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Oil Prices Fall, OPEC In Chaos, Derivative Markets In Hysteria

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Goldman Sachs Loses Money So Gold Prices Fall | Culture of Life News

OPEC was from day one, a cartel. Like all cartels, they made lots of money at first. But over time, everyone under the sun began competing because prices were artificially high and this lead to the inevitable gluts and sudden price collapses. The only tool to fix this for the Saudis and Texans was to generate wars against energy producers and boycotts like the one against Iran. This has now failed utterly. Also, rich bankers cooked up a stupid commodity futures scam called ‘derivatives’ which originally was only for wheat and corn, betting on the weather. Now, it is everywhere and utterly toxic and extremely prone to create price bubbles and collapses. This stupid market always goes rapidly to infinity and infinity is the bane of humans because it always ends with nothing instead of everything.

I have written extensively about all this and here are some past examples. The present situation is due to the very same causes as past deflation events: Infinite Money Kills Real Wealth | Culture of Life News

Instead of a new model, all sorts of goofy tricks have been introduced to explain away this obvious proof that the universe is not expanding, it is collapsing. Eventually the new model will emerge but only after enough astronomers literally die off so that younger upstarts can finally ask the proper questions (and thus, eventually answer them with new theories).

This is happening in economic matters. The Marxist/Capitalist model began to actively collapse with the triumph of communist rebellions which showed the weaknesses of Marxism. The triumph of capitalism in Marxist countries has led to the collapse of capitalism in the non-communist countries and the only people able to figure out that capitalism has collapsed has been the new capitalist communists.

The ideology about the Great Depression of the mid-20th century was, protectionism created this event. So insidiously, the elites in the capitalist West worked nonstop to eliminate trade barriers and this was elegantly exploited by the new capitalist communists. We then had a global banking collapse nearly identical to the one in 1930 and this proved that the ideology of ‘trade barriers create depressions’ to be false.

Instead of realizing free trade makes global banking collapses inevitable still isn’t the new ideology. The old one which totally misreads how and why depressions happens continues unabated in power in our universities and our government. Not one soul seems to have grasped that the economic model they are using is totally useless. Worse than useless, actively destructive.

 

 

Infinity=Death: Economics On The World Chess Board | Culture of Life News

The US merrily shipped most of our production and jobs overseas. We still do this, Obama has spent the last year going around the planet, making this even easier than before. The rich get richer and tax cuts and own Congress while the GOP screams about Obama not creating jobs. Well, the theory is, if we open up more trade, we get more jobs. After losing many millions of jobs with Free Trade, I would think someone would figure out, this is a stupid plan! But no, we had a ‘debate’ in the GOP last night and as always, they are more upset with gays kissing and teens getting abortions instead of appearing on Teen Mom with a baby in tow! Yup, anyways, INFLATION is now taking off in her usual leisurely way and has spread her gossamer wings to the rising winds of ZIRP interest rates to bankers. This is a problem, too, never discussed realistically.

Dr. Krauss Struggles To Understand Infinity And Nothingness…And Fails | Culture of Life News

Finances and astronomy are hand in glove thinking: it is all about infinity and zero! Motion, time and space are given numbers and rules and humans then try to riddle out what the Sphinx is telling us: mortality. The excitement about where we are going and where is the center of the universe are real questions humans cannot answer since we really, emotionally think that we are the center of the universe if not our own galaxy or solar system.

 

 

Some people like to think that Goldman Sachs and other gnome operations love to have depressions. They don’t, actually. They love the bubbly. They love lots of fizz. They grimly hang on and enjoy cheaper prices in depressions but they are not happy with these, they want infinity, not sloshing along picking up pennies in the gutter. Commodity markets are viewed as a desperate, last chance for money operation. This is due to it being stubbornly physical.

This is why the carbon CO2 trade business made them all hysterically happy. It was an invisible gas! And it was everywhere and nearly everything produces it! Whoopee! They even enthused that this could lead to infinite derivative deals. Then, it got too cold, too many people got too angry about high energy taxes and it has fizzled badly. So, back to buying gold and then trying to swindle someone down the line in desperate, dirty gold market deals.

Goldman Sachs couldn’t manipulate this market nearly as well as they do say, the derivatives market. They love derivatives, they hold their noses to do gold. And now, they are out of the gold since they have no profits to park there, temporarily. So gold drops like a rock. Oil, on the other hand, depends on wars. If we attack an oil producing nation like Iraq or Libya, the price of oil soars. Now that these wars are winding down, it is back to preventing Iran from selling oil. This pleases Saudi Arabia which is desperate for higher prices for oil. And it pleases the big gnomes playing the oil futures markets.

Alas, high oil prices=economic recession in the US. So, I expect this to worsen, not get better any time soon.

And so much for the past! The price of oil finally reached its saturation moment when even the most marginal processes and systems were profitable and now it has collapsed and this is bringing lower energy costs which is in the whole, very good for most of us consumers but bad for energy producers like the US, Russia, Saudi Arabia, etc. On the other hand, this makes manufacturing powers like CHINA and even Japan, better off! Since the US has offshored its manufacturing and has relied on food and fuel exports, this will make things worse for our trade deficit.

Duh! We used to be the world’s #1 manufacturing power. All tossed into the crapper by the bankers and politicians who wanted cheap foreign labor and big profits with zero interaction with irritable workers going on strike for better wages.

 

 

emeinel@fairpoint.net

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Oil Prices Fall, OPEC In Chaos, Derivative Markets In Hysteria

Culture of Life News

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Written by testudoetlepus

December 15th, 2014 at 3:10 pm

Crashing Crude’s First Casualty: One-Time Commodities Giant Phibro Liquidating

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While we were expecting that one-time “god of crude oil tradingwould have a poor year as a result of his consistent bullishness on the crude space, we were quite astounded to learn, as Bloomberg first reported yesterday, that Andy Hall – the man whose name was for a decade legendary in the commodity space – would call it a day. And yet that pales in comparison to the WSJ report overnight than Phibro itself, Andy Hall’s 113 year old employer currently owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer, marking the end of an era.

 

Phibro Trading’s Andrew Hall and his daughter, Emma, in 2012

What is paradoxical, and as we reported yesterday, Hall’s hedge fund Astenbeck, has not done badly in 2014. In fact, it was up another 1.2% in November and was up 7.2% year to date despite a roaring bear market in commodities.

Alas, that is cold comfort for Phibro. As the WSJ reports, “the 113-year-old company, founded in Germany by two scrap-metal dealers, is winding down its U.S. operations after it failed to find a buyer, according to a person familiar with the situation. The sale process for units in London and Singapore continues, the person said. Phibro specialized in physical trading of oil and other raw materials, seeking to profit by moving actual barrels and acting as an intermediary between producers and consumers. The pool of potential buyers for these kinds of operations has dwindled in recent years amid a regulatory crackdown on Wall Street banks’ involvement in these markets.”

As for Hall, while he will sever his relationship with Phibro, he will continue working for his $3 billion hedge fund Astenbeck, of which Occidental owns 20%.

