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As US Energy Secretary Expresses "Great Concern" Due To High Oil Price, OPEC Oil Shipments Decline

Tyler Durden's picture




 

With the market now only capable of kneejerk headline reactions which end up being immediately priced in, in the pursuit of the mythical Russell 36,000, it completely ignores the actually important news (whose interpretation has not been programmed into the algos trading the S&P) such as input costs and their derivatives, which will inevitably crush margins and lead to the same market reaction as that seen in the summer-fall 2008 transition. And since leverage on all cash flow producing assets will be at the same level as US banks circa 2008, the result will be an even worse wipe out. It has gotten so bad that US Energy Secretary Steven Chu was dragged out of his office to present his version of the "irrational exuberance" speech so pervasively ignored by the stock market until it was proven to be the only sensible thing ever uttered by the maestro. At a news conference on clean energy, Steven Chu said on Thursday high oil prices posed a threat to the global economy. "The oil producer countries and the oil consuming countries are concerned because it does have an impact on a very fragile economic recovery. There is great concern," Chu told a news conference while attending a clean energy conference. "There's ongoing discussions ... I'm not going to go into any of the details of the discussions. There is a concern about trying to stabilize prices. There is a concern about rising prices," he said." There may be a concern, but according to the president there isn't really much that can be done about said prices. The best people can do is learn to cope. Especially since there is no chance that the commodity complex will be declining any time soon: to many today's ECB decision was a potential catalyst. And instead the market took one look at the number, listen for 2 minutes to Trichet's rambling remarks and bid everything up.

From Reuters:

Oil prices vaulted to their highest level since September 2008 this week, stoking concern among analysts and economists that the higher cost of fuel will crimp consumers' spending.

OPEC ministers, however, have said the organization cannot do anything to stop the rally as the market is already well supplied.

OPEC is not due to meet to discuss output policy until June, although Saudi Arabia has increased its own production to help compensate for the loss of Libyan oil exports amid fighting between rebels and forces loyal to leader Muammar Gaddafi.

Chu said he was aware that the Libyan rebels had been able to sell a cargo of crude oil but he did not have any details on the transaction.

"We know it has occurred. The United States is supportive of that sale and is supportive of the Libyan transitional government for that sale," he said.

Chu was in Abu Dhabi for the second Clean Energy conference along with ministers approximately two dozen other countries. Chu said the ministers made progress on international cooperation for the development of smart electricity grids, home appliance efficiency and electric vehicle deployment.

What is concerning is that according to Oil Movements, OPEC was set to ship 1.6% less oil in the 4-week period. Well, since prices have only been going up, obviously OPEC is not chasing a drop in demand. Instead, OPEC may have well reached the proverbial peak in production. Sure enough this does include the offline capacity from Libya, although that conflict is far from over. What is troubling is ongoing preponderance of free money in margin accounts: with the market topping at the 1,330 level, the only asset classes that continue to push ever higher is the energy space and of course, precious metals.

Expect to see even more buying of oil as speculators keep their mouth shut for fear of breaking the trade and end customers keep their mouth shut for fear of upsetting the status quo.

 

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Thu, 04/07/2011 - 12:32 | 1145662 SheepDog-One
SheepDog-One's picture

Why be concerned? Obama just said 'suck it up, peasants and go buy a new car'. Problem solved.

Thu, 04/07/2011 - 12:36 | 1145675 Long-John-Silver
Long-John-Silver's picture

Replace car with bicycle.

Thu, 04/07/2011 - 13:43 | 1145969 Dr. Porkchop
Dr. Porkchop's picture

Replace congress with a chicken coop, the senate with a pig sty, plant corn on the white house lawn, put a farmer in charge and call it the orville office.

Thu, 04/07/2011 - 14:21 | 1146141 1fortheroad
1fortheroad's picture

Funny, Will Arnold Ziffel be there.

Thu, 04/07/2011 - 17:00 | 1146920 naughtius maximus
naughtius maximus's picture

Palahniuk would aprove

Thu, 04/07/2011 - 19:30 | 1147550 Thomas
Thomas's picture

Steven Chu neither knows any economics or oil (unless he reads ZH). He is a high-T superconductor expert.

Thu, 04/07/2011 - 12:35 | 1145678 umop episdn
umop episdn's picture

I think the concern is that too many peasants have been saying 'suck it up, central banksters, I'm buying Au and especially Ag.'

Pea Coil, spiraling down...

Thu, 04/07/2011 - 12:43 | 1145684 Cdad
Cdad's picture

And anyway, John OptionsJunkie Najarian on the BlowHorn [CNBC] is now also suggesting that selling here, well, did not happen.  Yep, he said that no one is selling.  Again, the criminal syndicate known as Wall Street literally suggesting to you that you should not trust your own lying eyes, and instead take heart in Wall Street generated projections.

Just take a look at ANF.  Here, the head hancho upgrades his own company's future, as sales more broadly suck, and the criminal syndicate known as Wall Street takes the stock straight up...25% in three days.  Makes sense, right?  Oh, and you cannot borrow it now because the Street, who is telling you to go long, already has every last available share sold short.  Perfect example of how the syndicate arbitrages to death everything on the face of the planet...and why we are so lucky to have these bankers as our new overlords.  So go be a good sheeple and buy ANF.  I hear gay fashion is going to be huge during the coming T Bill collapse.

Pay no attention to anything....just listen to the soft and delusional words of an option junkie on the BlowHorn and everything thingy will be all unicorny.  

Good grief [and by that I mean just bring on the zombie apocalypse already.  Life would be easier]

Thu, 04/07/2011 - 12:52 | 1145754 SheepDog-One
SheepDog-One's picture

Well if no ones selling and everyones bullish, the top is near.

Thu, 04/07/2011 - 13:01 | 1145795 blindfaith
blindfaith's picture

I knew a couple of real estate agents that sold the same property back and forth to each other for almost two years...they made a fortune on the commissions alone.

Thu, 04/07/2011 - 13:09 | 1145823 Clampit
Clampit's picture

No chance they patented the concept and are seeking punitive damages from the PD's?

Thu, 04/07/2011 - 13:20 | 1145892 nkktwotwozero
nkktwotwozero's picture

HFT for the win.

Did they co-locate?

Thu, 04/07/2011 - 13:37 | 1145953 Amish Hacker
Amish Hacker's picture

That's funny. I had heard of condos in Florida and Las Vegas being flipped multiple times for huge profits before they were even built, but I hadn't considered a scenario with the same 2 agents. I wonder how many times they took each other to lunch?

Thu, 04/07/2011 - 13:06 | 1145800 Cdad
Cdad's picture

But they did sell, Dog.  You can see the spires of equities dumped when the news came on Japan.  My point is...they did sell.

In the meantime, my guess per government idiot Chu, the fix is near to hand...just open the SPR.  There.  Done.  Like all these idiots at the helm of the US ship of state, they have no idea what they are doing, how the tinkering and the short terms market disruptions, actually further set the nation backwards.  Unless that is their plan, of course ;)

Cue the useless idiots and options junkies on the BlowHorn about how to make a good pre SPR release news trade!  Because if you can scalp 5% of something, then it should happen!  More unicorn money!

And look...here comes grandma Sue Herrera to calm everyone after this morning's temporarily upsetting news.  Expect further earthquake downgrades...momentarily.

