This page has been archived and commenting is disabled.

Much Ado About OPEC: Russia Is The True Wildcard, And Just Got Even More Powerful

Tyler Durden's picture





 

Today the world is transfixed with the dissolution of OPEC courtesy of yet another polarizing response to the most recent set of US MENA policies, with Saudi siding with the US (it has no choice in this: recent violent developments in the MENA region means Saudi Arabia is now even firmer attech to Uncle Sam's armed sleeve), yet the truth is that this is a completely non-event from a pure crude supply/demand perspective. Why? Because the real marginal supplier, in light of OPEC's secular decline in output, has been Russia for a long time. The Globe and Mail's Jeff Rubin explains: "Other than a gratuitous gesture to their concerns, any announced OPEC production increase isn’t going to pump more gasoline into U.S. gas tanks or, for that matter, the tanks of motorists anywhere in the OECD... Khalid al Falih, chief executive officer of state-owned Saudi Aramco, recently warned in April that at the country’s current rate of growth in domestic oil consumption, Saudi Arabia would burn a staggering 8.3 million barrels a day of its own oil by 2028. That is almost its current level of production." In other words, Saudi would promote unilateral actions regardless of the other 6 countries that just isolated the Middle East country, simply to keep its population happy with ever greater bribes, but also due to the expansion of its own economy (as transient as it may be). The real story is here: "Russia, the one country actually capable of producing 10 million barrels a day, isn’t even at the table at the OPEC meeting. And it’s been Russia that has been adding the most to world exports over the better part of the last decade as OPEC exports have faltered." In other words, now that the former cartel is finished, and supply bickering and uncertainty portend extreme crude volatility, Russia's role in the energy output scene, and thus in political in general, is about to become that much more important.

More from The Globe and Mail:

OPEC production remains well below its level prior to the Libyan civil war, and what ever modest increase its kingpin producer, Saudi Arabia, can muster will be more than consumed by that country’s own soaring demand for power from air conditioners in the approaching peak power summer season.

The only thing OECD oil consumers can count on growing in Saudi Arabia and the rest of OPEC is the cartel’s insatiable thirst for its own oil. With the price of gasoline  less than bottled water, Saudi Arabia already burns three million barrels a day with demand claiming a third of its total oil production.

Ridiculously cheap gasoline and even cheaper diesel-fuelled electric power are one of the key tangible benefits the Saudi population, outside, of course the extended royal family, get to benefit from the country’s massive oil wealth. In a period of unprecedented and growing social unrest in the region, those oil subsidies are unlikely to be withdrawn any time soon.

As for why it behooves the US to make a very close friend out of Putin ASAP:

Oil production in Russia, the world’s largest producer, rose to a near post-Soviet high of 10.26 million barrels a day in May. Unlike Saudi Arabia, which has been hard pressed to maintain even a nine million barrel a day production level, Russian production has been north of ten million barrels a day since September 2009.

Prime Minister Vladimir Putin has made it a national priority to maintain Russian oil production at over ten million barrels a day for the next decade. Let’s hope Russian oil giants like OAO Rosneft are up to the task.

And since the global geopolitical-energy axis just got redefined, expect Russian interests in the broader European area to become that much more well bid by the Kremlin, now that it has eliminated Obama's protest.

Slowly, gradually, the transition to the new reserve currency pair, the CNY-RUB, is becoming effectuated and more palpable with every passing day.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/08/2011 - 12:01 | Link to Comment BobPaulson
BobPaulson's picture

They're the only ones with excess capacity to trade...for now. They have to balance the need for the trade revenue with the strategic advantage of hoarding.

Wed, 06/08/2011 - 12:21 | Link to Comment BobPaulson
BobPaulson's picture

For sure (I'm a Albertan who normally works there in heavy oil related research). The production capacity of Canadian tarsands are highly overstated IMO. The reserves are massive and will never run out but it's like ripping up the pavement on the road and turning it into gasoline. EROEI is the bottleneck.

I'm not saying they won't try to maximize this, I'm just saying it aint 10MMB/d.

Wed, 06/08/2011 - 13:00 | Link to Comment oddjob
oddjob's picture

 EROEI is the bottleneck.

Just 'Candu' it.

Wed, 06/08/2011 - 13:11 | Link to Comment Flakmeister
Flakmeister's picture

Been looked at, fresh water is a serious issue. Also the NG is used to hydrogenate the bitumen....

Wed, 06/08/2011 - 13:51 | Link to Comment trav7777
trav7777's picture

mosely-claven says "ionic liquids" will make this all go away

Wed, 06/08/2011 - 17:00 | Link to Comment falak pema
falak pema's picture

he carry big crystal bowl. He be big sooth sayer crystal ball gazer of noble tribe of chem eng big ben yin yang chin chow. Him hate peak oil and all limit to mother earth. 

Wed, 06/08/2011 - 14:07 | Link to Comment Monedas
Monedas's picture

Do they use some of the refined product to soften up tar sands or do they just steam it out ? Just curious ? Monedas 2011 A wasted mind is a terrible thing ! School vouchers now !

Wed, 06/08/2011 - 13:35 | Link to Comment Urban Redneck
Urban Redneck's picture

 

I hope the fucking pipeline leaks all the way to the Gulf Coast, it would be karmic retribution to the tree-huggers who prevent the construction of new refineries in the US

(like perhaps on the northern border where the oil comes in, which in addition to reducing costs, environmental risks, and providing potential feed stocks for the dying manufacturing industry, it would reduce the strategic risk of petroleum shocks due to the Gulf coast refinery concentration.)

 

Wed, 06/08/2011 - 14:01 | Link to Comment Flakmeister
Flakmeister's picture

Why don't you investigate the refining capacity (and what type of crude they can handle) instead of number of refiners...

In 1982 (the earliest data provided), the United States operate 301 refineries with a combined capacity of 17.9 million barrels of crude oil each calendar day. In 2010, there were 149 operable U.S. refineries with a combined capacity of 17.6 million barrels per calendar day

 

taken from:

http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2011/Documents/StatisticsDefinitions.pdf

Wed, 06/08/2011 - 14:10 | Link to Comment Urban Redneck
Urban Redneck's picture

Because my point was about building a new refinery where it would do the most good. 

Pumping oil from Canada to the Gulf Coast in order to utilize existing refineries makes no rational sense.

Wed, 06/08/2011 - 14:23 | Link to Comment Flakmeister
Flakmeister's picture

Why? Where would you build a refinery that would make rational sense? The finished product still has to be distributed...Refineries gain (to a point) by scaling in size, also, it is cheaper to upgrade/expand than to go greenfield...

Wed, 06/08/2011 - 15:37 | Link to Comment Urban Redneck
Urban Redneck's picture

Build the thing somewhere between the Dakotas and Detroit, the volume of finished product is less than the volume of raw product, and the distance is substantially less (see the post I just did below).  I don't buy the cheaper cost model when the pipeline alone is $7B and its maximum flow is 700kbpd, with the pipeline, unlike a refinery, you can't scale, you can only build another pipeline if you need more capacity.  Plus, when the next Hurricane Katrina or whatever hits the 700kbpd capacity on the coast, there is a huge cost to bring the refinery back on line, and a an even bigger cost to the American consumer through higher oil prices.  If the crude pipeline leaks, it could be anywhere in the breadbacket of America and the entire pipeline must be taken OFFLINE to fix the situation.  With a refinery on the Canadian border finished product can be shipped by pipeline, rail or barge depending on the location of the refinery.  Rerouting in the event of a pipeline shutdown is a simpler matter and more unlikely to be necessary since the pipeline from the oilfield to the refinery is significantly shorter. 

Wed, 06/08/2011 - 15:41 | Link to Comment Flakmeister
Flakmeister's picture

Actually the volume of finished product is larger... hence the term "refinery gains"...

Sounds good until you realize that 700 kbpd is an enormous refinery and that building it far from existing industrial infrastructure is not cheap...plus the fact that the existing refining capacity is not being exercised, sounds like a surefire way to loose billions....