Mr. Hall is expected to continue trading energy derivatives through his $3 billion hedge fund, Astenbeck Capital Management LLC, which has avoided taking much of a hit from this year’s plunge in oil prices because Mr. Hall curtailed bets and shifted to holding cash.

The end of Phibro is another stark reminder, that bull markets make geniuses out of everyone, but it is when the bear markets tide flows out that we truly learn who was swimming naked.

The effective demise of Phibro underscores investors’ fading interest and the challenging trading conditions in many energy and commodity markets, which in recent years have been pummeled by the combination of rising supplies and tepid demand growth. Mr. Hall reaped huge profits by correctly betting on rising commodity prices in the 2000s, which was driven by rapid growth in China.

That kind of strategy worked well during the commodities boom, but fared more poorly during a period of relatively stable oil prices that ended in the middle of this year. The price of benchmark U.S. oil futures has plunged about 40% in the past six months. On Tuesday, the front-month contract rose 1.2% to $63.82 a barrel on the New York Mercantile Exchange. The decline in prices accelerated in November after the Organization of the Petroleum Exporting Countries agreed to maintain its production target.

Phibro employees were being notified of the developments Tuesday, according to the person. Analysts have said Phibro added little to Occidental’s financial performance and that executives were uncomfortable with the volatility it sometimes brought to results. Earlier this year, Hess Corp. also sold its internal trading arm, Hetco.

In retrospect perhaps the liquidation of Phibro shouldn’t come as a surprise: “Occidental in February said it was pulling back from proprietary trading of crude oil and other commodities amid a corporate reorganization, and a spokesman on Tuesday reiterated the Houston company’s plans to reduce exposure to these activities. Phibro executives had been shopping the operation to prospective buyers since the February announcement, according to another person familiar with the situation.”

Still the complete lack of interest for a legendary name in the commodity trading space is somewhat stunning.

Founded as Philipp Brothers in the early 1900s, Phibro went on to become at one point the largest supplier of raw materials in the world. In 1981, it acquired investment bank Salomon Brothers, and the trading firm became part of Citigroup in 1998.

Mr. Hall and his traders were known for placing big, long-term bets. In 2007, Phibro accounted for 10% of Citigroup’s net income.

As for Hall, who as recently as September went “all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less”, what is his outlook now?

Mr. Hall cut back sharply on his wagers in August, moving much of his portfolio to cash. “We think longer-term oil prices are supported in the $70-$80 range,” Mr. Hall said in a Dec. 1 letter to investors, which was reviewed by the Journal. But for now, near-term prices “will stay under pressure and could become very volatile as the market strives for equilibrium without intervention” from OPEC, he wrote.

And, like yesterday, we leave it off with the $64K question: has Hall [and Phibro] already liquidated his long positions yet, or is he yet to liquidate them? Judging by the relentless slide in Brent and WTI, with the latter just touching on a $61 handle, the market is less than eager to wait around for the answer.

 

Crashing Crude’s First Casualty: One-Time Commodities Giant Phibro Liquidating

[ZeroHedge]

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Written by testudoetlepus

December 10th, 2014 at 4:42 pm

Jobs, Shale, Debt and Minsky

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by Raul Ilargi Meijer
via The Automatic Earth blog,
12/06/2014

OK, I don’t see a whole lot of comprehension out there, so let’s try and link the obvious: employment to shale to plummeting oil prices to the debt the shale industry was built on (and which is vanishing). I know, people look at the US jobs report today, and at the stock exchanges (Europe up some 2% across the board), and think salvation has landed on their doorstep, but the true story really is very different.

The EU markets are up because of US job numbers + the expectation that Draghi will launch a broad QE in January. But US jobs are far less sunny than meets the eye at first glance, and the Bundesbank will not all of a sudden do a 180º on ECB stimulus options. Ergo: a lot of European investors are set to lose a lot of money.

Anyone notice how quiet Angela Merkel has become about the QE debate? That’s because she doesn’t want to be caught stuck in a losing corner. Even if the Bundesbank would give in to Draghi, and chances are close to zero, there would be multiple court cases in Deutschland against that decision, and chances are slim the spend spend side would win them all. That’s the sort of quicksand an incumbent leader like Merkel wants to avoid at all cost.

But let’s leave Europe to cook itself, and its own goose too.

What’s happening stateside is more important today. First, Marc Chandler has a good way of putting what I have said for as long as oil prices started testing ever deeper seas: the danger to the industry is not even so much falling prices, it’s financing both existing and future endeavors. Shale is a leveraged Ponzi, that’s its most urgent problem. Even if shale could break even at low prices, financiers and investors would still leave the building.

Both shale oil and gas have two big problems:

1) projects are based on highly optimistic returns, and

2) they are financed with very large and leveraged debt loads.
With WTI prices now at $66 a barrel, and the first Bakken prices below $50 a barrel having been signaled, the entire industry starts resembling a house of cards, a game of dominoes and/or a pyramid shell (pick your favorite) more by the day. Chandler:

This Is Oil’s ‘Minsky Moment’

Marc Chandler says the energy sector has just suffered its own Minsky moment. And while he doesn’t expect it to take down the stock market, the slide in oil could have a serious impact on the high-yield bond market. Minsky moment is a term coined by Pimco economist Paul McCulley in 1998, and it refers to a point when a period of rapid growth and risk-taking leads to a sudden turn lower and a crisis. Chandler, global head of markets strategy at Brown Brothers Harriman, says that is precisely what is happening in crude oil.

“Many people a couple years ago, a year ago, were saying that oil prices could only go up – ‘we’re in peak oil’ – meaning that we’re running out of the stuff. So a lot of things were leveraged based on oil prices that can only go up. Sort of like house prices—’they can only go up.’ So what happened is, because people held this as a deep conviction, they leveraged up,” Chandler said.” “The big risk now to our shale is not going to be that the price of oil drops so far that it’s not going to be profitable,” he said. “The weakness, the Achilles’ heel, is that they don’t get the cheap funding anymore.”

Even Nature magazine this week gave it a shot, and tried to lend scientific credibility to a certain view of shale. Here’s the editorial:

The Uncertain Dash For Gas

The International Energy Agency projected in November that global production of shale gas would more than triple between 2012 and 2040, as countries such as China ramp up fracking of their own shale formations.

Academic journals are filled with earnest projections about future energy dynamics, which usually turn out to be wildly inaccurate. Even worse, governments and companies wager millions of dollars on dubious bets. This matters because investment begets further investment. As the pipework and pumps go in, momentum builds. This is what economists call technology lock-in.

Nature has obtained detailed US Energy Information Administration (EIA) forecasts of production from the nation’s biggest shale-gas production sites. These forecasts matter because they feed into decisions on US energy policy made at the highest levels. Crucially, they are much higher than the best independent academic estimates. The conclusion is that the US government and much of the energy industry may be vastly overestimating how much natural gas the United States will produce in the coming decades.

The EIA projects that production will rise by more than 50% over the next quarter of a century, and perhaps beyond, with shale formations supplying much of that increase. But such optimism contrasts with forecasts developed by a team of specialists at the University of Texas, which is analysing the geological conditions using data at much higher resolution than the EIA’s.