Zombies please...bring them on.  Life would be easier than this nonsense day after day

Thu, 04/07/2011 - 13:15 | 1145865 SheepDog-One
SheepDog-One's picture

I agree, I'd rather be battling zombies all day that looking at the unicorn and clown show!

Thu, 04/07/2011 - 14:39 | 1146252 zeek
zeek's picture

just don't shoot Bill Murray... :)

Thu, 04/07/2011 - 13:23 | 1145908 Clampit
Clampit's picture

Steven doesn't fit the mold of the average government idiot, I know many people personally who would vouch for his intellect. Which makes his acceptance of the position all the more troubling; is it ego, naive philanthropy, or something more sinister?

I guess that's the nature of politics, at some point you start to believe your own myth. That others follow, or more importantly the following gives forced access to labor outside the free market, is a truly an unfortunate symptom of society.

Thu, 04/07/2011 - 13:26 | 1145919 Flakmeister
Flakmeister's picture

Do you think for a minute that Chu can actually say what he believes?

 

Thu, 04/07/2011 - 16:53 | 1146874 CrashisOptimistic
CrashisOptimistic's picture

Chu got himself politicized, but he has a solid brain and understands what's what -- and most important, he has gotten good briefings on Peak Oil and then proceeded to refuse to comment on the subject.

That's encouraging.  When someone refuses comment on the matter, and then says things that make clear he knows the inevitable is unfolding, we can call it encouraging.  He knows the horror that Peak Oil is bringing.  He's not clueless.

It's unfortunate a Democratic Administration is in power right now.  They are far too left wing by instinct to embrace the need to wipe out foreign populations ASAP.  It's the only way to ensure US consumption is preserved.  A GOP administration is no less moral.  It's just more willing to get to that particular finish line quicker.  It won't happen now.  It risks US dominance -- which should not be risked (if you're an American).

Thu, 04/07/2011 - 13:34 | 1145938 Cdad
Cdad's picture

So you're saying he is a special government idiot.  I feel so much better.  

Listen...just wait for it...SPR to release oil.  And whatever security we had in that 70 day supply of oil will be squandered.  It's next.  I assure you.

Long oil is dangerous right now.  It is all too obvious what will happen next.  

The entire nation has become a crony capitalist joke.  The stock market is actually a pachinko machine.  Our President is not even a citizen.  And the criminal syndicate known as Wall Street remains entrenched.  Great.

 

Thu, 04/07/2011 - 14:17 | 1146109 Snidley Whipsnae
Snidley Whipsnae's picture

Cheney said the SPR is for use by the military in case they run low of go juice. His side kick, Bush, did not disagree.

Thu, 04/07/2011 - 12:37 | 1145686 PRO.223
PRO.223's picture

You can really see why his handlers don't want him speaking off the cuff. Every single time he speaks without a teleprompter, he makes another stupid statement.

Thu, 04/07/2011 - 12:43 | 1145718 zeek
zeek's picture

exactly... he knows he's not gonna have to worry about filling his gas tank with his money...

Thu, 04/07/2011 - 13:05 | 1145808 nevadan
nevadan's picture

And he doesn't seem to have a problem filling AF1 up to fly to the next rally, all on our dime either.

Thu, 04/07/2011 - 13:07 | 1145827 Pegasus Muse
Pegasus Muse's picture

Chill, guys, chill.  People still know how to walk. 

Live -- First Round of the Masters: 

http://www.cbssports.com/video/player/masters-live?ttag=ML11_SEM_all_goog_os_kw_0038  

Thu, 04/07/2011 - 13:25 | 1145909 defn8Dog
defn8Dog's picture

Don't forget that for the first time in 36 years, Iran is in charge of OPEC.  Don't look  for increased production from them anytime soon.

Thu, 04/07/2011 - 13:48 | 1145993 Josh Randall
Josh Randall's picture

Hmmm....this could be the excuse Barry and BennyNet need to go get 'em

Thu, 04/07/2011 - 16:53 | 1146889 CrashisOptimistic
CrashisOptimistic's picture

Or . . . it doesn't matter who is in charge of OPEC.  They CAN'T PRODUCE AT A HIGHER RATE.

The party is over.  The cops are coming to shut it all down.

Four of them.  On horseback.

Thu, 04/07/2011 - 13:41 | 1145968 dow2000
dow2000's picture

Tyler please feature this story...draw attention to what's going on here please?

 

http://reinep.wordpress.com/2011/04/05/bp-whistleblowers-dead-missing-or...

Thu, 04/07/2011 - 19:53 | 1147649 bigelkhorn
bigelkhorn's picture

yes he is a weasal. I cant believe the prices of gas at the moment. 

but this guys is not surprised....

 

Live video analysis on crude and what is happening in crude lately by the guy over at http://www.forecastfortomorrow.com Very interesting stuff. And worth a watch. WOW!


Video ==> http://bit.ly/i14IaI


Shows you the technical side to crude and proof for where it is going. A nice touch!

Thu, 04/07/2011 - 12:32 | 1145670 bob_dabolina
bob_dabolina's picture

Well Ben printing money is bad enough but it's even worse when your energy needs are largely satisfied by a part of the world that hates you.

How fucking hard is this? Drill motherfuckers...we got oil. I don't see why we have to make life so hard on ourselves when there are such simple solutions.

1. Live within your means

2. Drill

3. win.

Thu, 04/07/2011 - 12:40 | 1145700 LawsofPhysics
LawsofPhysics's picture

Have faith, we will.  Just need to make sure everyone else is dry first and all those not on board with the "one world democracy" are silenced first.  Remember the mantra of the central bankers in regard to the "goyim".  It goes something like this "our survival is mandatory, yours is illegal"

Thu, 04/07/2011 - 13:22 | 1145903 Marla And Me
Marla And Me's picture

This is a huge tell:

http://online.wsj.com/article/SB10001424052748704587004576242450234233350.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsForth

The article is entitled "Putting on the Brakes: Mankind Nears the End of the Age of Speed."  It's a platitude-laden puff piece discussing the technological advancements of mankind, but makes ZERO references as to why we are even slowing down.  You won't find any discussion of peak-oil in that article, but I found it to be an even more valuable tell.  TPTB are moving on the next stage: the massaging of the masses for the eventual acceptance of their predicament.  Hedge accordingly.

Thu, 04/07/2011 - 12:42 | 1145704 Flakmeister
Flakmeister's picture

You do realize that 40,000 oil wells are drilled every month in the good 'ol USA and 10,000 are shut down because they are dead?

That is over 1,000 new holes a day....

Thu, 04/07/2011 - 13:42 | 1145972 tarsubil
tarsubil's picture

How many dry wells are reopened everyday? Guess there is a Center of World jungle full of breeding dinosaurs still producing some oil down there somewhere.

Thu, 04/07/2011 - 14:02 | 1146052 espirit
espirit's picture

Usually if only nat gas, or low volume/quality oil is found, the well is capped and the drillers move on. Nat gas too inexpensive to justify building new pipelines and maintaining pumps.

Just wait until we're past peak/peak oil. The move to nat gas will be... ah natural.

