into lowered expectations for our future.  This is good, part of the process.

The transition from whale oil to petroleum was an upgrade.  The transition from petroleum to coal liquids is a downgrade, and comes with its attendant costs and effect on the economy.

TPOG

[yabyum]

Bianchi 27 speed, Bitches!

[Rodent Freikorps]

They'll pry my GT from my cold, dead hands.

Speed is life, Biatchazzz.

[contrabandista13]

Of course... of course...  of course.....

How could I have been so blind.....?  There's a huge elephant in the room and I could not see it....  WTC....!  

I'm an idiot.....  "savant"...!

Best regards,

Econolicious

[Cdad]

does anyone really doubt that the MSM will bring up “speculators” as the villain?

Huh?  Straight up, The Bernank is one you have cited as part of the fuel on the long oil trade.  I don't get your concluding statement.

A lot of good points in this article.  However, to ignore the effect of criminal syndicate Wall Street bankers is stupid.  But we need not argue it.  Instead, fix the CFTC and add more delivery dates to the calendar.  There...just try that and we can avoid the whole argument about speculators.  The truth will shine like the morning sun.

Oh, and btw...and duh...get the guys drilling in the Gulf again already...which requires, I guess, getting rid of our current president.

[TruthInSunshine]

Forcing speculators to take physical delivery of oil would do more to crush the price of oil than anything else.

The problem now is that there is an unholy alliance of enviro-whackos and fraudsters, who both wish for higher prices, but for completely different reasons, so they accomodate and even encourage each others' lies.

[hardcleareye]

.

[hardcleareye]

"there is an unholy alliance of enviro-whackos and fraudsters.."

Your "limited" ability to articulate yourself is damaging your creditability.  There might be some merit in FOLLOWING YOUR OWN ADVISE!

"Do everyone a favor and cite rather than write your own shallow, muddy, devoid-of-all-reason-and-substance utterances."

[Cdad]

"Advise" is a verb.  Perhaps, the little pot should be running along now?  Maybe the eye is not as hard and clear as it once was?  Maybe throwing stones from a glass house is not such a good idea?

[Seer]

"Fixing" the CFTC and or tossing out Bernanke/Obama/Whoever isn't going to change the endgame.  There isn't any fix for the fact that our system is predicated on increasingly more and more cheap oil to fuel endless growth.

Yeah, there are crooks who skew things, but as each day passes the issue of readily available cheap energy looms over our heads.

As I've hammered before, the Drill, Baby, Drill solution isn't- it's a strategy of "strength through exhaustion," extremely silly!

[johan404]

Peak oil, bitchezzz.

[ebworthen]

see below

[ebworthen]

Conquer or be conquered.

The Middle East is lucky it was the U.S. and the Brits spilling their soldiers' blood then handing the countries back.  If the Russians or Chinese had been there they would have claimed it; or have we forgotten why Russia invaded Afghanistan?

We're too nice.

We saved France and we get disdain.

We rebuilt Europe and we get thumbed noses.

The Middle East is in the process of being subjugated to the radical branch of the predominant faith; but we pretend we don't really need the oil?

NO OIL = NO FOOD

NO OIL = NO FOOD

NO OIL = NO FOOD

Put your notions of a team of horses and a plow - or Grandpa on a tiny tractor tilling 5 acres -in the dust bin with the Model T and FDR.

The bushel production rate we now have in all major food crops is on the thousands of acres by huge planting and harvesting machinery running on diesel, fertilized and treated with pesticides derived from petroleum.

OIL IS ABOUT FOOD - NOT URBAN AND SUBURBAN NARCISISSTIC ZEITGEIST OVER SUV'S AND ELECTRIC TIN CANS!

Post WWII, the petrochemical industry allowed our rapid transition into suburbia, and ultimately the sending of our best and brightest to Wall Street to engineer societally toxic financial instrments (and attitudes) that are tearing down the Republic.

NO OIL = NO FOOD

DELTA V  $OIL = DELTA V $FOOD

[SheepDog-One]

Theyll use food as they always have, as the most effective population control device. Good luck to everyone living on declining wages if theyre lucky enough to even have a job going forward, declining house values, with gas going up to $5 and higher and 40% increases in food prices. 