The Texas team projects that gas production from four of the most productive formations will peak in the coming years and then quickly decline. If that pattern holds for other formations that the team has not yet analysed, it could mean much less natural gas in the United States future.

And then an article:

Natural Gas: The Fracking Fallacy

When US President Barack Obama talks about the future, he foresees a thriving US economy fuelled to a large degree by vast amounts of natural gas pouring from domestic wells. “We have a supply of natural gas that can last America nearly 100 years,” he declared in his 2012 State of the Union address. [..]

Over the next 20 years, US industry and electricity producers are expected to invest hundreds of billions of dollars in new plants that rely on natural gas. And billions more dollars are pouring into the construction of export facilities that will enable the United States to ship liquefied natural gas to Europe, Asia and South America.

All of those investments are based on the expectation that US gas production will climb for decades, in line with the official forecasts by the US Energy Information Administration (EIA). As agency director Adam Sieminski put it last year: “For natural gas, the EIA has no doubt at all that production can continue to grow all the way out to 2040.”

But a careful examination of the assumptions behind such bullish forecasts suggests that they may be overly optimistic, in part because the government’s predictions rely on coarse-grained studies of major shale formations, or plays. Now, researchers are analysing those formations in much greater detail and are issuing more-conservative forecasts. They calculate that such formations have relatively small ‘sweet spots’ where it will be profitable to extract gas.
The results are “bad news”, says Tad Patzek, head of the University of Texas at Austin’s department of petroleum and geosystems engineering, and a member of the team that is conducting the in-depth analyses. With companies trying to extract shale gas as fast as possible and export significant quantities, he argues, “we’re setting ourselves up for a major fiasco”.

The scientific ring to it is commendable, but this misses quite a few things. They cite David Hughes, but leave out the work of Rune Likvern, without whom in my opinion no true – scientific or not – view of the shale industry is complete. But okay, they tried, in their own way, and their conclusions may be a bit softened, but they’re still miles apart from those of either the industry’s PR, or the EIA.

And then we move to the next link: that between shale and jobs. Because that’s where falling oil prices start to go from joy for the whole family to something entirely different.

What happens if the US shale industry crumbles under the weight of its own leverage? Most people will probably think: we’ll just start buying from that oversupplied world market again. But it’s not that easy, that leaves out one big issue. American jobs.

And we can take it straight from there to today’s hosannah heysannah BLS report. Which, however, has issues that don’t show up at the surface. Tyler Durden:

Full-Time Jobs Down 150K, Participation Rate Remains At 35 Year Lows

While the seasonally-adjusted headline Establishment Survey payroll print reported by the BLS moments ago may be indicative of an economy which the Fed will soon have to temper in an attempt to cool down, a closer read of the November payrolls report shows several other things that were not quite as rosy. First, the Household Survey was nowhere close to confirming the Establishment Survey data, suggesting jobs rose only by 4K from 147,283K to 147,287K, and furthermore, the breakdown was skewed fully in favor of Part-Time jobs, which rose by 77K while Full-Time jobs declined by 150K.

And then for those keeping tabs on the composition of the labor force, the same adverse trends indicated over the past 4 years have continued, with the participation rate remaining flat at 62.8%, essentially the lowest print since 1978, driven by a 69K worker increase in people not in the labor force.
So according to the BLS Household Survey, the US lost 150,000 jobs, while the Establishment Survey, prepared by the same BLS, shows a gain of 321,000 jobs. Yay! pARty! But we’ve been familiar with all the questions surrounding the jobs reports for a long time, so that’s not all that interesting anymore.

Still, when you see that again most of the jobs that were allegedly created are low paid service jobs, and that wages are not going anywhere, you have to wonder what is really happening. Well, this. The vast majority of new US jobs since 2008/9 have come from energy and related industries, which makes them a dangerously endangered species now oil prices or down 40% and falling.

Tyler Durden ran the following on Wednesday, and I think this is very relevant today:

Jobs: Shale States vs Non-Shale States

Consider: lower oil prices unequivocally “make everyone better off”, Right? Wrong. First: new oil well permits collapse 40% in November; why is this an issue? Because since December 2007, or roughly the start of the global depression, shale oil states have added 1.36 million jobs while non-shale states have lost 424,000 jobs.

The ripple effects are everywhere. If you think about the role of oil in your life, it is not only the primary source of many of our fuels, but is also critical to our lubricants, chemicals, synthetic fibers, pharmaceuticals, plastics, and many other items we come into contact with every day. The industry supports almost 1.3 million jobs in manufacturing alone and is responsible for almost $1.2 trillion in annual gross domestic product. If you think about the law, accounting, and engineering firms that serve the industry, the pipe, drilling equipment, and other manufactured goods that it requires, and the large payrolls and their effects on consumer spending, you will begin to get a picture of the enormity of the industry.

Simply put, this means 9.3 million, or 93% of the 10 million jobs created since the recession/depression trough, are energy related.

The links above, jobs to shale to oil prices, are intended to give people an idea of what’s in store if oil prices stay where they are or fall more. It’s 4 to 12 for US shale, and its saving grace is nowhere to be seen. And if 93% of all new American jobs since the recession, even if they are burgerflipping ones, come from the oil and gas industry, what’s going to become of either of the BLS reports?

I’ve been saying for weeks that lower oil prices would not be a boon but a scourge for the US economy, for several different reasons, and this is a big one. The losses to investors, the restructurings and bankruptcies, and perhaps even the bailouts, are a very much interconnected and crosslinked other. There’s no resilience – left – in a system like this, it bets all on red, and that makes it terribly brittle.

 

Jobs, Shale, Debt and Minsky

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Written by testudoetlepus

December 7th, 2014 at 3:20 pm

Cattle Drive

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by James Howard Kunstler

How hilarious is the Federal Reserve’s cattle drive of cash money (i.e. “liquidity”) into the stock markets? I’ll tell you: if that cash is outflow from bonds that pay ZIRP interest rates, then this attempt to stampede investment into the stock market is only going to succeed in ravaging the bond market and by extension the credibility of the dollar, the US banking cartel, and then the world financial system as a whole.

If bond-dumpers rush into stocks, then who are the next bond buyers at ZIRP? The USA can’t keep going without continuous bond selling. Somebody has to buy the darn things. The Federal Reserve is now buying around 70 percent of US issue — a lot of it via secondary market pass-thru shenanigans involving “Primary dealers” (a.k.a. Too Big To Fail banks, who get to cream off a premium when they flip bonds to the Fed — tidy little racket). If the other 30 percent of issue can’t find willing buyers at ZIRP then interest rates will have to go up. If interest rates go up, then interest paid out on bonds (that is “debt service”) by the US government will go up catastrophically, because the aggregate debt is so colossal and most of the debt is short term, meaning that in a post-ZIRP world the interest rate ratchets up automatically every 13 weeks as bonds roll over. The US will then only be able to pretend that it can service the debt at higher interest rates. Everybody in the world will recognize this — surely only increasing the velocity of the stampede away from bonds. The question is: how long can pretending to service debt go on before it is just called by it’s real name: default? Or, if countered with additional furious computer “money” creation: hyperinflation? Either way, of course, you end up broke.