Thu, 04/07/2011 - 14:08 | 1146065 Flakmeister
Flakmeister's picture

Take a gander at

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E_ERTW0_XWF0_NUS_MF&f=M

and

http://tonto.eia.doe.gov/dnav/pet/pet_crd_wellend_s1_m.htm

I must confess that I erred in the number of wells per month, it 10,000 holes per month.... I stand corrected...

Note the relative fraction of dry holes, these guys are very good...

Thu, 04/07/2011 - 13:00 | 1145788 ZackAttack
ZackAttack's picture

Drill all you like; we do, in fact.

It's not enough, not by even a fraction.

Thu, 04/07/2011 - 13:06 | 1145816 Ned Zeppelin
Ned Zeppelin's picture

true, but not recognized.

Thu, 04/07/2011 - 13:09 | 1145835 GeorgeHayduke
GeorgeHayduke's picture

Yeah, but some people refuse to accept that answer. So they blame oil company conspiracies for holding back oil production to keep prices up. Or, my favorite, environmentalists whom they somehow believe have incredibly more political power than the oil, automobile and petro-chemical industries combined.

Oh well, if we have reached Global Peak Oil, there are many who will refuse to believe regardless of the evidence crumbling around them.  You may now junk away...

 

Thu, 04/07/2011 - 13:17 | 1145877 Flakmeister
Flakmeister's picture

Can you spell Cognitive Dissonance?  I thought you could...

Thu, 04/07/2011 - 14:06 | 1146062 ZackAttack
ZackAttack's picture

Yep... the narrative must follow the belief.

To channel Rush, it's enviromentalist wackos that want to force God-fearing Americans to give up their 4-ton SUVs for unicycles and share high-rise inner city skyscraper dwellings with smelly hippies.

Red Team! Blue Team! Fight, fight, fight!

Thu, 04/07/2011 - 14:37 | 1146251 trav7777
trav7777's picture

what I find funny is how some of the biggest opponents to the concept of Peak Oil are the same ones often most hysterical about the nuclear accident in Fukushima.

WTF are we supposed to do now??  For peak deniers, nukes were our ONLY TRANSITION STRATEGY.

There IS NOTHING ELSE right now that can even HOPE to provide "power" (even assuming we had the capacity to convert that electricity into liquid fuel)

Thu, 04/07/2011 - 14:50 | 1146334 Flakmeister
Flakmeister's picture

Reality is a cruel hard, heartless bitch...

Thu, 04/07/2011 - 16:59 | 1146915 CrashisOptimistic
CrashisOptimistic's picture

And she doesn't like to perspire.

KSA summer starts now-ish, and their air conditioners are powered by gasoline/diesel generators nationwide.

To the tune of 600K bpd that is NOT being burned this moment, but will be over the next few months.

And for even more fun, have a look at the Alberta government's shocking land use plan released yesterday that is taking 20% of oil sands out of the market.  To accomodate environmental concerns (you know, the ones that don't involve eating).

Thu, 04/07/2011 - 13:40 | 1145959 tarsubil
tarsubil's picture

Have you ever dealt with an environmentalist? They are pushing for the same results as: Obama, regressives, global warmists, eugenicists, peak oil fanatics, communists and muslims. Degrading all standards of living by worshipping the poverty of the masses while living very comfortably themselves.

Thu, 04/07/2011 - 13:54 | 1146008 GeorgeHayduke
GeorgeHayduke's picture

Really? They are? Where have you dealt with these folks? Also, wouldn't most of them be the bleeding heart liberals that want to give foks in poverty welfare? I'm getting confused on how folks want this stereotype to work out.

I've known many environmentalists for decades and none of them seem to be pushing that agenda. Sure, some of the fringe folks do, but we have fringe folks who push all kinds of nutty stuff. Most folks realize they are fringe elements and don't use them to define the entirety of people who might have similar beliefs, like radical Christians, militant Constitutionalist White Supremesists, etc... Not every Christian or Constitutionalist is one of those folks, much as everyone who wants a clean environment isn't a Communist.

Sure many environmental-leaning folks want it both ways. So does most everyone I encounter anymore.

 

Thu, 04/07/2011 - 14:07 | 1146066 tarsubil
tarsubil's picture

The government. But how could a bunch of hippie environmentalist push the big Federal government around? Yeah, I know. It is so weird.

"I've known many environmentalists for decades and none of them seem to be pushing that agenda."

That's either a bald faced lie or you do not know any real environmentalists that constantly troll government projects looking for a missed environmental impact study so they can sue.

 

 

 

Thu, 04/07/2011 - 14:51 | 1146346 GeorgeHayduke
GeorgeHayduke's picture

No lie at all. I used to be a paid environmentalist at the state level working on walkable neighborhoods and sustainable development. I sat in the office of the big players at bothe the state and federal level. I knew most all of the major environmental players in one of the top-5 most populous states and only about 15-20% were pretty much off the edge of the cliff and most of the big players knew the who was who.

If you insist on sticking to the sterotype, you're going to be wrong, but hey, you don't have to believe me. Here's the most powerful "environmentalist" I ran into: a woman who is a former well-connected lawyer and who's daddy was big power broker and she married a guy who makes really good money, but she decides to bag her career for a while to stay home with the kids in their high-end suburban, gated community. But then, some developer has the nerve to draw up plans for developing that empty field and wooded lot that her kids play in behind their house. Ok...former lawyer, some time on here hands, a supposed "environmental" problems here...You can see where things go from there. She wasn't exactly a hippy or a liberal. Who do you think will get something done? This woman or the idealistic college kids showing up for Earth Day lobby event?

If you say you are involved in government and think anything they do is done with their funders, or buddies, or backers getting a cut of the money; or it gets go ahead from someone who has big power (re: a huge bankroll) then look up Cognitive Dissonance. It may help you to see the real world.

Thu, 04/07/2011 - 15:12 | 1146455 tarsubil
tarsubil's picture

That is one of the more unintelligible things I've read. I love this line: "I knew most all of the major environmental players in one of the top-5 most populous states and only about 15-20% were pretty much off the edge of the cliff and most of the big players knew the who was who."

Oh, yeah! We are on the path to destruction. Make your time. All your base are belong to us.

Thu, 04/07/2011 - 14:26 | 1146169 Snidley Whipsnae
Snidley Whipsnae's picture

Some folks are so used to everything being labled that they naturally put a favorite lable on that not already having one.

Thu, 04/07/2011 - 14:31 | 1146210 tarsubil
tarsubil's picture

I of course forgot someone in my list. Big oil. If there was no worry about peak oil, how much would the price of oil drop? How uncomfortable would that make them?

Thu, 04/07/2011 - 14:41 | 1146267 trav7777
trav7777's picture

not a fucking bit.

Do you actually think that their process of drilling 3 miles down is CHEAP?

WTF do you think happens to production like COS with their breakeven of $39/bbl if the oil price went to $30.  It gets SHUT IN.

Thu, 04/07/2011 - 14:53 | 1146357 Flakmeister
Flakmeister's picture

From the links I posted, there is also this

http://tonto.eia.doe.gov/dnav/pet/pet_crd_wellcost_s1_a.htm

Look at the cost per foot and the increase.... This is an expression of EROEI

Thu, 04/07/2011 - 15:19 | 1146492 tarsubil
tarsubil's picture

Did you know that the DOE was created in 1977 by Jimmy Carter. Huh, how about that? Do they have any data on Earth's temperature?