 

Wed, 06/08/2011 - 16:02 | Link to Comment Urban Redneck
Urban Redneck's picture

The refinery doesn't need to be far from existing industrial infrastructure and there is lot of industrial infrastructure that is a lot closer than 2700km.  The raw material is basically worthless until it is refined, so if the pipeline goes down for repair  (the chances of which increase with each length and join) or the refinery is shut down due to hurricane season activity then the refinery, pipeline operator & US consumer is SOL.

Thu, 06/09/2011 - 05:41 | Link to Comment zuuuueri
zuuuueri's picture

You realize that 700kbpd of refinery capacity would cost something in the 20-30 billion range? 7bn for a pipeline to bring the stuff to existing refineries (which have excess capacity anyway) and even several billions on upgrades at existing refineries is a lot cheaper than building a new one.

There is also a huge difference between older refineries that have not had capital improvements  and those with newer better equipment. This is one sector where investment in upgrades and improvements makes a big difference. A lot of refining capacity has been shut down worldwide over the past couple decades because it's simply too inefficient to remain profitable. There are plenty of 30-50 kbpd refineries, even in a city nearby (wherevery one happens to live) which say 20 years ago were operating full tilt, but today would lose money. It's a better investment to put the money into expanding capacity at a facility that's been kept up to date.. and so far, transport costs have not tilted the equation back in favor of more, smaller, facilities.

Also, if there was a real will (and funding) to do it, a pipeline bringing canadian crude to the gulf could be complete and pushing product in 2 years. A major refinery in the hundreds of kpbd is a ten year project _before_ overruns and delays. 

As for 'cant scale', scaling up capacity in a pipeline or a refinery both come down to capital investment. You can't scale up capacity in a refinery without building and installing equipment, infrastructure, etc, either. With a pipeline, you already have the toughest problem - obtaining the right of way - solved, and yes pipelines, like rail lines, are occasionally upgraded. Depending on what goes through them, the schedule for replacement of pipe and equipment along the pipeline can be quite aggressive (corrosion is a major problem with crude, sulfur content and dissolved gases play a big role there.. the canadian syncrude is probably better than a lot of real crude in this respect) and a pipeline operator is more or less always slowly rebuilding his pipeline... kind of like painting a big ship. you dont ever stop and paint it... you just have a couple guys who are always ina continuous process of repainting it.. 

 

Thu, 06/09/2011 - 06:39 | Link to Comment Urban Redneck
Urban Redneck's picture

20-30 billion for 700kbpd in US refining capacity is outrageous - no wonder they call it the RUST BELT.  I could build 4 separate brand new refineries (using US E&D firms and Asia steel) in Africa for less than half that amount. 

I also don't think any 2700km pipeline in the US could be built in 2 years- it will take more than two years just to resolve the litigation (both expropriation and environmental).  At least with a refinery in Duluth the bulk of the much shorter pipeline could be run along the US-Canada border where the State's expropriation case is strengthened by the State's duties for border security.

Overruns and delays are likely in either scenario.

The whole point of building a new refinery would be to eliminate (90%) of the $7B cost of the pipeline, reduce refining concentration risk along the Gulf coast, and limit the environmental risk to a much smaller geographic area.  There is also the more fundamental wisdom of trying to defy the laws of physics- the run from the Canadian border to the Gulf Coast is all downhill, but the distribution of the refined product back across the American continent is basically all uphill from the existing refineries they want to expand (basically at sea level).

   

Thu, 06/09/2011 - 07:16 | Link to Comment zuuuueri
zuuuueri's picture

even if you could build such refineries in africa for that amount, here you are proposing that texas is too far away from this oil, but africa is not? does not compute.. 

Besides, it would for a lot of reasons be easier to build such a facility in an industrialized place with cheap educated labor and some infrastructure. in africa you'd have to build ports and roads and settle a few civil wars before you could ever build your refinery.. 

The closest thing to what you might be imagining is the jamnagar refinery in india. its humongous, about 600kpbd, it was completed in an amazingly short amount of time (but brought online in stages, so it reached full capacity about 10 years after the plan began) and cost something like 7 billion US. It's only been oeprating anywhere near capacity for a few years, so it is hard to say how many corners were cut or what the ROI will be like in a few years as maintenance costs change, but for now, it is probably the best example of what you are talking about. As a direct contrast, consider the heavy sour refinery that the saudis have been trying to build for years. The project's delivery date has been pushed into the 2020's and the cost is north od 20 billion, all the most expensive western companies building the thing and it just keeps slipping into the future and costing more without every getting anywhere. It is expected to be of comparable mega-capacity to your 700kpbd number, a little higher. That's 2000 miles away from the indian refinery and probably even a lot of the laborers are imported from india ;) 

As for pipeline construction speeds, yes, clearing right of way is the biggest issue. From the engineering perspective, with enough men and machinery (and if you really mean business you hire everyone out there) the nice thing about sucha project s that you can build almost all of it in parallel. A refinery has to be built in the right order, just the way the thing works. If you have twenty teams building a mile of pipeline a week each, yes, in 2 years you have your pipeline finished with time to spare.

 

Thu, 06/09/2011 - 08:03 | Link to Comment Urban Redneck
Urban Redneck's picture

I am not suggesting building in Africa, I'm suggesting Duluth, MN. 

I was suggesting that there is some extremely uncompetitive cost component in the US if 700k costs 20-30B.  The costs for Africa were simply as a comparison, the specific costs for one of our current clients of the port and related basic infrastructure works and the first 100k of capacity comes to roughly USD 2.2B and the projection is about 1B for the second 100k. Settling the civil war is a nice to have, not a core requirement, and has already been priced in.  On the E&D side either you pay for quality work upfront, or you pay even more for financing, unless you have an unsavory relationship with certain politicians or bankers.

I am not familiar with the jamnagar refinery, but the last E&D package for an oil refinery I saw out of India was a feasibility and preliminary design for 150k capacity in SE Asia and I was NOT impressed.  However, one of the guys I sometimes work with offered to have his old firm do a redesign and serve as project manager if the refinery found financing, as far as I know it hasn't yet though.  Perhaps they shouldn't have skimped on the design bill. 

Wed, 06/08/2011 - 14:39 | Link to Comment falak pema
falak pema's picture

Upgrading existing refineries is much cheaper than making new one...I should know I designed them and saw them being built for twenty years! In twenty different countries.

Wed, 06/08/2011 - 15:22 | Link to Comment Urban Redneck
Urban Redneck's picture

"Upgrading existing refineries is much cheaper than making new one" in the funny math world of ceteris paribus economics, but not necessarily here. 

Transporting any material costs money, the further a given amount of material is transported, the greater the cost both in dollars and energy consumed. Given that the target market is the domestic USA, the project moves the raw materials literally all the way from one border to the far border, just so that the value added product can be moved back closer to where it came from, this increases per barrel operating costs over time and will eventually eclipse the $1-2B base footprint cost of a new refinery, especially on a long enough timeline.

The pipeline must be constructed before it is operated, so land the must be acquired and then all the normal project E&D &C must be paid for and done, in the US there is huge litgation risk and delay with that big a land grab. Time is money.

My combined refineries and pipelines are under 20 and none of them were in the first world, but even looking at the cursory information in the article, the upfront numbers don't make sense.  The MAXIMUM flow rate of the pipeline is 700 kbpd.  If you want more flow you need to construct ANOTHER 2700km pipeline.  For less than $7B that the pipeline will cost you can a refinery to process the whole 700kbpd right in cheap ND land or somewhere near wherever the proposed pipeline enters the US, you can add in the 700kbpd Gulf capacity expansion cost as a buffer.   

Wed, 06/08/2011 - 16:00 | Link to Comment falak pema
falak pema's picture

My comments referred to revamping developed economies with existing infrastructure like USA and EU; where refineries are located either at consumer locations or at shipping points where it comes into the continental shelf. Not where nothing exists like in remote China etc. 