This cattle drive into stocks is strictly a political gambit. The cattle are being driven to the slaughterhouse. It’s discretionary strategic national financial suicide. They’re driving up the stock markets for cosmetic purposes, to make it appear that an economic recovery is going on, and with the aim of setting in motion a self-reinforcing financial feeding frenzy in this rush to “equities.” By the way, in case my manner seems didactic today I am attempting to define my terms as I go along because most other financial bloggers seem to assume that ordinary people understand all their jargon, which I am quite sure they do not.

Returning to my point… the Fed and their auditors on Wall Street and in government, are jacking up the stock markets in the hopes of stirring up “animal spirits,” as the financial psychologists say, to put over the story that it equals a vibrant economy — which is nonsense, of course, to anyone who shoots a casual glance at the economic wreckage all around them. Anyway, since the stock market action these days is dominated by high frequency trading robots running on algorithms, where exactly would animal spirits even factor in? If anything the absence of real animal spirits in this action also implies the absence of its counterpart, animal survival instinct, of which human intelligence is an order. What can come of stirring up animal spirits among robots? A train wreck is exactly what.

Now, I ask you: at a moment in history when vast interlinked global financial markets have never been so unstable, so primed for unintended consequences courtesy of the diminishing returns of technology, so ripe for a massive, cascading “accident,” is it a prudent thing to fuck around with such crude PsyOps?

One other factor outside pure financials assures that US economic performance will remain impaired (that is, the kind of economic activity we regard as “normal” (suburban sprawl building, credit card “consumer” spending): the price of oil, which is inching up to the $100-a-barrel hashmark. Apparently that shale oil bonanza we hear so much about has not left the USA swimming in cheap oil. As a general principle, it’s probably safe to say that an oil price above $80 crushes the US economy. It drives up the cost structure of just about everything we make, do, or sell here, but of course the primary things that go up in price are food and motor fuel.

Hence, it’s tragically ironic that — getting back to official financial PsyOps — that one of the primary motives for the Fed keeping interest rates super-low in the first place (apart from enabling wild fiscal irresponsibility in government) has been to promote the housing sector — because in the reality of our time “housing” translates into building more suburban sprawl. How smart is it to promote more suburban sprawl at a moment in history when there’s no more cheap oil?

It is this kind of stupendous foolishness that is putting the USA on the path of an epochal systemic collapse.

Superbowl addendum:

Did anyone notice how violent and psychotic the Superbowl advertising was this year? An Oreo commercial that depicted a mob of nerds destroying a library — huh? The Doritos spot where “Daddy” and his male buddies transform themselves into an insane clown posse of cross-dressers. The Fast and Furious 6 trailer featuring the destruction of every vehicle known to man and a few office buildings, too. The third-quarter power failure was a neat harbinger of things-to-come in the Most Exceptional United States of America. Party on, peeps!

The Kunstlercast podcast is back online all y’all! This week: interview with Nicole Foss of The Automatic Earth.com

 

 

For a complete list of books by James Howard Kunstler and purchase links, Click Here.

 

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Cattle Drive

[James Howard Kunstler]

Written by testudoetlepus

February 5th, 2013 at 11:52 pm

The Oil Production Plateau

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I was at a talk recently where a well-known oil economist made an analogy.

He said that if you gathered up all the crude oil that people have ever pumped out of the ground since Col. Drake drilled his famous well in 1859, it would cover California to a depth of about 10 feet.

“Of course,” he said with a smile, “we don’t have to worry about California drowning under 10 feet of oil. Over the past 150 years, mankind has taken all that oil, burned it, harnessed the energy and put the combustion products into the atmosphere.”

Everyone in the room laughed… sort of. We got the thermodynamic point, which is that mankind uses a heck of a lot of oil, much of it via four-stroke engines and that well-known cycle: intake, compression, power and exhaust.

Why has mankind used so much oil? Because global population has risen for over a century, right along with oil use. “People are energy,” as Scott Tinker, the state geologist of Texas, says. And people like oil because it’s energy-dense. A little bit of oil goes a long way, if you use it right.

Of course, oil impacts the planet in many ways, good and not so good. Indeed, it’s fair to say that oil defines modernism, even modern civilization. Take away oil, and much else in our world goes away, starting with Big Government and its far-ranging military and police powers. Take away oil, and most of the world’s people go away, too, sooner or later.

Keep in mind that the world’s oil-dependent energy system has been a century and a half in the making. The world — as we know it — needs a constant oil fix, and that won’t change anytime soon. Not without a major dystopian catastrophe.

Flat Output

Enough introduction. Let’s look at some numbers. Every day, the world uses about 84 million barrels of crude oil. That oil, of course, comes out of the ground, from wells scattered pretty much everywhere.

Oil comes from the deserts of the Middle East, the frozen tundra of Russia and Alaska. Oil comes, in huge volumes, from platforms in the Gulf of Mexico and North Sea, and wells off Brazil and West Africa. And oil comes in dribs and drabs from stripper wells across the oil patches of America, Canada and many other locales. You get the idea.

These two graphs illustrate the sources and destinations of the world’s daily oil.

First, look at the production side graph. Note how overall global oil output has flattened out over the past five years or so. Is this the proverbial “Peak Oil” plateau, the maximum in global output that precedes a long-term decline?

Some people now hate hearing talk about Peak Oil. They won’t have a word of it. The so-called “fracking revolution” is supposed to solve our energy problems for a long time into the future. Between the Eagle Ford play, down in Texas, and the Bakken play, up in North Dakota, the U.S. is in tall cotton, energywise. Or so I’ve been told.

Indeed, lately, I’ve received snarky emails from some readers when I bring up Peak Oil. I’ve been accused of “living in 2005.” One reader asked if I knew that the U.S. “will surpass Saudi Arabia in oil output by 2020.” Well, yes. I received that memo. But there’s more to the story…

I’ve stated many times that the Peak Oil concept is a tool. It’s a lens through which one can observe the world of energy, both to figure out what’s happening now and to forecast possible future scenarios.

Besides, when it comes to Peak Oil, time will tell. I started thinking about Peak Oil back in the 1970s when I met the geologist M. King Hubbert at Harvard. It’s only been 35 years. I can wait.

Can Consumption Exceed Production?

Let’s get back to those graphs. Look at the one for oil consumption. There’s no recent plateau there, right? Globally, oil demand has been steadily growing. It’s pretty clear that more and more oil is moving and burning across the world.

When you compare the two graphs, there appears to be higher oil “consumption” than there is “production.” How can that be? Can the world use more oil than it produces?

The difference in production and consumption between the graphs is due to two main things. First is the growing supply of natural gas liquids (NGLs) — essentially “oil” from gas deposits, such as blowing down traditional gas caps, as well as the recent fracking revolution. Basically, the world supplements its crude supply with NGLs.

That NGL phenomenon will work until it stops working due to the dicey economics of what’s called “energy return on investment” (EROI). That is, at some point, eventually, somebody will figure out that they’re putting a barrel of oil in to get a barrel of oil out.