Thu, 04/07/2011 - 15:33 | 1146537 Flakmeister
Flakmeister's picture

  Are you bi-polar?  I have read a number of well reasoned comments combined with some of the most inane shit I have ever read...

Look the world ain't a conspiracy theory, underlying trends and core incompetence is holographically equivalent...

Thu, 04/07/2011 - 15:40 | 1146571 tarsubil
tarsubil's picture

It isn't a conspiracy; it's a culture. You buy the holographically equivalent and I don't. Since I give no credibility to where you get your data, there is no point to debate this any further. I'm not going to call you names as I believe you gave me a tip on Katadyn products.

Thu, 04/07/2011 - 15:50 | 1146615 Flakmeister
Flakmeister's picture

Fair enough...

But for the record, there are two type of environmentalists; the Faux, hippie-wannabes that deserve all the riducule for their hypocrisy about NIMBY etc.. Then there is type that I tend to identify with, people that are aware of what is happening and know that they must balance that with the needs of society. They strive for a world where people can fulfull their potential in a sustainable fashion. They are a far more pragmatic and wise bunch....

Thu, 04/07/2011 - 15:59 | 1146654 tarsubil
tarsubil's picture

The non-hippies need a serious marketing campaign because today environmentalist equals smelly hippie. Maybe find a different name like environmentarian.

Thu, 04/07/2011 - 16:35 | 1146810 trav7777
trav7777's picture

so you believe you can just dismiss all data offhand?

What the fuck data do YOU have (i.e., evidence) that there is some massive conspiracy?

That's what I thought.  Your argument is fail.

Thu, 04/07/2011 - 16:03 | 1146665 tarsubil
tarsubil's picture

I was lazy before but now that I look at these numbers, why the sudden huge jump in 2007?

Thu, 04/07/2011 - 16:11 | 1146711 Flakmeister
Flakmeister's picture

Look at the price of steel, and the energy inputs into drilling...

Thu, 04/07/2011 - 16:21 | 1146754 tarsubil
tarsubil's picture

But if peak oil occurred in 1975, why did the cost of drilling suddenly jump in 2000 and then suddenly sky rocket in one year? What has it done since?

Look at the historic graph. It starts rising after 1975 then suddenly declines in 1982. It is bottomed out, then starts rising again til late 90s. Then it suddenly sky rockets. Restricted drilling running empty? Also, it doesn't say if the money is adjusted for inflation. It would really help to see their data for the last 3 years.

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E_ERTW0_XWWR_NUS_MDW&f=A

 

Thu, 04/07/2011 - 16:56 | 1146895 Flakmeister
Flakmeister's picture

US peak in 1970.... I would fathom that the rise in the early '80s was due to off-shore emerging (more expensive)  Here is the footage drilled per year

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=AER_ERTW0_XWF0_NUS_MF&f=A

Note that it peaked in the early 80s..... that was the era of drill baby drill and look what it did for us...

If there is lot of drilling going own, I would expect Rig prices, hence cost to rise....

 

Also look at the average depth

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E_ERTW0_XWD0_NUS_FW&f=A

Thu, 04/07/2011 - 21:15 | 1147900 tarsubil
tarsubil's picture

Average depth certainly doesn't line up with cost rocketing up. And if you restrict where you drill, no matter what, depth is going to increase. The question is if oil is a sustainable resource and at what level it can be sustained. The data presented certainly doesn't all fit together with peak oil/unsustainable. Depth decreased for 12 years after peak oil in 1970? Isn't that a little strange? If you really do believe in peak oil, why would worry about where we are drilling? Peak oil means we will effectively run out in the next 100 years. Why would you care if we drilled in more places to push that off as far as possible? That give us more time to develop legitimate alternatives. I'd think if you really believed in peak oil that you'd be concerned solely with getting energy from space or nuclear. Wind and solar panels isn't going to cut it.

Thu, 04/07/2011 - 13:28 | 1145916 bob_dabolina
bob_dabolina's picture

Or this...where is the incentive to look for oil in the US? If it's going to be illegal for me to drill it do you think I'm going to look for it? Would you? It's self-induced peak oil.  

"A number of states, including California and Florida, have banned leasing of state waters for oil and gas drilling. In 2009 a bill that would have partially rescinded a ban on oil and gas leasing of Florida state waters failed in the Florida statehouse (see Offshore oil and gas in Florida).

Federal Restrictions:

Congress passed the Marine Protection, Research and Sanctuaries Act in 1972, which provided for the establishment of National Marine Sanctuaries, in which certain activities, including oil and gas drilling, are prohibited. To date, 13 sanctuaries with a combined area of 150,000 square miles (390,000 km2) have been so designated.

In 1982 the US Congress directed that no federal funds be used to lease federal tracts off the coasts of Washington, Oregon, or central and northern California. Over the years Congress added other areas until the prohibited area included all the east and west coasts, and the eastern Gulf of Mexico. Congress repeated the effective ban on offshore drilling in these areas every year until September 2008, when an appropriations bill passed the House and Senate without the ban.

In 1990, Congress passed the North Carolina Outer Banks Protection Act, prohibiting leasing and drilling on federal seabed offshore from North Carolina.

In 1990, President George H. W. Bush issued an executive moratorium restricting federal offshore leasing to Texas, Louisiana, Mississippi, Alabama, and parts of Alaska. The moratorium banned federal leasing through the year 2000 off the East Coast, West Coast, the eastern Gulf of Mexico (offshore Florida Gulf Coast), and the Northern Aleutian Basin of Alaska. In 1998, President Bill Clinton extended the moratorium through 2012. In July 2008, President George W. Bush rescinded the executive order.

In 2002 Congress imposed a moratorium on drilling on or directionally beneath the Great Lakes. The ban was made permanent by the Energy Policy Act of 2005.[25]

Part of the central and most of the eastern Gulf of Mexico was declared off-limits to oil and gas leasing until 2022 by the Gulf of Mexico Energy Security Act of 2006"

So where the fuck do you drill? It's all off limits.

Thu, 04/07/2011 - 13:34 | 1145937 Flakmeister
Flakmeister's picture

All fine and dandy.... I cannot post figures but take a look at various figures here

http://fantazzini.narod.ru/useful_links.html

The guy grabs the latest info, but the link is slow....

Explain this:

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=A

Thu, 04/07/2011 - 13:42 | 1145961 bob_dabolina
bob_dabolina's picture

I did just expalin it

It's funny that the production of oil seems to have peaked as the regulations to produce it became more onerous.

Like I said...there is no economic incentive to a) look for oil, b) drill for oil, if congress/prez will shut you down or prevent you from drilling in the first place.

Would you look for oil if you knew congress wouldn't let you drill for it? What about the threat of being shut down once you've already drilled? That would be a waste of money no?

Thu, 04/07/2011 - 13:51 | 1146004 Flakmeister
Flakmeister's picture

Your dates do not jive with the production...

Check out the USGS 2000 report on global oil reserves, easy to google. The areas in question have de minimus oil, because the geology is not optimal. The majors did not drill, but they certainly analysed lots of seismic data. Poor prospects.

One exception is the coast of california....

You realize that a 30 billion bbl (OOIP) field takes ~10 years to get up to 1mmbd of production? That would increase US production by 20%.... wow, we are saved!

