Heads in the Sand

October 20, 2009

I was driving to work this morning listening to MPR and the Marketplace segment featured an interview with a director from the NGO Global Witness that promoted their new report “Heads in the Sand” talking about the coming global oil supply crunch.   “Hey!” I thought to myself, “oil prices have plummeted and gas is cheap again.  What in the hell is this guy talking about?”  Well, not really, but it sounds good and is probably reflective of the thinking (what there is of it) of the American public.

While not coming right out and stating that the global oil supply is finite and that we’re moving into the “lower quality and harder to extract” part of the inventory, the report is pretty stark in what it does lay out:

Governments have not taken on board the four underlying oil production factors which clearly show there is a problem.  Heads in the Sand outlines these factors – declining output, declining discoveries, increasing demand and insufficient projects in the pipeline – which clearly show that the world is facing an imminent oil supply crunch.  Some of these factors have been apparent for many years. [1]

Governments and multi-lateral agencies have failed to recognise the imminence and scale of the global oil supply crunch, and most of them remain completely unprepared for its consequences. The report calls for governments to officially acknowledge the crunch and to shift urgently into safe sustainable energy alternatives.

“The world’s governments have been asleep at the wheel. Their collective failure to recognise the imminent end of the oil age means we have lost a decade in which action could have been taken to develop alternatives and avert the worst outcomes of a dramatic drop off in the supply of oil…”

As the gentleman on the radio pointed out this morning, the $147/barrel oil price we saw in 2008 was possible taster of things to come.   We still had some wiggle room in supply then.  What will happen in the future when we are all trying to bid for oil output that only covers 90% of global demand, or 50%?

I’ve taken a necessary break from this blog to focus on other things (work, family, etc) and to recharge my blogging enthusiasm.  No promises on how often I’ll be posting in the future, but please know that this blog is not dead.  There’s too many signs popping up about what the future may bring, and most of it ain’t pretty.

The Naked and the Dead

October 19, 2009

Matt Taibbi has a great new article in Rolling Stone about Naked Short Selling and how it has been used & abused by the major Wall Street players for some time.  Good stuff and it illustrates a very complex situation clearly, which is a major benefit.

The way these major players manipulate and break the rules is breathtaking.  And the watchdogs haven’t gotten any smarter under the new occupants of 1600 Pennsylvania Ave either.  Considering that the major banks contributed heavily to both McCain and Obama in the last election cycle, this shouldn’t surprise anyone.   Despite the obvious damage being done to the economy at both the macro & micro levels from this white-collar form of pillaging, people aren’t being arrested and laws aren’t being changed at a very fast pace to try and stop this sort of thing from happening in the future.   Some ‘change,’ huh?

The American political process is sold to all of us as a left-right (or liberal-conservative) choice.   How much ‘choice’ do we really have when the same special interests are the major contributors to both viable candidates?

The Quiet Coup

August 14, 2009

Here’s a very good article written by the former chief economist for the International Monetary Fund dealing with how the US has been more or less captured by the financial elites while offering a way out of this mess.   It won’t be pleasant reading to many folks, seeing how the current US economic crisis neatly compares to past ones from countries we would make fun of in the past over their financial improprieties.  If you know people who still think we’ve hit the ‘bottom’ and that recovery is on the way, this article would be a good corrective.

Mr. Johnson’s proposed plan isn’t fun, but it sounds like it would provide the ‘come to Jesus’ moment that this country really needs to start clearing this mess off the books.  Naturally it’s therefore political dynamite to our two major political parties who thrive on donations from the financial sector.

The Quiet Coup

A Car Column You’d Never See in a US Paper

December 12, 2008

This is the latest column from the Times’ automotive columnist Jeremy Clarkson:

An Adequate Way to Drive to Hell

Anyone think we’ll see something as frank as that here in the States?

The Next Bloodbath – Auto Makers?

December 11, 2008

Breaking news tonight is that the auto maker bailout deal has collapsed.   Initial reports point to the deal being scuttled by the UAW refusing to accept some of the conditions (read: wage & benefit cuts) that Republican lawmakers were demanding.