[jesusonline]

We're too nice.

Sums up the mentality of an average american. US should stop "being nice" and once again remind everyone that "American way of life is not negotiable".

Gotta love that final scene from Three days of the Condor:
http://www.youtube.com/watch?v=Eovei355l4o

[That Peak Oil Guy]

This post takes an overly simplistic view of the supply/demand scenario for oil.  Oil is like oxygen for our global economy.  As it gets more expensive to extract there is an economic ceiling that forms at a point that is somewhat shifting due to the complexities of things like emerging market demands, speculation, and monetary policies.  When the ceiling is hit the economy suffers reducing demand and prices, recovers a bit, rallies, then hits the ceiling again.  This is the process of demand destruction.

It is naive to try to attribute oil price increases to any one factor; all factors must be taken into account.  But the fact is that we do have a supply problem, not meaning that the supply is gone or shrinking, but that the supply is more expensive to obtain.  Because oil is a primary fundamental input for the economy (like oxygen for a hiker) as the cost of extraction goes up performance goes down.

Some good additional info:

http://www.theoildrum.com/node/6814

TPOG

[tmosley]

You peak oilers always seem to equate oil with oxygen.  Oil is NOT like oxygen.  Oil is like food.  There are many sources of food, even if they aren't plentiful, but there is only one molecule called oxygen.  Oxygen is plentiful en extremis.  Oil and food are not.

But the fact is that if this crisis was caused by peak oil, then it would have been oil that lead prices up.  But it didn't.  Look at ten year charts of commodities and PMs, and you will see that clearly PMs lead prices up, which means one thing and one thing only--this crisis was caused by monetary policy, not peak oil.  Hell, oil is about the same price today as it has been for the last 50 years, priced in either gold or silver.  If oil was peaking, it should be going up against a form of money who's supply is constant.  Explain why it isn't.

[That Peak Oil Guy]

As concerns the health of the economy, energy trumps money every time.  Energy is a real input and money is an abstraction.

Of course we have a monetary crisis!  Money and energy are intertwined in a complex relationship that is difficult to disentangle.  As we have an energy crisis a monetary crisis is sure to follow.

Do you really think that it is a coincidence that the US left the gold standard at the same time in the early 70s that two large energy-related events happened?

  1. The US reached peak production of oil.

  2. The OPEC oil embargo leading to the first US oil crisis.

We have been living on borrowed time ever since and racking up debt buying oil from other places.

Food is another good analogy.  Perhaps when I say oxygen I mean energy and when I say oil I mean air, and what really matters is the energy density.  I still think it is a proper analogy.

TPOG

[zeusman]

TMOSLEY: I dont get if you are refuting peak oil or the exact chronology of economic events???   Poor monetary policy doesnt preclude geological reality.  Economists are people who couldnt quite cope with the rigors of full science curriculum e.g. differential equations, complex variables, non-linear systems etc.    Not saying they didnt make a good career decision from an economic perspective.. Clever wall street products have siphoned trillions of dollars from the economy over the past 25 years.   

[hardcleareye]

++++ Gail's writings are always a pleasure to read.  The following posts, (picking her work and assumptions apart) are usually very insightful and tend to give a "balanced" view.

[KickIce]

Thank your lucky stars that are farm equipment runs on diesel rather than gas so our food prices won’t increase.

 Seriously, I think some of the best headway could be made through the elimination of consumer plastics.

 Take milk.  First convert to glass and charge a premium for a first time store purchase and have stainless steel bins that the supplier could fill, clean and date. You could then have the bar code changed to “reusable” status at the counter.  Of course, this would require a universal bar code for a gallon of milk.

 You could do much of the same for laundry soap, shampoo as well as several of the bath soaps and lotions.

 Same could be done for deodorant.  Premium on the first time purchase followed by having say a pack of five that you could reload into the plastic base.

 Would it be a pain?  Sure, initially, but with the reduction in packaging consumers should see a nice gain in discretionary  income.  This gets me to bottled water…  We need to charge a large premium for this economic disaster.  With some of the money they save from the above they could purchase an electric cooler for the car and eliminate additional plastic products.