Thu, 04/07/2011 - 14:18 | 1146128 bob_dabolina
bob_dabolina's picture

The restrictions started in 1972...when did oil production start to tip over?

My dates jive perfectly with the production.

Thu, 04/07/2011 - 14:31 | 1146201 Flakmeister
Flakmeister's picture

I am not going to waste my time with you. You believe what you want to believe. After all, in a free society, I am duty bound to respect the right of others to make fools of themselves.

Thu, 04/07/2011 - 14:42 | 1146275 bob_dabolina
bob_dabolina's picture

Of course you're not going to waste your time when your chart backs up my point.

Production started declining at the same time regulations started becoming onerous. It's right there in your chart. Go look at it dumb shit.

Thu, 04/07/2011 - 14:44 | 1146294 trav7777
trav7777's picture

why the fuck did Mexico peak in 2004?

Why did the UK and Indonesia both peak around 1999?

Why has Burgan peaked (and Kuwait)?

Why are the VAST MAJORITY of oil-producing nations in production decline?

Fucking environmental regulations?!?  Get your head out of your ass bob.  You are one who "can see" so you're expected to be smarter than this.

Thu, 04/07/2011 - 14:51 | 1146324 bob_dabolina
bob_dabolina's picture

I don't give a shit ass hole. The world isn't running out oil in my lifetime.

The price going from 150 - 35 - (now brent is @120) in TWO YEARS has NOTHING TO DO WITH PEAK OIL! GET YOUR HEAD OUT OF YOUR SHIT.

Thu, 04/07/2011 - 15:43 | 1146584 trav7777
trav7777's picture

Listen you retarded jackfuck...PEAK OIL for the TRILLIONTH time does NOT MEAN THE WORLD IS RUNNING OUT OF FUCKING OIL.

It means that PRODUCTION of oil is NO LONGER GROWING IN RATE.

Thu, 04/07/2011 - 15:58 | 1146647 bob_dabolina
bob_dabolina's picture

And...if we allowed domestic oil fields like in Alaska, Great Lakes, off the short of the East/West coast, and other places would that add to the supply? Would that make the rate accelerate? Because that's been my point.

You fuckin cock hole.

 

Thu, 04/07/2011 - 16:37 | 1146822 trav7777
trav7777's picture

globally?  IT WOULDN'T MAKE A FUCKING BIT OF DIFFERENCE.

Those resources are relatively trivial of thcompared to the overall consumption picture.  You have absolutely no clue about any of this, what the sizes of the resources are, or their expected rates of production.

So shut your fuckin dumbass hole

Thu, 04/07/2011 - 18:19 | 1147270 Bicycle Repairman
Bicycle Repairman's picture

The public does not know and will never know how much oil is out there.  It is a state secret.  Information is power.  Pun intended.

Thu, 04/07/2011 - 14:58 | 1146370 tarsubil
tarsubil's picture

Why is it declining in the Middle East? Why is declining in Mexico? You forgot to ask about Nigeria. Nigeria has a peak oil related problem, peak pipelines. They keep springing leaks.

Thu, 04/07/2011 - 16:38 | 1146825 trav7777
trav7777's picture

rates are declining because oil production has achieved peaks there.  It's a geological phenomenon

Thu, 04/07/2011 - 14:54 | 1146350 tarsubil
tarsubil's picture

It is interesting to look at the year to year production #s instead of the graph. There were drops in production a couple years throughout the 40s, 50s, and then a slight draw back in the early 70s. The thing started to seriously fall in 1973. Started to recover in the 80s but then resumed after the bust. If you add the data for inflated adjusted price of oil, it is quite a coincidence that the biggest rise was ever was over the 8 years of a President that lived through the bust of the 80s. And even though the Republicans controlled Congress and the White House, they couldn't open up land for exploration. Huh, how about that?

Thu, 04/07/2011 - 14:40 | 1146278 trav7777
trav7777's picture

bob, STFU...you are on the wrong side of this one too.

Peak was CALLED 20 years before it happened here.

Do the damned research.  Accept what I and Flak are saying.  Oil is not an infinite resource and the rate at which it is produced cannot grow forever. 

Thu, 04/07/2011 - 14:46 | 1146311 bob_dabolina
bob_dabolina's picture

You shut the fuck up.

None of you dumb shits were running around screaming peak oil when it was trading at $35 a barrel two years ago.

Now all of a sudden Ben prints money, the price goes up, and now the world is out of oil again.

Make up your stupid fucking minds already. You're like the meteorologists saying "climate change" "global warming" and than in the 70's it was a coming "ice age"

stfu troll.

Thu, 04/07/2011 - 14:56 | 1146375 Flakmeister
Flakmeister's picture

Actually I was on various boards back then telling people to back the truck up on HGT and PBT...300% plus another 20% of divendends since then.

You are a clown, go away and fantasize about how you are the only one that can see the truth...

Thu, 04/07/2011 - 15:05 | 1146425 bob_dabolina
bob_dabolina's picture

Why don't you go back to blowing gypsies. Take your HGT and shove it up your ass.

If Ben wasn't printing money oil would not be priced where it is but because it is everyone is crying peak oil. Cry babies whining over illusory correlations.

Thu, 04/07/2011 - 15:37 | 1146556 Flakmeister
Flakmeister's picture

Game, Set and Match.... You lose.

As a consolation prize, you get the daily ZH award for most pathetic attempt to deny peak oil... Faulty rhetoric and grand conspiracy theories do not refute anything...

Thu, 04/07/2011 - 15:46 | 1146597 trav7777
trav7777's picture

SURE I WAS, MORON.

I was buying COSWF hand over fucking fist when the price of oil was below their cost of production!

And I was having PO arguments weekly with idiots like you.

And here we are with the price spiking again as demand recovers but supply doesn't.

Why don't you drill in your head for oil, dipshit?

Thu, 04/07/2011 - 17:09 | 1146977 CrashisOptimistic
CrashisOptimistic's picture

I am at this point going to suspect that Bob is a smart guy, knows what is coming, and also, crushingly, has a young family.

I have found that to be the most powerful impetus for men who can understand, choosing not to.

Thu, 04/07/2011 - 13:55 | 1146021 GeorgeHayduke
GeorgeHayduke's picture

Is there oil worth drilling in these places?

Are some of these places and what they offer of more value than the oil under them?

Yeah, I know I must be a liberal retard to even consider such things when the only thing of importance is oil, oil, oil.

Thu, 04/07/2011 - 14:02 | 1146044 bob_dabolina
bob_dabolina's picture

Yea, there is a shit ton of oil in those areas especially Alaska. Alaska is one of the most resource rich regions in the world for all kinds of things to include oil/oil shale/coal.

Thu, 04/07/2011 - 15:42 | 1146585 Flakmeister
Flakmeister's picture

Quantify "shit tons", I've gone over the 10-K's of lot of juniors and am not familar with the term. Is it a geologic term that I am not familiar with?

Thu, 04/07/2011 - 15:46 | 1146601 trav7777
trav7777's picture

it's what's between his ears

Thu, 04/07/2011 - 16:03 | 1146678 bob_dabolina
bob_dabolina's picture

It's what comes out of your mouth

Thu, 04/07/2011 - 17:12 | 1146994 CrashisOptimistic
CrashisOptimistic's picture

NPR-A was found empty just a few months ago, taking double digit billions off the table.