Whoops! Busted! At the end of the day, you can’t violate the second law of thermodynamics for long. Physics will prevail.

The second aspect of crude oil consumption exceeding production is a quirk of modern technology called “refinery gains.” In essence, down at the refinery, there are ways of transforming a barrel of crude into more than a barrel of refined product.

Here’s a graph that’s based on data from BP. The data show that crude oil production has hit a plateau in recent years at around 82-84 million barrels per day. Yet despite flat oil output, it’s apparent that refinery output has steadily increased. Why?

Refinery output has increased due to the proverbial “better living through chemistry.” That is, engineers continually figure out more ways to squeeze more barrels of refined product out of the same amount of raw material. More specifically, refiners take low-cost oil fractions — like distillates, which used to go to asphalt or bunker fuel — and upgrade them to higher-priced chemicals and fuels. More bang for the buck, more bucks for the barrel.

Who’s Burning Oil?

As the graphs up above indicate, oil consumption is growing fast in the Middle East. There, population has exploded in the wake of several decades’ worth of more babies and longer life spans. That, and there’s rapid, energy-intense industrialization all across the region. Plus, most Middle Eastern nations heavily subsidize energy use by the populace.

Of course, growing internal oil use across the Middle East leaves less oil available for export. Is that a problem? We’re about to find out. We’re exactly on the cusp of that thorny issue. Saudi Arabia’s so-called “spare capacity” is getting squeezed. It’s a problem, and it could transform into a really big problem in short order. Stand by.

The graph above also shows crude oil consumption growing strongly in Asia-Pacific, Africa and South/Central America. It’s the well-known story of how the developing world is… developing.

Billions of people are moving toward a higher standard of living. That requires oil.

That’s all for now. Tune in tomorrow for Part II of this discussion…

Byron W. King

Original article posted on Daily Resource Hunter 

The Oil Production Plateau appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

 

The Oil Production Plateau

[The Daily Reckoning]

Written by testudoetlepus

December 11th, 2012 at 5:22 pm

Posted in Change

Tagged with , ,

Max Keiser: U.S. Energy Policy With Gregor MacDonald

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In this edition of the show Max interviews Gregor Macdonald from Gregor.us. He talks about the IEA’s report which expects the US to be the world’s largest energy producer by 2020. Gregor Macdonald is an oil markets observer, journalist, and data analyst, who writes on the challenge of energy transition.

 

Max Keiser: ”US energy policy with Gregor Macdonald”

[nakedempire]

Written by testudoetlepus

November 27th, 2012 at 11:42 am

How It Could Happen, Part One: Hubris

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by John Michael Greer

Over the course of this year, my posts here on The Archdruid Report have tried to outline the trajectory of America’s global empire and explore the reasons why that trajectory will likely come to a sudden stop in the near future. To bring the issue down out of the realm of abstraction and put them in the context of history as lived, I’ve returned to the toolkit of narrative fiction, and this and the next four posts will sketch out a scenario of American imperial defeat and collapse. The narrative takes place at some unspecified point in the next two decades; it’s probably necessary to say outright that is not how I think the end of America’s empire will happen, simply one way that it couldhappen—and thus a model that may help expose some of the vulnerabilities of the self-proclaimed hyperpower currently tottering toward history’s compost bin.

 

 

The news of the latest Tanzanian deepwater oil discovery broke on an otherwise sleepy Saturday in March. Thirty years before, a find of the same size might have gotten two column inches somewhere in the back pages of a few newspapers of record, but this was not thirty years ago. In a world starved for oil, what might once have been considered a modest find earned banner headlines.

It certainly loomed large in the East Wing of the White House, where the president and his advisers held a hastily called meeting that evening. “The Chinese already have it wrapped up,” said the Secretary of Energy. “Tanzania’s in their pocket, and there are CNOOC people—” CNOOC was the Chinese National Overseas Oil Corporation, the state-owned firm that spearheaded China’s quest for foreign oil. “—all over the place on site and in Dar es Salaam.”

“Is it close enough to Kenyan waters—”

“Not a chance, Mr. President. It’s 200 nautical miles away from the disputed zone, and that last clash with the Tanzanians isn’t something Nairobi wants to repeat.”

“Dammit, we need that oil.” The president turned and walked over to the window.

He was right, of course, and “we” didn’t just refer to the United States. Jameson Weed won the White House the previous November with a campaign focused with laser intensity on getting the US out of its long and worsening economic slump. Winning the country a bigger share of imported oil was the key to making good on that promise, but that was easier said than done; behind what was left of the polite fiction of a free market in petroleum, most oil that crossed national borders did so according to political deals between producer countries and those consuming countries strong and wealthy enough to compete. These days, more often than not, the US lost out—and the impact of that reality on Weed’s upcoming reelection campaign was very much on the minds of everyone in the room.

“There’s one option,” said the president’s national security adviser. “Regime change.”

President Weed turned back from the window to face the others. The Secretary of Defense cleared his throat. “Sooner or later,” he said, “the Chinese are going to stand and fight.”

The national security adviser gave him a contemptuous look. “They don’t dare,” she said. “They know who’s boss, and it’s too far from their borders for their force projection capacity, anyway. They’ll back down the way they did in Gabon.”

The president glanced from one to the other. “It’s an option,” he said. “I want a detailed plan on my desk in two weeks.”

Regime change wasn’t as simple as it used to be. That was the sum of scores of conversations in meeting rooms in the Pentagon and the CIA headquarters in Langley as the plan came together. Gone were the easy days of the “color revolutions,” when a few billion dollars funneled through Company-owned NGOs could buy a mass uprising and panic an unprepared government into collapse. The second generation strategies that worked so well in Libya and half a dozen other places—backing the manufactured uprising with mercenaries, special forces, and a no-fly zone—stopped working in turn once target governments figured out how to fight it effectively. Now it usually took ground troops backed up by air power to finish the job of replacing an unfriendly government with a compliant one.

Still, it was a familiar job by this point, and the officials in charge got the plan put together in well under the two weeks the president had given them. A few days later, when it came back signed and approved, the wheels started turning. Money flowed to CIA front organizations all over East Africa; Company assets in Tanzania began recruiting the ambitious, the dissatisfied, and the idealistic to staff the cadres that would organize and lead the uprising; elsewhere, mercenaries were hired and the usual propaganda mills went into action. The government of Kenya, the nearest American client state, was browbeaten into accepting American troops on its border with Tanzania, and a third carrier strike group was mobilized and sent on its way to join the two already within range.

It took only a few weeks for the government of Tanzania to figure out that its recent good luck had put it in the crosshairs of American power. One afternoon in early May, after a detailed briefing from his intelligence chief, the president of Tanzania summoned the Chinese ambassador to a secret meeting, and told him bluntly, “If you abandon us now we are lost.” The ambassador promised only to relay the message to Beijing, but he did so within minutes of returning to the Chinese embassy, and included a detailed and urgent commentary of his own.