[SheepDog-One]

What? Farm equipment runs on diesel so food prices wont increase? Diesel is going up far higher and faster than gasoline is. Here premium is $3.05, diesel is $3.40.

[KickIce]

You missed the subtle sarcasm font SD.

[hardcleareye]

Upppp,  need a "sarcasm standard" for posting..... 

[Seer]

I see only the same font.  If you are unable to set a different font to denote sarcasm then I suggest using a "<sarcasm>" start and a "</sarcasm>" end approach.

[TruthInSunshine]

Oh boy!

Yet another doomcult prognostication from the Church of Peak Oil, the crowd that LITERALLY once believed dinosaurs were the exclusive source of crude oil deposits.

Just what I was looking forward to; Peak Oil cultists swarming ZeroHedge!

I've yet to come across a more dogmatic, idiotic cult than Peak Oil-istas, and if you ever get a former cult member to come to their senses, they'll speak about their experience in the cult in near-militaristic terms.

Fact: Peak oil cultists have ZERO clue regarding how much oil exists, and more importantly, they have ZERO clue as to what drives the extraction/production cycles (as this is as much a matter of internal government and cartel policy as anything else in most of the world), yet they will gladly spew total fabrications about both of the aforementioned subject matters for eternity.

Another cult, another Y2K-type crowd.

http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDeta...

http://www.energybulletin.net/node/347

http://www.sciencedaily.com/releases/2006/10/061019162104.htm

http://www.youtube.com/watch?v=6v3w4eyXVWE

[trav7777]

Wow...just wow.

Ladies and gents, here we have a retard who believes that production can grow FOREVER.

Listen, you stupid ass, if you DO NOT believe that production can grow FOREVER to INFINITY, then YOU TOO BELIEVE IN PEAK OIL. 

BTW, do you even READ the fuckin links you cite?  The VERY FIRST ONE talks about DECLINE RATES of production at producing fields!  Stupidity like yours should be on display at some kind of stupidity museum; it's really noteworthy.

[TruthInSunshine]

Of all the people I've encountered on ZeroHedge, you're the little piss ant juvenile running around screaming 'we're all going to die!' and "STFU!"

Do everyone a favor and cite rather than write your own shallow, muddy, devoid-of-all-reason-and-substance utterances.

What makes you and you ilk slightly more dangerous than average is that your aiding and abetting the enviro-scam of Cap&Trade and 'Global Warming,' and assisting the true whacked out enviro-nuts and their Machiavellian end game of eliminating the use of fossil fuels, even if it has to be done through data manipulation and outright lies ("Oh look, here's a neat trick we can employ to demonstrate constantly rising temperatures!").

From the 1st link (reading comprehension is your friend, not your enemy): 

"As to the future production profile, almost two-thirds (63 percent) of remaining reserves are associated with fields that are still either in the buildup period or on plateau, and are producing 59 percent of current production.  In addition, CERA’s database of new field developments expected to come on stream in the next four or five years includes some 350 projects (120 OPEC and 230 non-OPEC) with gross contributions of approximately three million barrels per day (MPD) annually from OPEC and 3.5 mbd from non-OPEC countries over the next few years.

World Capacity Conclusion

“The results of this new study reinforce CERA’s existing bottom-up global liquids capacity model showing that liquids capacity of around 91 mbd in 2007 could climb to 112 mbd by 2017,” according to Jackson. 

[zeusman]

You might want to check CERA's record of prognostication before you cite their garbage.

[hardcleareye]

+++++ you pointed that out for me....

[trav7777]

just fucking amazing...the way you throw "global warming" and environuts out there as if that has ANYTHING to do with peak oil.  Just...incredible.

I've already MADE the cites, probably the 20th idiot ago.  I have no more time for anymore idiots like you.

CERA is trash and their forecasts are bunk.  WE DIDN'T HIT 91MBPD in 2007, you fucking MORON.

[zeusman]

Good post trav7777 - Peak oil deniers best rebuttal is the often cited Sinclair oil commercial which used a dinasour as a marketing campaign to refute the reality of peak oil.    Did Texas peak? Yes.  Did the US as a whole peak? Yes.  Has the North Sea peaked? Yes.  Now for you non intellectual types if you simply do the aggregate math ( I know it is hard for most) you can easily see if country after country goes into decline the sum of all this will be a reduction in production.   As trav7777 has pointed out endlessly it is not just total reserves but the maximum rate of extraction.   You guys (cornucopians) are all real stupid and would challenge you to demonstrate any compentency in math.