Alaska is seismically active.  Seismic activity multiplied by millions of years spike the probabilities of caprocks getting cracked.  When that happens, the trap is compromised and by the time we look for what used to be under it, it's gone.

Thu, 04/07/2011 - 17:01 | 1146924 nkktwotwozero
nkktwotwozero's picture

>2. Drill

North America is nearly drilled out.

That's why we're going to OCS, deep-water, horizontal drilling, fracking, etc.

Mexico might have more drilling potential, but they're off limits for now.

Canada's only recourse left are the oil sands.

Which is why they're rapidly expanding that.

Alberta's conventional oil production capacity (once the largest in Canada) has dwindled.

Drilling doesnt equal production.

 

Thu, 04/07/2011 - 12:35 | 1145672 Long-John-Silver
Long-John-Silver's picture

You will soon be allowed to buy gas according to the odd or even number on your tag. Pumps will be recalibrated for liters instead of gallons because purchases over $999.99 are no possible.

Thu, 04/07/2011 - 12:42 | 1145707 Rockfish
Rockfish's picture

I rember those days, I would swap tags from my dads car to mine. His was even and mine odd. Ah the good ol days

Thu, 04/07/2011 - 13:21 | 1145896 cougar_w
cougar_w's picture

I remember working in a quik-mart while I was in college, around 1979, when the price of gas first went over $1 and the pumps didn't have enough numerals to display a cost/gal over 99 cents. They were able to calibrate the meter to charge over a dollar, but could not display the "1" dollar next to the cents so we went out with a permanent marker and wrote a "1" next to the cents on the bezel of the machine.

About a year later when the crisis didn't abate new pumps were delivered that could display rates over $1, and it felt like the world would never be the same.

These days I don't buy gas. I ride a bicycle and take light-rail to work. I like it that way. I watch the price of gas going up, and see people driving around like it doesn't matter, but they aren't fooling me at all.

I was there when the first shock hit. I'm still ringing from it. And I was right, the world was never really the same.

Thu, 04/07/2011 - 13:33 | 1145941 earnyermoney
earnyermoney's picture

I'm waiting for the day when I can use the Interstates as a large bike lane. It would make the commute to work a nice workout. 50 K round trip.

Thu, 04/07/2011 - 13:55 | 1146015 cougar_w
cougar_w's picture

Freeways thick with weeds, a path still worn down one side where there is still some asphalt and cement left that bikes, pedestrians and horses can use. Trees reestablishing themselves, the beginning of a new forest.

Someday people will wonder who made those straight cuts in the hills and around the sides of mountains. What were they used for? Where did those people go? What happened?

Well they will have become someone else, with different ideas about life, after the end of oil.

One fine day. Perhaps a long time from now. But the day will come because it must.

Thu, 04/07/2011 - 14:32 | 1146199 Snidley Whipsnae
Snidley Whipsnae's picture

"Someday people will wonder who made those straight cuts in the hills and around the sides of mountains."

Some future geologist will claim they are fault lines.

Thu, 04/07/2011 - 13:51 | 1145998 tarsubil
tarsubil's picture

Such a good little obedient serf.

Thu, 04/07/2011 - 13:56 | 1146017 cougar_w
cougar_w's picture

Okay, that was out of left field.

My guess is, time to change your meds.

Thu, 04/07/2011 - 14:13 | 1146085 tarsubil
tarsubil's picture

"These days I don't buy gas. I ride a bicycle and take light-rail to work." - Good little obedient serf

Thu, 04/07/2011 - 14:40 | 1146261 Rodent Freikorps
Rodent Freikorps's picture

Hey, hey, hey!

If these folks want to voluntarily get off my road and allow me to get out of fourth gear, I am all for it. I'll happily burn their gas ration for them.

Imagine an empty freeway all the way to the horizon. Paradise.

Speed is life.

Thu, 04/07/2011 - 14:55 | 1146352 cougar_w
cougar_w's picture

Oh yes you can have the freeway and my ration of fuel.

My gift, to you. Enjoy the speed.

And don't miss your exit on the way.

Thu, 04/07/2011 - 15:01 | 1146403 tarsubil
tarsubil's picture

Thanks! You can have my de-lousing treatment too. The road doesn't go to the chamber but the train stops right out front.

Thu, 04/07/2011 - 14:50 | 1146325 cougar_w
cougar_w's picture

o i c

Funny you should put it that way. Actually I don't think anybody at the top likes me being this way. Rather, the obedient types are buying Ford trucks on lease, knocking down the doors at WalMart for the midnight sale, and banging the war drum for cheaper oil at any cost (pun intended). But no, I'm keeping the money and retooling my back yard as a garden. The '68 Dodge PU will do for another 20 years, easily, for weekend runs to Lowes. I put maybe 10 gallons in it a month.

I'm no longer part of your nightmare.

I woke up.

Epic win.

 

Thu, 04/07/2011 - 15:01 | 1146392 tarsubil
tarsubil's picture

Total burn. Nothing like riding a light rail train to work. You know I'm jealous of the 68 Dodge. Hey, I burned my house down and am living in a cave with a deer skin coat I made myself. I guess I win on who can live the crappiest life.

Thu, 04/07/2011 - 17:06 | 1146952 nkktwotwozero
nkktwotwozero's picture

Things you own end up owning you much?

Thu, 04/07/2011 - 17:13 | 1147015 CrashisOptimistic
CrashisOptimistic's picture

Do not misunderstand.

Those who understand the geology do not advocate you compromise your lifestyle.

Personally, if you are American, I advise you to go out and buy all the SUVs you want, drive all you want, consume all the oil you need to for comfort.

I advise this because conservation is absurd in this situation.  It's not going to make any difference at all.

The only thing that will is immediate nuclear strikes on the large population centers of Asia.  Nothing else will reduce demand from competitors.

Thu, 04/07/2011 - 18:23 | 1147287 Bicycle Repairman
Bicycle Repairman's picture

I remember in the 1970s when we were running out of oil.  Then they went out and found some more where they hadn't looked.  So my neighbors and I all bought SUVs.

Thu, 04/07/2011 - 12:36 | 1145681 Dreadker
Dreadker's picture

[Start Sarcasm] Lower output from OPEC??  How is this possible - they clearly stated they can increase production - they're even creating huge solar fields to gurantee this!  They are our friends, and are very concerned about reducing the price to sub $90... [End Sarcasm]

 

Nevermind that Libyan output will never return, Bahrain is systematically hunting down and silencing the 'dissenters' hospital by hospital with the help from Saudi - can't let the majority disrupt the buying of gold plated rolls royce now can we!

Thu, 04/07/2011 - 12:38 | 1145682 LawsofPhysics
LawsofPhysics's picture

Yes, where is that OPEC production increase?  Didn't the Saudis raise their output?  Things getting messy in the ME and no one seems to know any details.  Not to hyjack the thread but everyone did notice that push for attacking Libya came from three women, Ms. Clinton, Rice, and another witch in France.  So much for more peace if women were in charge.  Every married man has known better since the day they were married.

Thu, 04/07/2011 - 13:50 | 1146003 velobabe
velobabe's picture

those three you mention, really aren't woman. they don't want to be like real woman at all. fuck puff cakes wouldn't know what to do with a dress or shirt on. she might have to feel the insides of her blubber thighs.