Three days later, a dozen men sat down around a table in a conference room in Beijing. A staff member poured tea and disappeared. After an hour’s discussion, one of the men at the meeting said, “What is it that the Americans say? ‘Draw a line in the sand?’ I propose that this is the time and place to do that.”

A quiet murmur of agreement went around the table. In the days that followed, a different set of officials drew up a very different set of plans.

The port at Dar es Salaam, Tanzania’s capital and biggest city, was a busy place, thronged with oil tankers carrying black gold to China and its allies, and container ships bringing goods of every description, mostly from China, for the booming Tanzanian economy. In the bustle, no one paid much attention to the arrival of a series of plain shipping containers from Chinese ports, which were offloaded from an assortment of ordinary container ships and trucked to half a dozen inconspicuous warehouse districts along the coast between Dar es Salaam and the northern port city of Tanga. CIA agents watching for signs of a Chinese response missed them completely.

More generally, the number of container shipments to Tanzania and half a dozen other Chinese client states in Africa ticked up slightly—not enough to rouse suspicions, but then nobody in the US learned how many African companies found themselves facing unexpected delays in getting the Chinese merchandise they had ordered, so that other cargoes took the space that would have been theirs. Nor did anyone in the US worry much about the increased number of young Chinese men who flew to Africa during the four months before the war began. US intelligence did notice them, and their arrival sparked a brief debate at Langley—military observers, one faction among US intelligence advisors insisted, there to snoop on American military technology; military advisors, another faction claimed, there to assist the Tanzanian army against the American forces that were already gathering in Kenya.

Both factions were wrong. Most of the tight-lipped young men went to ground near those same warehouse districts between Dar es Salaam and Tanga, where the contents of those shipping containers were assembled, tested, and readied. Meanwhile, thousands of miles away, the Peoples Liberation Army Air Force (PLAAF) shifted six fighter wings, equipped with some of China’s most advanced aircraft, to Central Asian bases. The Chinese government had announced that it would be holding joint military exercises that August with Russia, and so the satellite photos of Chengdu J-20 fighters parked in the deserts of Turkestan got an incurious glance or two in Langley, and went into filing cabinets.

After years of budget battles on Capitol Hill, the US military was not quite so powerful or so swift to deploy as it had been in the last years of the twentieth century. Only two of the remaining eight carrier strike groups—CSGs, in naval jargon—were on station at any time, one in the western Pacific and one shuttling back and forth between the Mediterranean and the Indian Ocean; transport was a growing challenge by sea or air, and borrowing airliners from the civilian air fleet, a mainstay of late twentieth century Pentagon planning, was less simple to arrange now that air travel was only for the rich again. Still, the units assigned to the first phase of the Tanzanian operation—the 101st Airborne, the 6th Air Cavalry, and the 1st and 2nd Marine Divisions—were used to rounding up transport in a hurry and heading off on no notice to the far corners of the globe.

The first units of the 101st Airborne landed at Nairobi in the middle of May, when the heavy rains were over and the first riots were breaking out in Dar es Salaam. By the time President Weed gave his famous speech in Kansas City on June 20, denouncing atrocities he claimed had been committed by the Tanzanian government and proclaiming in ringing terms America’s unstinting readiness to support the quest for freedom around the world, all four divisions were settling into newly constructed bases in the upland country south of Kajiado, not far from the Tanzanian border. Alongside them, logistics staff and civilian contractors swarmed, getting ready for the two armored divisions, on their way from Germany by ship, who would fill out the land assault force, and the bulk of the supplies for the assault, which were on their way by sea from Diego Garcia.

Meanwhile three CSGs, headed by the nuclear carriers USS Ronald Reagan, USS John F. Kennedy, and USS George Washington, headed at cruising speed toward a rendezvous point in the western Indian Ocean, where they would meet the ships carrying the armored divisions from Germany and a dozen big supply ships from the Maritime Prepositioning Squadron based on Diego Garcia. Two Air Force fighter wings had already been assigned to the operation, and would arrive just before the carriers reached operational range; they and carrier-based planes would then take out the Tanzanian air force and flatten military targets across the country during the two weeks the armored divisions would need to land, join the rest of the force, and begin the ground assault. It was a standard plan for the quick elimination of the modest military forces of a midsized Third World country; its only weakness was that the US force was no longer facing a midsized Third World country.

In times of peace, August and September are the peak tourist season in East Africa; inland from the always humid coast, the climate is cool and dry, and the wide plains of the interior are easy to travel. Since plains in cool dry weather are among the best places on earth for an assault by tanks and attack helicopters, these were also the months the Pentagon’s planners assigned for Operation Blazing Torch, the liberation of Tanzania. Briefing papers handed to President Weed in late July sketched out the final details, and he nodded and signed off on the final orders for the invasion. The Secretary of Defense looked on from the other side of the room with a silent frown. He had tried several times to bring up the small but real chance that the Chinese might retaliate, and had his advice dismissed by Weed and mocked to his face by the president’s national security adviser and Vice President Gurney. As soon as this thing was over, he told himself for the fifteenth time, he would hand in his resignation.

Outside the White House windows, barely visible in the distance, a small band of protesters kept up a desultory vigil in the free-speech zone set aside for them. Pedestrians hurried past, ignoring the chanted slogans and the protest signs. It was another brutally hot summer day in Washington DC, part of the “new normal” that the media talked about when they couldn’t avoid mentioning the shifting climate altogether. Out beyond the Beltway, half the country was gripped by yet another savage drought; the states of Iowa and Georgia had just suspended payment on their debts, roiling the financial markets; eyes across the southeast turned nervously toward a tropical storm, poised off the Windwards, that showed every sign of turning into the season’s first big hurricane.

What many perceptive observers recalled afterward was the sullen mood that gripped the country that summer. Only the media and the most shameless of national politicians tried to pretend that the approaching war with Tanzania was about anything but oil; the president’s approval rating drifted well below 25%, which was still three times that of Congress and well above that of any credible candidate the other party had to offer; the usual clichés spewed from the usual pundits, but the only people who were listening were the pundits themselves. Across the nation and across the political spectrum, the patience of the American people was visibly running short.

Those who were dissatisfied had plenty of reasons. The intractable economic slump that had gripped the country since 2008 showed no sign of lifting, despite repeated bailouts of the financial industry that were each proclaimed as the key to returning prosperity, and repeated elections in which each candidate claimed to have fresh new ideas and then pursued the same failed policies once in office. The fracking boom of the early twenty-teens was practically ancient history; energy prices were high, and straggling higher; gasoline bumped against $7 a gallon that summer before slumping most of the way back to $6.50. None of these things were new, but they seemed to infect the national mood more powerfully than before. Shortly they would help spark an explosion—but there would be other explosions first.

At the end of July, the invasion task force assembled in the Indian Ocean almost two thousand miles east of the Kenyan coast. Fleet Admiral Julius T. Deckmann, commanding the task force, made sure everything was in order before giving the orders to sail west. A career officer with half a dozen combat assignments behind him, Deckmann had learned to trust his intuition, and his intuition told him that something was not right. From the bridge of the USS George Washington, his flagship, he considered the assembled fleet, shook his head, and ordered reconnaissance drones sent up. Real-time images from US spy satellites showed nothing out of the ordinary; data from the AWACS plane circling high overhead confirmed that, and so did the drones, once data started coming in from them. Deckmann’s unease remained as days passed uneventfully and the task force neared East Africa.