So, stock futures are tanking, rumors abound that GM may file bankruptcy as soon as Friday, and the UAW may be the loser in a huge game of chicken.   If GM files bankruptcy and wins approval to unilaterally throw out the union contracts, Ford & Chrysler will be sure to tell the UAW that they need to take the same deal as GM’s workers, or they’ll have to file as well.

I’m guessing it’ll be a bloody Friday on Wall Street.

UPDATE: And here we go… first reports are out that GM will cut production by 250,000 vehicles for Q1 2009.   Less cars & trucks to produce means less hours for workers.   We’ll see how fast DC blinks and the Bush team issues the funds as some reports are saying they may do.

Low Gasoline Prices… Now and in the Future

December 8, 2008

Fascinating article by Gail the Actuary at The Oil Drum concerning where gasoline prices are now, and where they are going in the future.  The comments for this article are especially good.

One point that jumped out at me is that a lot of economic pundits are writing articles and theorizing timelines based on when they feel the markets will truly ‘correct’ and be able to move forward again.  This article posits the idea that the markets  are so debt-ridden that they may never truly be able to correct.

The US government has thrown a lot of cash at the banks, the GSE’s, insurers, and practically everyone else except homeowners who played by the rules and only bought what they truly could afford.   The incoming Obama administration is promising to throw even more cash at things to try and get things moving again.  This ‘cash’ is really just more debt we are throwing on top of a massive mountain of debt we already are burdened with.  While this additional debt may provide a short-term jump-start to the economy, in the long run it’s just adding to the bill current and future generations will have to try to pay off… or not.

The current unwinding of debt that is starting now will probably not end for a while… when will we reach the point where the low energy prices will start killing off energy companies, and what will that mean for the country?    How many homes in the Northeast will be uninhabitable if there are no companies to deliver heating oil?  If natural gas prices crash to the point wellheads and pipelines shut down, what would that mean to millions of homes across Canada and the northern USA?  These are interesting questions that few people have thought about while we’re enjoying much lower gas prices.

Not Throwing Fuel on the Fire

November 15, 2008

Interesting open memo by Hirsch Report author Robert Hirsch, in which he more or less tells peak oil proponents to shut up… at least for a while:


The world is in the midst of the most severe financial crisis in most of our lifetimes. The economic damage that has already been wrought is considerable, and we have yet to see the bottom or the turnaround. Against this background, I suggest that the peak oil community minimize its efforts to awaken the world to the near-term dangers of world oil supply. The motivation is simple: By minimizing our efforts in the near term, we may not add fuel to the economic fires that are already burning so fiercely.

We are all aware of how disoriented governments and business are right now. Our leaders, leaders-to-be, and best minds are disoriented and seeking pathways out of the current morass. The public is in a quiet panic mode — those who were reasonably well off are less well of, and their options for action are limited. Those that have lost their jobs and/or homes are desperate. Businesses and the markets are in what might be called a free fall. If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable.

Like many of you, I’ve devoted my recent efforts to trying to wake the public and governments to the impending horrors of peak oil. As much as that awaking is urgently needed, continuing to press forward now is almost certainly not in the broader interest.

Many may be tempted to directly challenge the recent IEA World Energy Outlook. I am among those who were very disappointed. Pressing those concerns at this time might further the peak oil “cause,” but it could well do much more damage than any of us really intend.

Please keep up your studies and thinking, because helping the world realize the dangers of peak oil is an absolute must. In the near term, keeping relatively quiet is likely the better part of valor.

Mr. Hirsch has a point… many people are freaking out right now about losing their jobs, houses and means to secure food & other essentials for their family.   Hammering home the point about declining output of global oil production is only going to make those people freak out even more.

An imperfect analogy would be to go back to the last time the world’s economies simultaneously went into the shitter… back in the 1929-39 timeframe.   One of the things that dragged the world out of its prolonged economic slump was the breakout of World War II.  Global war is at least part of the ‘added trauma’ Mr. Hirsch is referring to.   War can be a very effective way to jump-start the economy, mobilize the populace and also thin out the number mouths to feed somewhat.  Our modern forms of warfare are particularly effective at this.

I have no desire to see the globe plunged into another cycle of global warfare if it can be avoided.  I usually limit my peak oil screeds to this site and a few other online fora… so I’ll just continue to do that.  There will be plenty of time for illuminating others down the road.

HT:  Energy Bulletin