Thu, 04/07/2011 - 17:17 | 1147025 CrashisOptimistic
CrashisOptimistic's picture

FYI, the production increase.

The Saudis are shipping their new light sweet special blend next week.  They will ship 1 million barrels of it.  They plan one more shipment of that blend.

And no more.  Not 1 mbpd.  1 million.  Then another million.  And no more.  Because that's all they can make.  2 million barrels in the month they have been trying.

Not 2 mbpd.  2 mbpMONTH.

Thu, 04/07/2011 - 17:18 | 1147030 CrashisOptimistic
CrashisOptimistic's picture

FYI, the production increase.

The Saudis are shipping their new light sweet special blend next week.  They will ship 1 million barrels of it.  They plan one more shipment of that blend.

And no more.  Not 1 mbpd.  1 million.  Then another million.  And no more.  Because that's all they can make.  2 million barrels in the month they have been trying.

Not 2 mbpd.  2 mbpMONTH.

Thu, 04/07/2011 - 12:38 | 1145683 BORT
BORT's picture

The crisis of 2008 delivered Obama to the White House, and the crisis was not wasted.  We ended up with all three branches the same and got Health Care reform, his number one priority.  That crisis used up, we need to make another one to get the chance to put in place the liberal alternative energy policy.  It will be created and then not wasted.  If he just had a couple more years, or a couple more oil area wars.  Coincidence?

Thu, 04/07/2011 - 12:44 | 1145724 Confused
Confused's picture

You still think this is a left/right issue, huh?

Thu, 04/07/2011 - 12:51 | 1145744 Dreadker
Dreadker's picture

lol thumbs up Confused...

 

If people thing there is a 'side' to government... probably best trot on over and watch the regular news or dancing with the (no longer) stars...

Thu, 04/07/2011 - 12:53 | 1145750 Idiot Savant
Idiot Savant's picture

Right, just like Bush used the 9/11 crisis to start multiple wars. The politicians have won, as the peasants are thoroughly divided. Left, right, it doesn't matter, they're all crooked politicians pandering to their masters.

Thu, 04/07/2011 - 12:56 | 1145773 John McCloy
John McCloy's picture

There is only one shadow agenda and those who are installed to see it through. The world is now run via a committee. They care not for the citizens who are supposed to be represented.

Thu, 04/07/2011 - 13:15 | 1145869 samsara
samsara's picture

Yes, he believes there are two teams on the floor when the Harlem Globtrotters play the Washington Generals.

Even though both get their checks from the same company.

Don't pop his bubble, It would confuse him.

Thu, 04/07/2011 - 14:15 | 1146098 espirit
espirit's picture

Let's try another explanation so that the nieve can understand.

The road to Washington DC is two lane, the winners advance in one direction and the losers return from the opposite direction.

Two party system? buuhahahha!

Yep, winners and losers.

Thu, 04/07/2011 - 13:23 | 1145898 GeorgeHayduke
GeorgeHayduke's picture

+1,000

If Obama hasn't proven beyond any and all reasonable doubt that both parties are the same, then those folks are beyond hope. Or, they need to turn off mainstream and wingnut media.

Thu, 04/07/2011 - 13:55 | 1146022 tarsubil
tarsubil's picture

He never mentioned the right so why do you?

Thu, 04/07/2011 - 13:00 | 1145798 ZackAttack
ZackAttack's picture

Red Team! Blue Team! Fight, fight, fight!

Thu, 04/07/2011 - 13:08 | 1145840 Urban Redneck
Urban Redneck's picture

The liberal alternative energy policy is to have US energy users pay for the alternative energy infrastructures and green jobs of the OPEC nations.  Once that is done, if the US serfs are not bankrupt, only then may they have the honor of paying for their own alternative energy infrastructure.  

Thu, 04/07/2011 - 13:31 | 1145932 GeorgeHayduke
GeorgeHayduke's picture

Geez...why pay for such stupid things like alternative energy options when we can instead keep all of our eggs in one basket with an aging infrastructure AND pay for adventurous wars where we can kick some ass? Doesn't matter, the US serfs get to pay for that one too. But hey, wars and oil is something we are comfortable with, so just go that route because we all know change is not acceptable to a large segment of society.

Thu, 04/07/2011 - 14:50 | 1146317 Urban Redneck
Urban Redneck's picture

I like results and am willing to pay for results.  Paying for research and studies does nothing but provide employment for those who cannot succeed and deliver results in an open marketplace. 

Furthermore, were are not keeping all our eggs in one basket, we have thrown out the basket, and bought OPECs oil dependency brand.  The life cycle of a producing oil well is generally measured in multiples of presidential terms or decades.  The ramp time alone is measured in years.  If you think gas is expensive now in the US- wait 5 years, even if the Bernank ceased printing today, supply will be fundamentally impaired with 0% demand growth between now and then.

Unless the advocates of new technology are willing to indenture themselves and their families to slavery in the event on non-delivery of their promised petroleum replacement pipe dreams then they should not be trusted.    

Thu, 04/07/2011 - 15:04 | 1146407 GeorgeHayduke
GeorgeHayduke's picture

I agree with much of what you're saying. However, the oil industry has been subsidized itself for decades. Also, it was the easiest play of the time. Breaking into the next generation of power generation may not be so easy and leaving it totally to that amorphous, mythological entity we call the free market may not be the best idea either.

At present, most business seems to have the same short-ranged thinking as our political system, much because they are nearly the same entity. But business works on the quarterly report cycle while politicians work on the election cycle. I'm going to leap way out here and take a guess that solving this problem may extend well beyond such limited perspectives.

That's why I don't mind paying for such research. Heck, the money spent on 2 days of fuel in the Afghanistan war would cover tons of research. It just depends on where our priorities lie.

Fri, 04/08/2011 - 11:48 | 1150109 Urban Redneck
Urban Redneck's picture

damn internet & microsoft <sarc> TPTB must be trying to silence me again </sarc>

 

Three Obstacles & Five Puzzle Pieces

 

Domestically:

1) The US Gov has no NOC.  It receives revenues primarily through fees and taxes, cut the fees & taxes, create a NOC and require a significant equity stake for permitting.

3) There is an inherent conflict of interest created by placing both E&P and Safety and Regulatory within the same body. Again, create a NOC. 

4) There is no differentiation between the majors and the small players.  In both the Oil and Mining sectors- the small players are forced to pump LPs through shops one step removed from boiler rooms, or page huge coverage costs to respectable analysts.  The big guys can self finance, and the big banks will bend over to get their business, meanwhile the small guy gets bent over every time Congress gets involved.  It is actually easier and cheaper to finance wildcatting in banana republics, that is backwards.

5) The whole purpose of the DOE was energy independence, it has FAILED, kill it.  Tax domestic and imported energy differently.  Lowest Tax- domestic production. Medium Tax – close AND stable allies.  Highest Tax – all other foreign.

 

Paper: The whole structure is unstable and needs to be overhauled. 

1) Speculative and hedging need to be treated differently.  In theory one has to take delivery, but not in practice. 