Wed, 06/08/2011 - 16:41 | Link to Comment Urban Redneck
Urban Redneck's picture

How about Duluth, MN?  There is waterway access and a little over 200m to the Canadian border- how many kbpd capacity could be built for $7B?  My expience is only in the 100-300kbpd size but in that size in a third world shithole you can generally do 100kbpd per $1B USD plus $1B USD fixed.  Of course I haven't readjusted for the dollar since QE2 kicked off.  Also the article doesn't specify that they plan on pumping the max 700kpbd through the pipeline, but my gut is telling me in addition to strategically safer, it's cheaper to build up north even before it starts operating or being delayed by both emminent domain and environmental lawsuits.   

Wed, 06/08/2011 - 17:01 | Link to Comment falak pema
falak pema's picture

You would be one of the few to risk his neck in refining these days...Unless you had backing of partners with access to oil and to hot money...

Wed, 06/08/2011 - 17:08 | Link to Comment Urban Redneck
Urban Redneck's picture

Access to the oil is a lot harder to find than willing investors, but apparently there are some guys in Canada...  However, I prefer third world regulatory hurdles, since they can usually be reasoned with, unlike the US where the most effective solution seems to be to buy some congressmen and get all the mahor law firms on retainer.  But I need to get up in six hours-

Wed, 06/08/2011 - 12:02 | Link to Comment Johnny Lawrence
Johnny Lawrence's picture

In Soviet Russia, oil produces you.

Wed, 06/08/2011 - 12:05 | Link to Comment BobPaulson
BobPaulson's picture

Cross link to the WWII Russia post yesterday: It was all about the oil...again (or I guess this case, before). June 6 was highly motivated by the desire to beat the Russians to Berlin. Their version of Manifest Destiny extents to about Lisbon.

Wed, 06/08/2011 - 14:16 | Link to Comment Monedas
Monedas's picture

We took our time ! We played the Russians and the Germans well ! Look at the KIA figures ! We care for our soldiers, sailors and airmen ! Monedas 2011 God Bless Ike and Churchill and all our men in harms way !

Wed, 06/08/2011 - 12:11 | Link to Comment ZeroPower
ZeroPower's picture

Haha. Had to be said.

Wed, 06/08/2011 - 12:06 | Link to Comment cougar_w
cougar_w's picture

What Putin is waiting for is peak oil to materialize as a Western concern. Russia has no real industrial base anymore, and little use for the stuff domestically. Putin will sit back while the MENA suppliers commit seppuku, then show up as the global oil Czar with the last proven and productive reserves. Having a complacent populace and centralized control run under the RBN, Russia will be in position to trickle out a life-saving 8M BPD long after Gwar is in terminal decline.

Russia might even end up with the last modern mechanized military, or at least the last military with any fuel.

The board is set, and the pieces are in motion. The rules are as old as the world. Someone is going to win but winning has nothing to do with making the first move, only the last.

Wed, 06/08/2011 - 12:11 | Link to Comment BobPaulson
BobPaulson's picture

That's a ways off. The US could restrict fossil fuels to only agriculture and military and stay fueled for a long time. It wouldn't be fun for the soccer moms in the exurbs though. Can you say "Cuba"?

Wed, 06/08/2011 - 12:45 | Link to Comment cougar_w
cougar_w's picture

The US could restrict fossil fuels to only agriculture and military

How, exactly? And if you were a politician how would you break the news to the folks back home who intended to make use of those millions of miles of freeways (built at great public expense) to get to work?

And what about the airline industry, and the auto industry, and the warehouse-on-wheels industries, and GDP, and trade balances? Those aren't going to evaporate in the night because some central planner decides to fuel Big Ag and Big Def.

You can say it, but you can't make it happen. When this shit hits that fan, there will be no answers.

Wed, 06/08/2011 - 13:46 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

How, exactly?

Ever read One Second After?  An EMP would make one hell of a false flag, and could effectively restrict fossil fuel usage in an instant.

Wed, 06/08/2011 - 14:26 | Link to Comment Real Estate Geek
Real Estate Geek's picture

Lights Out (http://www.frugalsquirrels.com/fiction/lightsout1-10.pdf) is another example, and an engrossing read at that.

Wed, 06/08/2011 - 13:33 | Link to Comment BobPaulson
BobPaulson's picture

An example of what you can do in a panic, even when people are distant from the problem, is the Canadian war mobilization in WWII from 1939-1942 when the U.S. was not in and the invasion of mother England was a terrifying and realistic prospect (I choose this story because of second hand knowledge of it, not because it's the best example). When my parents and grandparents talk about that time, it is TOTALLY different from anything I have experienced. The commitment to the war effort was absolute and unconditional even though the prospect of Canada being invaded was nil. Almost all the production capacity was going on boats to the UK and Russia and a weak sparsely populated hinterland constructed the world's 4th biggest merchant navy. Everybody rationed everything, and people who wasted resources were subjected to massive peer pressure not to do so.

It is not at all unconceivable to imagine people mobilizing and making HUGE sacrifices if they are woken up out of their consumerist stupor. For me that is one thing that keeps me hopeful, that if people figure out we are in trouble, they are capable of acting.

Wed, 06/08/2011 - 16:35 | Link to Comment Malachi Constant
Malachi Constant's picture

How, exactly?

Like this: "In the interest of public safety and national security, all civilians are hereby prohibited from driving any gas-propelled vehicle until further notice." Or, as they used to open all depressing announcements in the USSR, "In compliance with workers' wishes..." Only terrorists can disagree.

Wed, 06/08/2011 - 12:14 | Link to Comment topcallingtroll
topcallingtroll's picture

Interesting take on russia.

Our military is working on plasma laser powered robots that can obtain energy from any organic carbon source, even dead soldiers and their uniforms!

Plus we still got coal to oil and natural gas and some petroleum.

I am sure we will use it for important stuff too, like a mechanized army ( sarc)

Wed, 06/08/2011 - 14:05 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture
We don't want to fight but by Jingo if we do

We've got the ships, we've got the men, we've got the money too
We've fought the Bear before, and while we're Britons true
The Russians shall not have [us by the balls because of BTUs]

From: http://en.wikipedia.org/wiki/Jingoism

Wed, 06/08/2011 - 12:18 | Link to Comment equity_momo
equity_momo's picture

Very astute observation cougar but the industrialized age will end how it began : with the major threat(s) to US/UK global dominance being taken down several notches , a la Germany and Russia circa turn of the 20th century.   That means the spooks have some shit stirring to do between China and Russia.

Wed, 06/08/2011 - 13:06 | Link to Comment cougar_w
cougar_w's picture

They will try, probably, but the spooks are no longer in the driver seat. That was a temporary situation brought on while super powers were too afraid to cross one another.

That fear is all but gone.

Real bullets always end the palace kabuki play of espionage. And then whoever can project power the furthest and fastest, wins. Genghis Khan and Napoleon and Julius Caesar are all laughing at us from their graves.

Wed, 06/08/2011 - 13:59 | Link to Comment equity_momo
equity_momo's picture

Well the spooks im referring to were actually high powered diplomats in the British monarchy and ruling elite pre WW1.   Im not talking about the mopes that run around with badges.  You understand how and why WW1 came about im assuming - there is a liklihood the Western Arc will once again try to unsettle the rising threat of any nation becomming dominant - china and russia.

Wed, 06/08/2011 - 12:28 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

"Russia might even end up with the last modern mechanized military, or at least the last military with any fuel."

LOL.  Nice use of cold war talking points.  That all you got?

Wed, 06/08/2011 - 12:50 | Link to Comment cougar_w
cougar_w's picture

I'm not debating anyone. It's no real concern of mine, and the discussion is only vaguely interesting.

Wed, 06/08/2011 - 23:29 | Link to Comment samsara
samsara's picture

This was supposed to go here...

 

You are right.  Look  at a few New Year's eves ago.  See the kind of pressure they can exert.  5 below  and  they cut off the nat gas....

The future is going to be very exciting...

Wed, 06/08/2011 - 12:03 | Link to Comment ZeroPower
ZeroPower's picture

The RUB is still way too illiquid to actually be a reserve currency, but the recent interest in RUB denominated bonds (and hello developing CIS/CEE region) make Russia quite an attractive space for FDI.