[That Peak Oil Guy]

The reason the peak oil people are here is because peak oil is here.  Does it mean doom?  Probably not.  We should be more worried about the reactions to the situation rather than the situation itself.

Even the IEA now says that peak production of conventional oil already happened.  This is the same organization that has painted rosy pictures of the energy outlook for years and even now continues to try to paint a rosy picture even as it gently breaks the bad news:

"The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case"

http://www.worldenergyoutlook.org/docs/weo2010/weo2010_london_nov9.pdf

An economy is simply all about taking energy and material inputs and transforming them into more usable and desirable outputs.  When one of our primary energy inputs becomes more costly that extra cost will be reflected in the economy's outputs.  And since nothing can buy more oil it means declining production.

There is no cult here.  Only the stark face of reality.  I was not worried about Y2K at all.  The research I have done on our energy crisis has me quite worried.  But it is hard to step outside of this system we have constructed and see the truth for what it is.

TPOG

[AnAnonymous]

 the crowd that LITERALLY once believed dinosaurs were the exclusive source of crude oil deposits.

Really? That assertion was made by people who didnt want to discuss oil availability.

This shift in credit shows that peak oil people are losing the battle.

[akak]

Over the next year we are likely to be buried in a deluge of excuses, half-truths, and lies, all meant to divert attention away from the word “inflation” as the masses begin to question just what the hell is going on.

Karl Denninger and Mish Shedlock take note!

Will 2011 mark the final demise of the deflationary flat-earthers?  Let us hope.

[absinthejo]

Deflation is coming. Sorry. Dow 13,000 then 6,000. Oil 150+ then 20-30. Countless bankruptcies. No weimar republic by December 2011. Then Peter Schiff will apologize publicly and say "even the book The Limits to Growth is too optimistic".

[CrashisOptimistic]

Housing is 40% of the avg person's budget.  Rents are not going up.  With 2.7% of houses in the USA presently VACANT, rents are not going up.

Until they do, there is no inflation.

[CrashisOptimistic]

The quality of oil discussions on ZH is improving.  The sneerers in contempt have actually started to spend time on the matter.

Here are my additions for the moment:

1) The usual wave of the hand saying "technology improves" and "we will adjust" . . . and from that wave the conclusion that "it's not the end of the world" is correct.  Yes, it is indeed correct.

It's NOT the end of the world.  The end of the world is when all 7 billion people on it die instantly.  That's not going to happen.  That's not even going to happen over a 10 or 20 year period.

But about 5 billion are going to die.  Over that period, starting in about 15 or so years -- or sooner if wars trigger more aggressively (and they probably will).

So yes, we will adjust.  By 5 billion, in just a few years time.  "Adjust" is not a pretty thing.

2) We'll find an alternative.  Let's examine that like so.  If I shut off the global oil supply TOMORROW, 100% shut off, would we find that alternative?  No.  There would not be time.  Focus of activity would have to instantly return to manual labor.  There would be no time to think.  No time to create.  You have to spend that time finding food.

Tomorrow is extreme.  How about if it shuts off next week?  No difference.  One week is not enough time.  How about one year?  Still no difference.  How about 3 years?  Still no difference.  Why?  Because we would not do a crash program if people don't believe it's 3 years away.  More important, even a crash program could not do it in 3 years.

3) If you're an American with children, I guarantee you 100% you will not object even remotely to interdicting someone else's oil if it means feeding your kids.  China had better walk a careful line.  Oil tankers are a lot more vulnerable than pipelines from Canada.

[Bicycle Repairman]

The FED has been bending over backwards keeping interest rates low to keep this economy from croaking.  Do you honestly expect that TPBT will now let oil and gasoline prices croak this economy?

Why does J6P support the troops in the ME?  Is it for our freedoms or affordable oil?  Unaffordable oil might call the whole paradigm into question.

There might be an oil spike, but that's it.  The price will retreat, rapidimente.