The fleet reached its assigned position off the Kenyan coast on schedule. Final news came via secure satellite link from Washington: the Air Force fighter wings had arrived and were ready for action; the Tanzanian Freedom Council, the puppet government-in-exile manufactured by the State Department, had called “the nations of the world” to liberate their country, a plea that everyone knew was directed at one nation alone; the CIA-led mercenaries who spearheaded the second, violent phase of the uprising had withdrawn from Dar es Salaam, leaving the local cadres to their fate, and were moving toward the Kenyan border to open the way for the invasion. Deckmann made sure every ship in his fleet was ready as the sun set in red haze over the distant African coast.

Very few of those involved in the war got much sleep, that last night before the shooting began. On the three carriers, and at two newly constructed airfields in southern Kenya, aircrews worked through the dark hours to get their planes ready for battle, unaware that other aircrews were doing the same thing thousands of miles away in Central Asia. Soldiers of the two armored divisions that had been brought down from Germany prepared for a landing in Mombasa most of them would not live to see. In Dar es Salaam and Nairobi, presidents met with their cabinets and then headed for heavily guarded bunkers; elsewhere in the world, heads of state read intelligence briefings and braced themselves for crisis.

Two hours before the East African dawn, the waiting ended. Two people ended it. One was Admiral Deckmann, barking out the orders that sent the first fighter-bombers roaring off the deck of the George Washington and the first Tomahawk cruise missiles blazing skywards. The other was an officer in a Chinese command center deep in central Asia, who watched the planes take off and the missiles launch, courtesy of a high-altitude observation drone—one of three that had been following the George Washington since it went through the Suez Canal, and were now stationed high above the fleet. As infrared images showed planes and missiles hurtling toward Tanzania, the officer typed rapidly on a keyboard and then hit enter twice. With the second click of the enter key, the Chinese response began.

 

 

End of the World of the Week #42

In the world of apocalyptic fantasy, an engineer’s degree is very often a passport to success. An engineer’s training focuses on figuring what can happen, not what did happen or will happen, and so engineers reign supreme in many fields of rejected knowledge; from creation science through the quest for ancient astronauts to past and present claims of imminent apocalypse, books by retired engineers are usually the most imaginative and least inhibited works on their eccentric subjects.

Retired electrical engineer Hugh Auchincloss Brown was a classic of the type, and had an even more vivid imagination than most of his peers. In his book Cataclysms of the Earth (1967), he argued that the amount of ice at the south pole was steadily increasing, and the excess weight would eventually cause the planet to unbalance and flip over in space, devastating the entire surface of the globe and leaving few survivors. Moreover, he insisted, this had happened before: the present Antarctic ice cap was “the successor to a long lineage of glistening assassins of former civilizations on this planet.”

Brown died in 1976, convinced to the end that the cataclysm was already overdue and might occur at any moment. His theory found eager listeners among late 20th century fans of apocalypse, but lost market share as better measurements made it clear that the ice cap on Antarctica is contracting, not expanding.

—for more failed end time prophecies, see my book Apocalypse Not

How It Could Happen, Part One: Hubris

[John Michael Greer]

Written by testudoetlepus

October 4th, 2012 at 3:53 pm

The End of The Dollar Era

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GEAB


Issue N ° 63 is Available!

Global Systemic Crisis – The Five Devastating Storms In Summer 2012 At The Heart of The World Geopolitical Swing
- Public announcement GEAB No. 63 (March 15, 2012) -

In its January 2012 issue, LEAP/E2020 signalled the current year as that of the world geopolitical swing. The first quarter 2012 has, to a large extent, started to establish that an era was in fact coming to an end with, in particular, the Russian and Chinese decisions: to block any Western attempt at interference in Syria1:their stated desire, associated with Indiaespecially, to ignore or circumvent the oil embargo fixed by the United States and the EU against Iran2;the increasing tensions in relations between the United States and Israel3the acceleration of the policy of diversification out of the US Dollar led by China4and the BRICS (but also by Japan and Euroland5the premise of change in Euroland’s political strategy at the time of the French electoral campaign6and the intensification of actions and statements fueling the rising strength of trans-bloc commercial wars7In March 2012, we are far from March 2011 and the “hustling” of the UN by the USA/UK/France trio to attack Libya.

March 2011 was still the unipolar world of after 1989. March 2012 is already the post-crisis multipolar world hesitating between confrontations and partnerships.

Thus, as anticipated by LEAP/E2020, the handling of the “Greek crisis”9has quickly caused the disappearance of the so-called “Euro crisis” from the media headlines and market participants’ concerns. The mass hysteria maintained by the Anglo-Saxon media and the Eurosceptics during the second half of 2011 on this subject hasn’t lasted long: Euroland is increasingly asserting itself as a sustainable structure;10once again the Euro is in vogue in the markets and for emerging countries’ central banks,11the Eurogroup/ECB functioned effectively and private investors will have to accept a haircut of up to 70% on their Greek assets, thus confirming LEAP/E2020’s 2010 anticipation which then spoke of a 50% haircut when almost no-one imagined such a possibility without a “catastrophe” signalling the end of the Euro12. Ultimately, markets always yield to the law of the strongest… and the fear of losing more, whatever the students of ultra-liberalism may say. It’s a lesson which political leaders will jealously guard because there are other haircuts to come, in the United States, in Japan and in Europe. We will come back to this in this GEAB issue.

Central bank held sovereign debt (as a % of GDP) (2002-2012) – United States (in violet), United Kingdom (in grey), Euroland (in violet dots), Japan (in grey dots) – Sources: Datastream / central banks / Natixis, 02/2012

Contemporaneously, and that contributes to explaining the gentle euphoria which feeds the markets and many economic and financial players these last few months, due to it being an electoral year and from the need to make a good impression at all costs against a Eurozone which isn’t collapsing13, the US financial media have given us a remake of the “green shoots” story from the beginning of 2010 and the “recovery” 14 from the beginning of 2011 in order to paint a picture of an America “exiting the crisis”. However, the United States at this beginning of 2012 really resembles a depressing scene painted by Edward Hopper15 and not a glowing 60s chromo in the style of Andy Warhol. Just as in 2010 and 2011, the spring will for that matter be the moment of the return to the real world.

In this context all the more dangerous, as all the players are lulled by a dangerous illusion of a “return to normal”, in particular of the “restarting of the US economic engine” 16, LEAP/E2020 considers it necessary to alert its readers to the fact that summer 2012 will see the shattering of this illusion. In fact, we anticipate that summer 2012 will see the crystallization of five devastating shocks which are at the heart of the current process of world geopolitical swing. The black clouds which have been accumulating since the beginning of the crisis around economic and financial issues have now been joined by the dark clouds of geopolitical confrontation.