And corruption, well... toss up between Africa or Russia being the worst case here.

Wed, 06/08/2011 - 12:16 | Link to Comment BobPaulson
BobPaulson's picture

If I were investing in a concept, I'd be long corruption. It's in a global bull right now.

One of my biggest fears is if the high-level mega-kleptocracy of the US were to translate to the personal level in the same way we see in third world countries where people have given up on society, it would/will make life very tedious and annoying (I'm saying that as somebody living in Mexico here).

Self enforcing law and order (not the jack-boot enforced kind, but the peer pressure enforced kind) is an incredible lubricant to society. Just simple trust makes SOOOO many things much easier day to day.

Wed, 06/08/2011 - 12:23 | Link to Comment Bay of Pigs
Bay of Pigs's picture

"I'm long corruption"...

Hahaha...nice one Bob.

Wed, 06/08/2011 - 12:40 | Link to Comment GoinFawr
GoinFawr's picture

Excellent points Bob. "Money makes the world go around" is really/has always been, at its core, "Trust makes the world go around".

Wed, 06/08/2011 - 15:56 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Well said. Very insight-ful.
ORI

Wed, 06/08/2011 - 12:51 | Link to Comment topcallingtroll
topcallingtroll's picture

Sadly it is moving to an individual level.

When you try to comply with a complex regulatory structure at great cost there comes a point where people throw in the towel and just start looking for ways to ignore the law.

As this habit becomes more engrained it generalizes to all business and social activities eventually.

Healthcare is a good example. Also anyone who runs a small business is knowingly or unknowingly violating several laws to remain successful.

When law and regulations start harming your way of making a living it eventually is ignored and deep cynicism and self interest begin to rule all activities on a personal level.

Wed, 06/08/2011 - 14:14 | Link to Comment Wannabee
Wannabee's picture

Is there an ETF for that?

Wed, 06/08/2011 - 12:23 | Link to Comment Cleanclog
Cleanclog's picture

Okay, not as a reserve currency, but I recently heard a super smart researcher suggest that oil seems to be serving as the "new interest rate".  I wonder if it could be what forces some pricing honesty into the manipulated interest rates the Central Banks have effected.  


Wed, 06/08/2011 - 12:30 | Link to Comment BobPaulson
BobPaulson's picture

I've often mused that the ideal currency is the unit of energy: Joules or kWh. 

Wed, 06/08/2011 - 12:39 | Link to Comment oddjob
oddjob's picture

Having said that, does Silver not seem priceless when taken into account it's ideal use in solar power?

Wed, 06/08/2011 - 13:14 | Link to Comment GoinFawr
GoinFawr's picture

You know, I like solar panels, but if you want to use sunlight to generate electricity, this way can be much more efficient:
http://en.wikipedia.org/wiki/PS10_solar_power_tower

Using this technology a field of only 50 square kms would be sufficient take care of all of Australia's electricity requirements.

Now imagine a smaller version on the rooftop of every new bldg...'Decentralization' doesn't distribute only politcal power evenly

Wed, 06/08/2011 - 15:12 | Link to Comment BobPaulson
BobPaulson's picture

There are these extremely efficient solar collectors that convert solar energy into cellulose. There are different designs that work at almost all the different lattitudes. They call it the "tree".

Wed, 06/08/2011 - 17:08 | Link to Comment falak pema
falak pema's picture

Nice to see Americans going green!

Wed, 06/08/2011 - 12:03 | Link to Comment SDRII
SDRII's picture

U.S. Navy cruiser Monterey anchored in the Romanian southeastern Passenger Berth of the Port of Constanta on the Black Sea within the NATO European missile shield project, Romania news agency Actmedia said on Tuesday. Romania has agreed to host interceptors within the second phase of the program which Russia opposes. Russia’s NATO envoy says: "Any attempts by those in NATO who dream of neutralizing our strategic potential will be futile," Rogozin said in an interview with the Rossiya-24 TV channel. "We have enough capacity to create both defensive and offensive means to counter any missile threat and to penetrate any missile defense." Novosti RIA

Wed, 06/08/2011 - 12:29 | Link to Comment That Peak Oil Guy
That Peak Oil Guy's picture

I keep wondering what is up with this Russian guy talking about new weapons and man-made tsunamis.  Is this is hoax?  Disinformation?  Is there any reality behind it?

http://www.youtube.com/watch?v=Haj02zodA-c&feature=related

TPOG

Wed, 06/08/2011 - 13:09 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

Zhirinovsky is an ultra-right-wing nationalist combining Soviet Pride with right-wing rhetoric. He's not the best person to listen to, not to mention take seriously. He was saying these things from the early 90s and he's a joke. But there's a much more important point to be made here, which is that Putin is shifting his politics towards this set of values (minus the racist rhetoric and so on.). His goal is to re-create and re-territorialize USSR's sphere of influence, and to expand it to all of Europe via energy policies (just remember, he's holding Germany and most of Western Europe in a deadlock every year by threatening to cut nat-gas supply to industrial end-users). Furthermore, taking this into account, we can safely presume that with China growing in influence and US losing it's influence, and with Russia holding the energy supply of most of the West Europe (as do Russia controlled satellite states in Central Asia) that multipolar political landscape is re-emerging. This time the "battle" wont be waged via political or ideological means, but via economic ones. If you suddenly see independent trade agreements surpassing the dollar (as Sino-Russian ones tend to do since 07/08) you can rest assured that at some point in the near future Ruso-American trade agreements and Sino-American trade agreements (both outside of WTO) will not be solely based on exchange of dollars for energy/products, but it will combine one or more currencies. Both China and Russia know US is overstretched both military wise and monetary wise and it can not demand that all of it's terms be accepted in negotiations by threatening military retribution. This is the environment we're living in now. It's capitalism, for sure, but there is more than 1 kind of capitalism seeking global dominance, and it seems US version will not prevail. My money is on Sino-Russian synergy whereas Russia is the energy provider and China is the World's manufacturer (with it's satelite states in SE Asia [think Vietnam, Laos, Cambodia etc etc) when labour costs in China become to prohibitive).

Wed, 06/08/2011 - 13:37 | Link to Comment That Peak Oil Guy
That Peak Oil Guy's picture

Interesting thoughts, thanks!

TPOG

Wed, 06/08/2011 - 13:46 | Link to Comment CD
CD's picture

Good to see you still out & about here on ZH, Cheeky.

Wed, 06/08/2011 - 13:55 | Link to Comment GoinFawr
GoinFawr's picture

"...deadlock..." Well, that's one way of Putin' it I suppose; polite, but Cheeky.

Wed, 06/08/2011 - 14:23 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

ROR

Wed, 06/08/2011 - 13:26 | Link to Comment Urban Redneck
Urban Redneck's picture

The cold war neverreally ended - it just moved moved from the ledgers of the DoD and MoD to the CIA and FSB.

The video brings back memories of the good old days of the early nineties when all Washington was terrified Zhirinovsky and KGB would assume the control in Moscow, then they got Putin and the KGB after the bender with Boris.

I don't know about Zhirinovsky individually.  However, soft/ asymmetrical/ psychological/ psychotropic/ technological warfare doctrine has been big in Russia for a couple decades.  Not much gets written about it in the US, but there is a surprising amount of academic and bureaucratic writing that has been unclassified and published by the other side.

Then there are those odd characters who keep reappearing at regular intervals...

October 10, 1990 Washington, DC

Meeting between SecDef. Dick Cheney and Maj. Vladimir Lopatin, Vice Chairman Russian State Committee on Public Security

Nukes, Mind Control, Weather Control, Economic Warfare

Makes you wonder what is the number of ZH contributors doing the work of the of the former communist States, what percentage of those is cognisant of their actions are what percentage is oblivious?

Wed, 06/08/2011 - 12:13 | Link to Comment Zing
Zing's picture

Russia with an economy of $1 trillion, trade and budget surpluses and a small and illiquid bond market to become a part of a reserve currency?  Seiously Tyler?