2) The paper also needs to match the product, WTI is a false market, Brent is to a lesser extent.  Combined both are a negligible amount of overall production, and there are dozens of other benchmarks, and even more blends based off the benchmarks.  There should basically be one fungible OIL contract (ex transit and irrespective of delivery point).  Discounts and premiums for existing benchmarks and blends can all be just as easily calculated off a single point of reference worldwide.  There is simply to much paper arb opportunity in the existing structure 

 

Strategically:

1) Oil dependence leads to a negative trade balance.  GDP ignores to continual export of America’s wealth.  Much like with inflation, there might be an academic or analytical value to try and strip out volatility for a single data set, but when the direction is the same month, year, and decade after decade, it is simply no longer volatility its ignorance.  When you then take into account the return flows which finance our debt and purchase/strip the equity the assets which the US has built the export of wealth is that much more egregious.

 

2) The US is both very blessed with riches and very spoiled.  The poorest of the poor in the US are middle-class by the standard of undeveloped economies.  The very existence of health insurance, forget pricing, is not universal.  In addition, Americans have unemployment benefits, old age benefits, and food subsidies.  As insignificant as these monthly benefits may seem, they amount to more than monthly median income in many undeveloped countries.  Food and energy are core needs and commodities; their pricing is basically the same anywhere.  For example, monthly per capita GDP (not household income) in the US was $3800 last year, a person on Social Security or unemployment with food stamps might receive $1800 a month in subsidies from the government.    Monthly per capita GDP (again not household income, and before reductions for the formerly ruling kelptocrats) in the Tunisia was $689 last year.  Both the American and the Tunisian have food and energy needs, the Tunisian without the benefit of state subsidies.  Is it that surprising that a Tunisian might resort to self-immolation to make a political statement?

 

3) Highly Developed and efficient economies tend to be extremely reliant on the functioning of their infrastructure.  Returning to the point of Americans being spoiled, potable water (by international standards) flows freely seven days per week, there is an expectation that when a light switch is turned that illumination will occur, or that when one enters an elevator that the power will not go out before reaching the destination.  High speed access to Zero Hedge is always available, at home, by cell, and countless Wi-Fi hotspots, there is not a bandwidth constriction of a handful of undersea cables for a continent of a billion or more people.  In New York, both food and iPods are always available on store shelves (barring a new product launch).  However, if the food supply is only two days- what happens when the always-available, just-in-time societal model isn’t just-in-time because of a breakdown in the energy supply chain?  To compound matters once the first energy domino falls- there is the immediate decision as to distribution of remaining available resources.  With both armies and farmers in the field, the consequences of continuing the status quo is a cascading failure and societal meltdown as hunger sets in.                 

 

4) Competition:  (Ex Japan and assuming $4/gal as the current finished product price) The three big net buyers are the US, the EU, and China.  In the event of a grudge match- the EU has the option of reducing it’s $4-5 per gallon tax, China can grant Turbo Tax Timmy’s Christmas wish and let its currency appreciate faster 20% savings at $5/gal is $1, and at $10/gal it’s $2.  In fairness, China has some structural issues and the balancing is, at a minimum, extremely difficult.  However, compared to Chairsatan China has it easy.  Chairsatan has a really tiny EU tool ($0.50) and, short of using HAARP on either an EU nuclear reactor or the ECB, no Chinese tool.  

 

5) The deal with the Devil, Chairsatan, Yamani and the US 5th fleet...  See my next post.

 

Thu, 04/07/2011 - 13:15 | 1145878 samsara
samsara's picture
Carroll Quiqley on the Two Party System   "The argument that the two parties should represent opposed ideals and policies, one perhaps of the Right, and the other of the Left, is a foolish idea acceptable only to doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can 'throw the rascals out' at any election without leading to any profound or extensive shifts in policy... But either party in office becomes in time corrupt, tired, unenterprising, and vigorless. Then it should be possible to replace it, every four years if necessary, by the other party, which will be none of these things but will still pursue, with new vigor, approximately the same policies". -- Carroll Quigley, "Tragedy and Hope", 1966, p. 1247-48
Thu, 04/07/2011 - 12:40 | 1145688 malikai
malikai's picture

Fate of BP gulf spill dissenters, scary: http://bpwhistleblowers.blogspot.com

Thu, 04/07/2011 - 12:47 | 1145725 falak pema
falak pema's picture

If this is true its time to corral the WHOLE BP management in ONE fell blow...How can this be possible in a civilized country...? Is this MLK/JFK style 'problem solving' forever? Why doesn't the FBI do something instead of hatching eggs on homeland security junks...

Thu, 04/07/2011 - 12:53 | 1145749 John McCloy
John McCloy's picture

After killing JFK they believe they are untouchable. This kind of wealth and political capture is capable of doing anything they desire.

Thu, 04/07/2011 - 13:03 | 1145812 samsara
samsara's picture

believe they are untouchable

Know they are untouchable

Thu, 04/07/2011 - 12:51 | 1145743 Northeaster
Northeaster's picture

Statistical probability of all those involved meeting and early demise are (especially those with families)?

Thu, 04/07/2011 - 12:51 | 1145745 John McCloy
John McCloy's picture

WTF?

Thu, 04/07/2011 - 12:52 | 1145757 Confused
Confused's picture

Wow. Thanks for sharing. 

Thu, 04/07/2011 - 13:02 | 1145807 samsara
samsara's picture

Gee,  that's almost as scary as doing a google on Dead Micro Biologists.

List Of Dead Microbiologists

http://new-world-order-for-dummies.blogspot.com/2009/04/dead-microbiologists.html

or just google it.

Thu, 04/07/2011 - 13:20 | 1145886 blindfaith
blindfaith's picture

There was a story one morning about two weeks ago about the well leaking again...a ten mile wide slick by 100.  The story disappeared as if by magic.

Thu, 04/07/2011 - 12:39 | 1145692 Herman Strandsc...
Herman Strandschnecke's picture

I tried the bus only yesterday after 30 years since the last time. It wasn't too good. We waited a couple of minutes at the terminal when the driver started the engine, threw a fag out the door and jerked off. Two old ladies fell backwards and collapsed on the floor.

 

Thu, 04/07/2011 - 12:40 | 1145693 Debtless
Debtless's picture

When your 'economic recovery' is a fragile stack of lies - seems everything is a threat to expose it.

Thu, 04/07/2011 - 12:40 | 1145694 falak pema
falak pema's picture

Elect Hugo Chavez as US president, those venezuelan chicks are beautiful and Venezuela has EXCESS oil....better than invading it...As the US screws up every war...

Thu, 04/07/2011 - 12:39 | 1145696 Commander Cody
Commander Cody's picture

So many concerns, so few solutions.

Thu, 04/07/2011 - 12:46 | 1145727 LawsofPhysics
LawsofPhysics's picture

Indeed.  Necessity is the mother of all invention.  There is tremendous energy in fat, perhaps we need to think of American obesity as a solution and not a problem.

Thu, 04/07/2011 - 12:56 | 1145768 Dreadker
Dreadker's picture

Good call!  Bullish on Fast Food!

Thu, 04/07/2011 - 12:58 | 1145780 zeek
zeek's picture

so Tyler had it wrong when making soap...?!  ;)

Thu, 04/07/2011 - 13:03 | 1145803 ZackAttack
ZackAttack's picture

Ha! I first read that as "Necessity is the mother of invasion."

I like that one.

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