Therefore, in LEAP/E2020’s view, five devastating storms will mark the summer of 2012 and thus accelerate the process of world geopolitical swing:

. US relapse into recession against the background of European stagnation and BRICS slowdown
. dead end for the central banks and interest rate increases
. storm on the foreign exchange and Western sovereign debt markets
. Iran, the war « too far »
. new crash in the markets and financial institutions.

In this GEAB issue our team analyzes these five shocks of summer 2012 in detail.

At the same time, in partnership with the Anticipolis Editions, we are publishing a new excerpt from the book by Sylvain Périfel and Philippe Schneider, “2015 – The great fall of Western real estate”, at the time of the French version going on sale; dealing with the prospects for the American residential real estate market.

Lastly, we give our monthly recommendations targeting gold, currencies, financial assets, stock exchanges and commodities in this number.

Read the rest of this entry »

Warren Pollock Talks With James Howard Kunstler

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Warren Edward Pollock interviews and has an open talk with leading author James Howard Kunstler. We are at a cultural moment where we are incapable or understanding reality. We are in a massive cultural denial. We must be sensitive to the hardships we are moving towards so we can make better choices. We are going to be dragged kicking and screaming to our destination. Technology Narcissism and Organizational Grandiosity are both movements of denial of what resides in the future paradigm. The hallmarks are denial the inability to tell the truth to ourselves are unfortunate symptoms of our times. We have a highly integrated economy with most of our activity reliant on cheap energy availability and inputs. The public has been bombarded by propaganda aimed at the voting public but biased to vested interests trying strenuously to loot and gather other peoples money for speculation. We are entering a period where we are going to have investment capital scarcities. Investment capital will be very scarce. Its going to become impossible to develop a technological solution set. Risk in our society has been wrongly priced.

Oil being the collateral of the reserve currency which requires sea empire. We just don’t want to know. There is a physical world and the monetary constructs are just a construct and esoteric layer. Complex systems we depend upon will break in the future and we see that process underway. Under these stresses all our systems are destabilizing at the same time with the money and banking system proving to be the most fragile complex system because its the most abstract. The Long Emergency and the Witches of Hebron talk about a world without a steady energy input. With MF Global we have a physical world effect due to monetary breakdown.

The North Korean failed idea or Juche “Self Reliance in Depravation,” comprehensive anticipatory design science and ephemeralization, or breakdown crisis. We debate the idea of technological advantage and disadvantage. What is a job? What is necessary for life support? How many people (and workers) are needed today? Will we see a great reset (the long emergency) which will kill off lots of people as we migrate into a low functioning society in the Witches of Hebron? There will be a great deal of human attrition with the Soviet Collapse being illustrative of the process. We talk about the reduction of population in Russia (and reduced life expectancy) as background noise in life. Disease starvation and a slow death will take the population down. Perhaps Dmitry Orlov is correct regarding the process of society collapse. James suggests that we will not see policy or protocol to correct the condition of earth being over its life-support capacity.

Futurist-Author James Howard Kunstler

[Inflection Points]

| Gramercy Images |

Jive Talkin

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Well, he had to get up there and say something. In this particular winter of our discontent, the wispiest nostrums and baldest lies will do. America is not interested in reality. America is a nine-hundred pound man imprisoned in a fetid trailer bedroom begging for one more case of Little Debbie Cocoa Cremes before the front-end-loader bashes through the wall to haul him to intensive care. America just wants to hear another story about its own wonderfulness before that happens. America’s soul is so lost that it has disappeared into the same cosmic wilderness that MF Global’s client accounts were last seen entering.

Mr. Obama keeps telling nationwide audiences that “we have a supply of natural gas that can last America nearly 100 years.” That is just not true. If he believes it then he is either 1) getting treasonously bad advice from dishonest advisors or 2) not reading reports issued by his own agencies or 3) just making shit up. This was the same week, by the way, when the US Department of Energy dropped its estimate for the Marcellus shale gas play by 66 percent, while the estimate for all US shale basins went down 42 percent. The shale gas industry is another Ponzi bubble that is about to founder on a scarcity of investment capital. Just watch.

The “energy independence” trope is a lie, too. At least in the sense that Mr. Obama means – that we can run the suburban clusterfuck and all its accessories by other means than fossil fuels. He just says it because it makes voters feel better. By the time they find out it was just a story, he won’t need their votes anymore. Meanwhile, we’ll do nothing to prepare for a different way of life, and so, necessarily, the result will be an obscene scramble for power and resources that will leave a lot of people dead.

The topper for me, though, was the President’s cheeky announcement that he’d ordered the Department of Justice to form a “special unit” to investigate mortgage fraud and other lethal irregularities in the banking sector. The fact that his congressional audience did not bust out laughing shows what a convocation of craven and perfidious cat’s paws they are. Note to readers: the DOJ has a long-established criminal division fully empowered to prosecute all the familiar scams of our time from NINJA lending to the robo-signing of titles to MERS mortgage mischief, to the bundling and sales of booby-trapped CDOs – up to and including whatever Jon Corzine thought he was doing at MF Global.

Notice how lame the major newspapers and cable news networks were in responding to Mr. Obama’s impudent japery. None of them, including The New York Times, bothered to ask Attorney General Eric Holder what he’s been up to along these lines for the past three years. It is really hard to account for the stupendous incompetence of the news media in recent years. Of course, I’m allergic to conspiracy theories and the only explanation that adds up for me is the diminishing returns of technology. Among other untruths we’ve embraced collectively is the idea that computer-distributed information amounts to knowledge and understanding, tending toward judgment. Apparently, it’s only made our society much dumber and more irresponsible. After all, none of the supposed media watchdogs even asked The New York Times or The Wall Street Journal, or CNN and a hundred other outlets why they didn’t interview the Attorney General of the United States and ask him why he has not been taking care of the business now assigned to this special unit.

Not included in the State of the Union message was any reference to the provision in the recently signed National Defense Authorization Act that allows the US government to suspend due process of law and use the military to arrest and indefinitely detain US citizens on vague and opportunistic charges of “suspicion” You will remember a month ago when Mr. Obama signed the law and issued a “signing statement” that said his administration would not carry out these specific provisions. Did anyone notice that it is an impeachable offense for the president to state his opposition to enforcing the law? In which case, why isn’t there a bill of impeachment making its way through Congress right now?

I’ve had enough of Obama, though I voted for him in 2008. I won’t vote for him again. But I’m not altogether confident that any of us will be voting for anyone in the fall of 2012. Too many systems we depend on are spinning out of control. I suppose we will continue feeding ourselves a diet of lies and evasions until circumstances become so extreme that language itself loses all relevance and only real action will answer. I believe that moment is approaching in the yet-to-be-acted-out political uproars of the spring and summer. In the meantime, American leadership is bankrupt. Just accept the fact that America has no legitimate leadership. The vacuum is total and we know how nature feels about a vacuum.

 

 

My books are available at all the usual places.

northshire.com

WOH100px.jpgWMBH100px.jpgKunstlerCast_Cover100.jpgTLE100px.jpgGeography100px.jpgEOR100px.jpg

Jive Talkin

[Clusterfuck Nation]