Wed, 06/08/2011 - 12:25 | Link to Comment alexwest
alexwest's picture

###budget surpluses\

you're kind of disinformed.. russia had budget surpluses before 2008/9 crisis... not anymore..

currently desptie oil prices are over 100$ pb, budget is not balanced .. there's presidential election next year , so social promises are being made..

now, budget can be balanced on 120$ per barrel oil, if oil go down to $60-70, RUSSIA is gonna have huge budget deficit , around 120-150 bln per year.. ( 10% of GDP)

so WATCH OUT , ITS REAL BLACK (OIL) SWAN :))

alx

Wed, 06/08/2011 - 12:32 | Link to Comment Raynja
Raynja's picture

All they have to do is make x RUB redeemable for y barrels of oil. It may not be the single reserve currency, but it could attract international interest.

Wed, 06/08/2011 - 12:13 | Link to Comment equity_momo
equity_momo's picture

The Cold War never ended.

Act II should be fun.

Wed, 06/08/2011 - 12:17 | Link to Comment topcallingtroll
topcallingtroll's picture

We could have ended it and had a grateful russian population if we had generously extended a new marshall plan post soviet collapse, but we chose to let them starve.

Their naive faith in us slowly turned to anger and suspicion, and here we are today.

A terrible missed opportunity.

Wed, 06/08/2011 - 12:34 | Link to Comment Cast Iron Skillet
Cast Iron Skillet's picture

you are absolutely correct.

Wed, 06/08/2011 - 14:19 | Link to Comment Terminus C
Terminus C's picture

I was in high-school at the time and had the 'priveledge' of asking Kim Campbell (then minister of Foreign Affairs for Mulroney's government) why Canada was going to allow the Russian people to starve.  I warned her that in times of crisis and economic collapse people turn to anyone who can solve their problems (usually extremists).

Her reply was that they were monitoring the situation...

The next question was something along the lines what was it like to be a woman in cabinet or some such drivel...

Guess which question made it to the evening news.

Wed, 06/08/2011 - 13:43 | Link to Comment Cyrano de Bivouac
Cyrano de Bivouac's picture

Right on. We used peace dividend to attack Iraq.

Wed, 06/08/2011 - 12:27 | Link to Comment Hulk
Hulk's picture

Can Burt the turtle be in color this time?

http://www.youtube.com/watch?v=IKqXu-5jw60

Wed, 06/08/2011 - 12:31 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

If I duck and cover, can I avoid Fukushima?

Thanks in advance.

Wed, 06/08/2011 - 12:38 | Link to Comment Hulk
Hulk's picture

Yes, just make sure you are wearing your thermals and have a DU dinner table...

(Or better yet, DU roof shingles)

Wed, 06/08/2011 - 12:39 | Link to Comment equity_momo
equity_momo's picture

He'll be 3D , have a facebook account and probably gay.  I have nothing against gays or 3D btw.

Wed, 06/08/2011 - 13:47 | Link to Comment GoinFawr
GoinFawr's picture

You're a longboarder then?

Wed, 06/08/2011 - 14:41 | Link to Comment falak pema
falak pema's picture

the cold war was a sterile debate that impoverished the world. Why do you want to return there?

Wed, 06/08/2011 - 12:15 | Link to Comment SDRII
SDRII's picture

Cheniere Offers Gas Price 25% Lower Than Gazprom, Lithuania Says 

 

Wed, 06/08/2011 - 12:13 | Link to Comment alexwest
alexwest's picture

@TYLER DONT BE STUPID.
dont write about you have no idea

###
And it’s been Russia that has been adding the most to world exports over the better part of the last decade as OPEC exports have faltered." In
###

here's stats from RUSSIAN centr-bank

# oil export
http://cbr.ru/eng/statistics/print.aspx?file=credit_statistics/crude_oil...

peak was in 2004 , 260 mln ton, since then .. FLAT
no fucking growth, despite growth in price

#oil product export
http://cbr.ru/eng/statistics/print.aspx?file=credit_statistics/oil_produ...

from 2006 year, 5% growth

#gas natural
http://cbr.ru/eng/statistics/print.aspx?file=credit_statistics/gas_e.htm...

peak was in 2005, since then fall 10%..

SO LAST 5 YEARS NO FUCKING GROWTH,, DESPITE AT LEAST TRIPPLING PRICE..

well its consistent w/ no real growth in consumption .. USA imports are 10 year low despite 10% growth in population 

alx

Wed, 06/08/2011 - 12:48 | Link to Comment That Peak Oil Guy
That Peak Oil Guy's picture

It is true that most observers of such things believe Russia is at or near peak.  This does not change the fact that they have a lot of oil available for export (and will for a long time) and can therefore have a major impact on the market.

TPOG

Wed, 06/08/2011 - 12:13 | Link to Comment ElvisDog
ElvisDog's picture

And don't forget, Russia is the only place that the enormous supply of abiotic oil percolates up to the surface. They have an infinite supply of oil. Lucky Russia.

Wed, 06/08/2011 - 12:17 | Link to Comment alexwest
alexwest's picture

only problem
there's NO people who could dig oil/gas from earth..

despite huge oil/gas money gains russian population has contracted for last 20 years ++ average man life expentancy is around 60 yy

its WORSE than in s.america, its level of countries in Africa..

alx

Wed, 06/08/2011 - 12:43 | Link to Comment equity_momo
equity_momo's picture

Plenty of chinese will do it for them. They wont even have to ask.

Wed, 06/08/2011 - 12:48 | Link to Comment spartan117
spartan117's picture

Plenty of Chinese to cross the border to do the work and to repopulate Russia. 

Wed, 06/08/2011 - 12:19 | Link to Comment Franken_Stein
Franken_Stein's picture

 

So Russia in the last 20 years clearly demonstrated how to successfully manage the collapse of a centrally planned empire.

 

As long as you command huge reservoirs of natural resources of course, which will make up for and carry you through any political or demographic mistake as long as it is not too grave.

 

They should write a book about it.

 

Could prove to be a useful lecture for future U.S. presidents.

 

Wed, 06/08/2011 - 12:24 | Link to Comment Diogenes
Wed, 06/08/2011 - 12:27 | Link to Comment Franken_Stein
Franken_Stein's picture

 

+10

 

That didn't take long.

Keep up the good work.

 

Wed, 06/08/2011 - 12:33 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

If I were China, I'd already be looking for USA natural resources for payment and not funny green squares of paper.

Wed, 06/08/2011 - 13:40 | Link to Comment Mad Cow
Mad Cow's picture

Maybe I missed it but, what did China lend the US? Was it some hard asset or just funny pieces of paper? Thanks.

Thu, 06/09/2011 - 02:15 | Link to Comment Transformer
Transformer's picture

Franken,

  They also have published hundreds of papers on Abiotic Oil, and tried for 20 years to tell the west about it.  they were completely ridiculed for it.  Now they just increase production every year and rake in the money.  They don't believe in Peak oil.

Wed, 06/08/2011 - 12:44 | Link to Comment samsara
samsara's picture

That was one of Orlov's first posts. He has since wrote the book.

Make sure to take time and listen to his points and predictions from when it was written in 2006.

See how well he called it so far.

Wed, 06/08/2011 - 13:02 | Link to Comment falak pema
falak pema's picture

brilliant post and comparison....Kudos to Orlov!!!

Wed, 06/08/2011 - 13:49 | Link to Comment CD
CD's picture

You can also check out:

http://www.spiritoftruth.org/newlies4old.pdf

There are some who believe the USSR never went away, the bear merely retreated briefly to its cave to don a new coat. Google Anatoliy Golitsyn.

Wed, 06/08/2011 - 12:26 | Link to Comment magpie
magpie's picture

I'm sure somewhere smart girls and boys are counting their natural gas and REE stocks very carefully.

Wed, 06/08/2011 - 12:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

meme of the day: It's a sad, sad, sad, sad world

It's summer (and already a hot one), we're in a grinding economic slump that we were recently informed just got a lot worse, the price of things are high and rising....and we got turmoil and conflict in the air. Nobody knows quite what to do. The Fed is trapped: if we give the car the gas and gun it, we'll go over a cliff. But if we let up, the motor will stall out and we'll go sliding backward. Can somebody, anybody help here? Doesn't anyone have any answers anymore? 

Wed, 06/08/2011 - 12:32 | Link to Comment SheepDog-One
SheepDog-One's picture

Thats just it, they're out of answers, and now depending on the idea if they keep convincing people they have an answer just right around the corner, they can prevent their necks from being stretched by rioting mobs a bit longer.

Wed, 06/08/2011 - 12:46 | Link to Comment djsmps
djsmps's picture

And the weather sucks.

Wed, 06/08/2011 - 13:07 | Link to Comment topcallingtroll
topcallingtroll's picture

Huge deficit spending to build a national smart grid and monetize the hell out of the bonds.

We would get a return on this trillion dollar investment and goose the economy too.

Wed, 06/08/2011 - 13:54 | Link to Comment Mad Cow
Mad Cow's picture

We're just chasing our own tail. Same ol' shit, just more of it.

Wed, 06/08/2011 - 12:19 | Link to Comment Milestones
Milestones's picture

Russia has 4 big things going for it:

1) Oil

2) Small population for country size. Large potential for strategic immigration. translation: Brains, especially well educated students from overcrowded China who can't find work.

3) Hugh unexplored and unexpolited country.

4) Global warming which will make a huge area of Russia cultivatable--a new world breadbasket.

Oswald Spengler pointed to Russia as the next most likely society to rise to power. Chinas' huge population is not an asset in an overcrowded world.      Milestones

Wed, 06/08/2011 - 12:43 | Link to Comment equity_momo
equity_momo's picture

Not with their birth/date rate they wont. The map of Russia as we know it will be redrawn several times in the next few decades. First , they will lose more regions due to religios extremism - Chechnya is one of several that will break away and that spells trouble for their oil pipelines. And China is going to keep encrouching.   Goto a Chinese classroom and look at a World map on the wall. See where they think the terrortorial line between them and Russia is today , let alone in 10 years. The Kremlin will not have the political power or manpower to stop this.

Wed, 06/08/2011 - 13:00 | Link to Comment topcallingtroll
topcallingtroll's picture

If they would encourage and subsidize hardworking immigrants with more than just general labor skills (uneducated unskilled third worlders need not apply) they could definitely become a real economic powerhouse in a post global warming environment. Imagine a temperate siberia!

Thu, 06/09/2011 - 02:14 | Link to Comment Transformer
Transformer's picture

Milestones,

  Russia also has this huge technology that we don't have.  It is the technology of Abiotic Oil, oil produced in the basement rock, not from biological material.  That's why their production goes up every year.  Hubbert predicted long ago they would peak not long after the US.  But then, they don't believe in peak oil.

  You could just leave out the Global Warming point.  It's a joke at this point.  A really big joke in Britain.

Wed, 06/08/2011 - 12:49 | Link to Comment ZeroPower
ZeroPower's picture

1) yes, but so does Canada and Australia (granted, the latter doesn't have anywhere near as much proven reserves, but admittedly both are deemed better places to live).

2) Agreed, but Chinese dont want to go to their neighbours. They want to live the (North) American (or even European) dreams.

3) Fully agreed here

4) Lost you here, but i dont want this to turn into a GW debate. Suffice to say, if youre loooking for land, again you might want to turn to a place with more population. Whats the use of crops and food which will need to be transported thousands of KMs to where the population is, if oil is running out and will no longer be able to provide the cheap access of global food in our superstore megamarkets.

Wed, 06/08/2011 - 12:56 | Link to Comment RacerX
RacerX's picture

wrt #4:

You still believe in that religion?

Become educated and step into the Light my Brother.

Wed, 06/08/2011 - 13:23 | Link to Comment falak pema
falak pema's picture

that's why germany wants a long term link with Russia...Merkel is hoping to be proxy mother of new catherine the great of Russia who will be german...and make the eastern european zone a german empire which is in the cards, as is their current expansion into MENA with their Desertec project in Morocco.

www.desertec.org 

Wed, 06/08/2011 - 12:21 | Link to Comment Flakmeister
Flakmeister's picture

Now the real meat of Peak Oil... Peak Net exports... we are down 10% since 2005.

But hey, we will just depopulate those exporting countries. I wonder how we will do that?

SA is starting a program to look for unconvential NG around Ghawar... That should tell you something.

Wed, 06/08/2011 - 14:21 | Link to Comment trav7777
trav7777's picture

Export Land Model, bitchez

Wed, 06/08/2011 - 14:48 | Link to Comment Flakmeister
Flakmeister's picture

Long time no see...

In the other PO related thread some guy was trying to convince me that all was ok because some Aussie company is making CTL-UCG (not sure which one was he was touting because he kept shifting back and forth) for $30 per bbl... They are hoping to get up to 5000-6000 bpd in a few years...currently
"a couple of thousand litres per day"....

Phew, that Peak Oil thing was a close call...

Wed, 06/08/2011 - 15:03 | Link to Comment falak pema
falak pema's picture

In the other post I invited your opinion about the debate on "ethanol to car fuel" debate...love to hear your point of view...

Wed, 06/08/2011 - 15:43 | Link to Comment Flakmeister
Flakmeister's picture

I don't have much to say about it... (but I did just post)...Burning ethanol for electricity is not a good idea....(think of the electricity you would generate if you used the fuel in the distallation...)

Wed, 06/08/2011 - 16:09 | Link to Comment falak pema
falak pema's picture

Is it a viable route to go from irrigable land to ethanol to fuel in ICE? That is the current trend in both USA and brazil and it seems crazy from energy return point of view IMO.

Ok read that. Thanks...

Wed, 06/08/2011 - 12:24 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Viva la Putin

Wed, 06/08/2011 - 12:25 | Link to Comment Silver Dreamer
Silver Dreamer's picture

Why make friends with Russia?  We are soon to be the largest third world nation on the globe, and our oil consumption will drop along with our economic level.

Wed, 06/08/2011 - 12:34 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea oil wont be a problem for much longer, no one will be able to afford it. The old american paradigm of filling up your tank every day so you can drive to malls and Walmart to fill the SUV with cheap crap and food from China is about over.

Wed, 06/08/2011 - 12:56 | Link to Comment equity_momo
equity_momo's picture

No bad thing. For a country that has been as powerful and progressive as the US , reorganising how society commutes from home to work or from home to the stores really isnt rocket science or expensive.  Bailing out the automakers was a tragic error.

That cash and much more should go into mass transit - especially rail ; destroying and relocating neighbourhoods that are built in the middle of nowhere (all those ghost towns - it would have the added bonus of remove housing inventory) and blitzing the sheep with real informative education on why this is being done. Instead of ignoring the problems....

Towns have sprouted like earless rabbits over the last 30 years in places that only cheap fossil fuel made possible. The urban sprawl map is going to change whether we like it or not.

Wed, 06/08/2011 - 14:09 | Link to Comment Greater Fool
Greater Fool's picture

It's been changing already for ten years and more, when so-called "white flight" began to reverse. In traffic-snarled Atlanta there are a number of experiments that have already been built in an effort to create some sort of postmodern neighborhood structure. The old one was supported by a great street car system that was torn up at the behest of car companies.

If property taxes and local governance weren't so awful, Camden, NJ would be a great place to buy some land....

Wed, 06/08/2011 - 12:36 | Link to Comment Seasmoke
Seasmoke's picture

Obama vs. Putin.......not a good matchup for Game #7

Wed, 06/08/2011 - 12:38 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

http://www.bloomberg.com/video/70335328/

The most important interview you will see this year.

Lukoil executive admits their old fields are depleting production 5%/yr.  They have to have billions upon billions of dollars to drill the 10s of thousands of new wells punching holes in tiny pools to keep production up.

Lukoil production fall . . . 5%/yr.  Russia is 10 mbpd.  5% of that is 500Kbpd.  That's 1/2 a Libya gone each year.  

There is no fix for this.  We have to depopulate our competition.

Wed, 06/08/2011 - 12:40 | Link to Comment SheepDog-One
SheepDog-One's picture

Quickly approaching the final solution, all out world war.

Wed, 06/08/2011 - 12:58 | Link to Comment equity_momo
equity_momo's picture

That doesnt solve much though unless we are talking about wiping out 3 or 4 billion people at the least. Lifestyle changes of epic proportions , war or not , are the real paradigm shift.

Thu, 06/09/2011 - 02:04 | Link to Comment Transformer
Transformer's picture

Crashis,

  You're right about all that, except for Russia.  Their production is rising every year.  Hubbert predicted they would peak soon after the US did in 1970.  What happened?  Well, the Russians don't believe in Peak oil.  Peak oil is a creature of biologically produced oil, you know, dinosaurs and planckton... all that.  The Russians have a different theory.

  Their theory is called Abiotic Oil.  Oil is not biological and is produced in the deep rock way down below the biological level of 16,000 feet deep.  They have over 350 wells drilled down like that, and it works.  they are not peaking, they are producing more oil every year.

  The BP disaster in the Gulf was a deep well.  Those wells have much higher pressures and temperatures, and BP didn't have the technology.  Russia offered to fix it, but was rejected.  The Tiger fields in Vietnam were drying up.  The Russians went in and showed them how to drill deeper.  Now, more production.

Wed, 06/08/2011 - 12:41 | Link to Comment falak pema
falak pema's picture

Now the US will realise why the Germany/Russia/Turkey strategic tie -up is the key to stability in ME/EU. The USA will get more and more sidelined in this global play. The writing is now appearing on the wall. If the Chinese/Brazilians/Russians/Germans can convince IMF to move away from USD reserve currency status in the next two years, especially in commodity trades,  the mountain will start to slide...

Wed, 06/08/2011 - 12:48 | Link to Comment toxic8
toxic8's picture

http://www.economist.com/node/18070416

 

Love that image. Says it all

Wed, 06/08/2011 - 13:09 | Link to Comment falak pema
falak pema's picture

Where have all my oil nuts gone...long time handling...growling with the bears not howling with the wolves.

Wed, 06/08/2011 - 12:57 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

With prices this high, oil producers are running at full capacity.  This means production is as high as possible.  Yet production levels are now declining.  The peak is here.

The OPEC meeting - How much will production really increase?:

http://www.theoildrum.com/node/8007

Wed, 06/08/2011 - 12:57 | Link to Comment RacerX
RacerX's picture

#moved/deleted

Wed, 06/08/2011 - 13:12 | Link to Comment John McCloy
John McCloy's picture

   Russia will be the greatest challenger to the U.S. as they try to reclaim their superpower status. Since the Russian system imploded the U.S. fell victim to the greatest sin which is hubris. We believed we could over extend ourselves using our military might unchecked and began imperializing along with our European counterparts. Meanwhile Russia stood back and learned a lesson and still has a vast landmass on this planet and ample natural resources. 

      They have been allowed to play possum and abided by this as we embarked on the path of debt ruination. Now they can stand back and look at us as the fragile economy and nation we are reliant upon the false money printing economy. They see how captured we have become as a nation that no longer respects the piece of paper (the constitution) that gave us our unprecedented prosperity and have allowed the crony capitalist system to usurp the beauty of individual liberties. It would take only a mild shift in the wind to dismantle our perceived "power". 

    All we have going for us at this point is our reserve currency, informational technology and eroding  (On a daily basis) liberties when compared to other nations. We are slowly returning back to Earth because we have a cowardly political structure. Putin knows this and he is a leader in the truest sense when compared to our puppet president. Although I have disdain for him personally because because of his oppression of the press he does in fact lead his nation as opposed to our nation being led by Wall Street using a mannequin in a suit. 

    In the past few decades we have a history of picking on weaker nations but the moment Russia or China challenged us we would recoil because we no longer have the luxury of saying "we are the do-gooders and lead by example". That arrow is not in our quiver any longer. Russia has long been seeking a warm watered base to launch naval operations and they still possess quantities of Uranium second only to America and at any moment can rebuild their military and make pacts with other nations that now consider us the enemy to their mutual benefit. 

       China has already proven it can park a sub off California and launch a trident undetected and our government was too frightened to admit how vulnerable we are truly. Now they are going to sit back and allow us to implode ourselves with debt as we make more enemies and all they need to do announce a joint currency backed a commodoity basket of metals and commods along with China. 

   See you later reserve currency. Watch our overprivileged nation of zombies riot and beg for the quality of life they are used to enjoying because of the reserve status and finally arrive in the real world where and honest days pay is reliant upon an honest days work. All of this because we could not respect the enshrined rights of personal liberty and sound money. Is it too late to alter out path? Never but time is running out. 

 

Wed, 06/08/2011 - 13:16 | Link to Comment Vergeltung
Vergeltung's picture

very well said Sir. best user comment I've read here in a long time.

 

Wed, 06/08/2011 - 13:29 | Link to Comment falak pema
falak pema's picture

what I can't understand is why Putin's russia is considered the challenger of US hegemony in decline in the coming age. It looks more likely to be either China or eventually Germany if it is the only western country left standing after the western civilization financial collective debt burden collapse...

Wed, 06/08/2011 - 15:14 | Link to Comment John McCloy
John McCloy's picture

Germany is still a relatively small piece of land one now that has proven to have allegiance to a world government centered in the West. China is completely reliant upon the West for their wealth. That is why our jobs are Houdini. They are all outsourced but China is still reliant upon our paper dollars in exchange for being the factory of the world both the U.S. & Europe. 

      They also need oil. Oil is the currency of the future and as more nations become industrialized the usage will go through the roof. Africa is where the greatest untapped potential lies for homes and resources. It is a isolated continent centered between West & East. When they become industrialized (Via Western dollars) the oil usage will spike as more drive cars and have electricity. Russia has oil. China is gaining by exposure to our products and technology and learning how to make our goods without tech at cheaper costs. Eventually they will not need us but they are still finding their sea legs. They also have a massively oppressed civilization who are used as labor slaves to fund our excesses. With a population of that size they are overdue for a revolution unlike the world has never seen. Especially as they gain exposure to our films, media. Why do you think China blocks all of this? Humans by nature want to be free but it will catch up with China. The Russian people are battle hardened and familiar with being militaristic against the greatest super power empire (us) to ever exist. That is why I feel Russia is more concerning than any nation in the Middle East or Asia. 

      As noted before in the beautiful post reminding of how much sacrifice Russian people laid down while opposing Operation Barbarossa(3.5 million German troops & Armor) they are familiar with uglies of war and inhumanity of our race. I am glad someone finally pointed out how much they contributed to WW2. It should also be noted that the Russian military embarked on the greatest campaign of forced rape upon German women as they made their way to Berlin in 20th century history. Hitler would have won had he not made it paramount to symbolically take Moscow in an attempt to break the will of the Russian people. 

   Stalin, although a murderer far beyond Hitler, always knew Hitler abhorred their political system and attack was inevitable. He was quite prepared and if Hitler had focused on England and repelling the Allied invasion he would have been able to eventually overtake Russia with starvation tactics in the coming years. 

Wed, 06/08/2011 - 13:50 | Link to Comment Urban Redneck
Urban Redneck's picture

Russia sits between China and the EU and provides both with commodities (raw materials to which value is added).  It is the key to unlocking the dollar hegemony door in global finance.  As long the first transaction in the chain is not dollar denominated, then the migration of all subsequent steps becomes much easier.   

Wed, 06/08/2011 - 14:48 | Link to Comment falak pema
falak pema's picture

Russia is the weak link in the chain from my perspective not the strong one. Our world depends on technology initiative, not having access to RM resources. In this area and in terms of social organisation, Germany is supreme in EU. So the future belongs to it or to China in case of US regression; if it enjoys a cultural revolution in terms of technological innovation that allows it to catch up or even overtake the west!

Wed, 06/08/2011 - 15:44 | Link to Comment Urban Redneck
Urban Redneck's picture

I look at Russia more as kingmaker than US challenger, but Russia has what Germany and China need and they all dislike the USD (granted it is for different reasons and there are different levels of animosity) but if Russia moves its 12% of the worlds oil trade away from the dollar, this will give other producers as well as other commodity markets cover to do the same.

Wed, 06/08/2011 - 13:25 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

+1

I do think that the sub was either a US one and the US military was showing off a new weapon, one that took out a cruise ship with an EMP, or if it was foreign I think it was Russian.  I think Russia's military is superior to China's, and it would be they who could sneak into "US" waters.  This is my opinion.

Wed, 06/08/2011 - 16:14 | Link to Comment Diogenes
Diogenes's picture

And I still say it was the roof off a meth lab :O

Wed, 06/08/2011 - 13:32 | Link to Comment Charlie
Charlie's picture

Don't forget about Russia's bad demographics.

Wed, 06/08/2011 - 15:02 | Link to Comment Magnix
Magnix's picture

+1

Wed, 06/08/2011 - 15:57 | Link to Comment metaforge
metaforge's picture

Indeed.  Well said.

Wed, 06/08/2011 - 16:44 | Link to Comment Arnolds Love Child
Arnolds Love Child's picture

"Although I have disdain for him personally because because of his oppression of the press"
http://english.pravda.ru/opinion/columnists/22-08-2008/106172-september_...

Zionist controlled media, perhaps.

Wed, 06/08/2011 - 13:34 | Link to Comment Comrade de Chaos
Comrade de Chaos's picture

According to my sources, Russia is as corrupt as ever. Hence when it comes to producing and certain business aspects, it is as inefficient as ever. The point is, they need the west as much as the west needs their energy resources. And while there are plenty of loud political statements, those are directed mostly at the local population & politics. 

Wed, 06/08/2011 - 13:20 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

The collapse of the Soviet Union at the end of the 1980's was a great blow to the hopes of revolutionaries. Why did it collapse? The primary causes were political and economic and they were the result of the culture of war.

The immediate cause of the Soviet collapse was economic, as the Soviet Union lost the arms race and international competition with the West. The United States was able to profit from its imperialist exploitation of other countries, while socialism could only lose economically in that competition. By the end, the ruble collapsed as Soviet consumers turned to imports to satisfy their needs. They could not buy a good pair of leather boots or a good television set or a computer made in the Soviet Union, because all the boots and the electronics were swallowed up by military procurement. And, needless to say, there were no quality goods to export in order to balance imports.

Economic factors were linked to political and psychological factors. As the Soviet economist Latsis said at the time, "the gloomy background of the worsening market situation ... has a depressing effect on people." Their gloom deepened as a result of policy failures such as the explosion of the Chernobyl atomic power plant and the war in Afghanistan .

Another factor was the lack of honest information, the secrecy and propaganda that is central to the culture of war. As contradictions mounted the Soviet people became more and more cynical about the propaganda of government-controlled media. It was common to hear the Russian people say that you could find truth anywhere except in Pravda and the news anywhere except in Izvestia. This was exacerbated by the propaganda warfare carried out by the West in Radio Free Europe and by dissidents in self-published Samizdat.

Secrecy and distortion of information have disastrous economic as well as political effects. As explained in a 1991 article "Secrecy and restricted movement, the hallmarks of militarism and bureaucracy, pervaded Soviet society when I was working there. They hampered the work of the scientific institutes where I was located, even though they were not doing military research. As a result, I found that all levels of the system, from institutes to ministries, were isolated from each other, both by barriers to communication and by an attitude that one should mind one's own business."

The command-administrative model of war-communism hobbled economic development. As the article by Latsis put it, "The glitter of [the war-time economic] miracle blinded us for decades, and the command-administrative methods of the extensively developing economy took firm root in the country."

When, at the end, the Gorbachev administration realized that they would have to convert military industry to civilian production, they could not even get the Defense Ministry to give them an accurate list of defense industries (See Agaev remarks to the United Nations). In other words, the Soviet Union had developed its own military-industrial complex.

Economic indicators were routinely suppressed or falsified to the point that when the final economic collapse was imminent there were no published figures to indicate the points of weakness. For example, as Latsis remarks, the government did not even admit until 1988 that it was running a budget deficit. As a result the government had no way to take remedial action.

All of these factors accumulated on top of a profound alienation of the Soviet people that had grown up over the years as the country remained in the grips of the culture of war. In the Stalin years, not only was the economy devoted to the arms race, but information was controlled in the form of propaganda and dissidents were sent to labor camps. People did not feel free to discuss this, and most people did not participate in governance. Although women were more equal in the work force than in the West, at the top the Communist Party was all men. Photos of the ruling Politburo showed old men covered with war medals like so many old military generals.

Labor camps were largely disbanded by the time of the Brezhnev years, but the alienation remained. And by the time of Gorbachev, it was too late. The economic collapse and the loss of the war in Afghanistan came on top of generations of alienation. Few seemed to care when the government collapsed.

http://sfr-21.org/collapse.html

Wed, 06/08/2011 - 13:36 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Oil production peaked in '89.  Production has picked up recently, and is near its '89 peak, but due to the production peak, Russia lost a lot of money.  This hurt their economy, and helped push them and the ruble into collapse.

Wed, 06/08/2011 - 13:40 | Link to Comment Al89
Al89's picture

ed.

Wed, 06/08/2011 - 14:03 | Link to Comment citizen2084
citizen2084's picture

Maybe someone could help with this.  The gentleman who is credited with calling out peak oil in the 50s, forget his name, also predicted that Russia would be in decline shortly after USA production peak.

How have they been able to provide so much oil?

THx-

 

Wed, 06/08/2011 - 23:44 | Link to Comment samsara
samsara's picture

The  man's name was M. King Hubbert.   He  was an Oil Scientist for Shell Oil.  He simply plotted the production graphs for individual wells over time. It formed (in the perfect case) a bell shaped curve.  Production rised over time to a maximum, then declined.  He notised you could do he same for a whole field's production, and the curve was the same.  From that he extrapulated that the continental US would peak in 1970, then decline for ever after that.  It gave this presentation to a Shell meeting in 1956, and like today, not many where receptive.

 

He said US would peak in 1970 and decline forever after that.

It Did and It Has.

He  "Projected"  Not 'Prodicted" that the world would peak just after the turn of the century.  and decline for ever.

 

It Did, and It will.

Graphs of real production amounts over time,  Not Predictions, Not Guesses, Not Theories.

Look at the graphs of each county's production in the last 70 years and you will see Hubbert's peak repeated over and over.

It's Over.

Thu, 06/09/2011 - 01:52 | Link to Comment Transformer
Transformer's picture

And of course this is all true.  The biotic oil theory makes it true.  As long as oil comes from biological material, like dinosaurs and planckton, it will peak and then decline.

But, those Damn Russians, they just keep producing more and more oil.  Could it be because they have a different theory?  They don't believe in dinosaurs and planckton.  They think oil is produced in the mantle, and there is lots more of it way down below the biological level of 16,000 feet deep. 

You don't suppose.....

Wed, 06/08/2011 - 14:06 | Link to Comment Jack Burton
Jack Burton's picture

 Russia is the Neo-Con's ultimate goal. Splitting up this vast resource rich nation into small and weak dependent states is the aim. Sadly, Mr. Putin's intelligence services are all to well aware of the hopes and dreams of Neo-Con central. i.e. CIA headquarters.

Putin has promised nuclear weapons modernization and the avowed policy of using nuclear weapons on any foreign force crossing the Russian frontier in a force size that the Russian convential forces can not turn back. This policy has been put forward on several occasions. Despite the damage to their own territory, the detonation of tactical nukes over any foreign force on Russian soil would be legitimate self defense.  So Neo-Con dreams must be realized by internal political destabilization efforts. These too are well know by Kremlin political leaders.

All those reources and all that oil. It is also a tempting target for a rising China, that complicates the Russia self defense position.

Do NOT follow this link or you will be banned from the site!