Future Chaos: There Is No “Plan B”
by ilene - October 16th, 2010 1:27 am
Future Chaos: There Is No "Plan B"
Courtesy of Chris Martenson
Note: This article builds on my recent report, Prediction: Things Will Unravel Faster Than You Think. It explores the coming energy crunch in more detail by looking at existing government planning and awareness, and the implications of what international recognition of Peak Oil as early as 2012 might mean.
The hard news is that there is no "Plan B." The future is likely to be more chaotic than you probably think. This was the primary conclusion that I came to after attending the most recent Association for the Study of Peak Oil & Gas (ASPO) in Washington, DC in October, 2010.
The impact of Peak Oil on markets, lifestyles, and even national solvency deserves our very highest attention – but, it turns out, some important players seem to be paying no attention at all.
ASPO conferences tend to start early, end late, and be packed with more data and information than should be consumed in one sitting. Despite all this, I was riveted to my seat. This year’s usual constellation of excellent region-by-region analyses confirmed what past participants already knew: Peak Conventional Oil arrived a few years ago, and new fields, enhanced recovery techniques, and unconventional oil plays are barely going to keep up with demand over the next few years.
But there were two reports that really stood out for me. The first was given by Rear Admiral Lawrence Rice, who presented the findings of the 2010 Joint Operating Environment (a forward-looking document examining the trends, contexts, and implications for future joint force commanders in the US military), which spends 76 pages summarizing the key trends and threats of the world. "Energy" occupies six of those pages, and Peak Oil dominates the discussion. Among the conclusions (on page 29), we find this hidden gem, which uses numbers and timing that are eerily similar to those that I put forth in my April 2009 report, Oil – The Coming Supply Crunch:
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.
While there are two "coulds" in that statement, the mere possibility that such an imminent arrival and massive shortfall could be true should give every prudent adult a few second thoughts about what the future may hold. If surplus production capacity disappears…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggInterview: Chaostheorien
by ilene - July 28th, 2010 4:58 pm
Interview: Chaostheorien
Courtesy of Karl Denninger at The Market Ticker
Good reading here, if you’re interested in my views "in a nutshell":
Karl Denninger, the publisher of “The Market Ticker”, in an exclusive interview for chaostheorien.de: “In order to honestly assess what’s going on and what has to be done to fix the problems, we first must admit our mistakes.” Furthermore he says why the financial system is more and more a farce, gives his stance on the prospects of a military dictatorship in the United States, and explains his position with regard to Peak Oil.
Have a read….. but grab a beer first.
The Future of Cities
by ilene - June 18th, 2010 11:03 am
The Future of Cities
Courtesy of Charles Hugh Smith Of Two Minds
The energy consumption of cities will certainly decline in the coming decades, but cities may not disintegrate as many expect.
Among those who understand Peak Oil and the fragility of global supply chains, it is widely assumed cities will quickly become hellholes of squalor and extreme violence once liquid fuels are no longer cheap and abundant. Perhaps, but history suggests cities are highly resilient adaptations.
What never ceases to amaze me is how few people who expect cities to implode have any grasp of the size and scale of cities which thrived for hundreds of years without any fossil fuels.
Fernand Braudel’s masterful three-volume history of European Capitalism (Civilization & Capitalism, 15th to 18th Century) The Structures of Everyday Life (Volume 1), The Wheels of Commerce (Volume 2) and The Perspective of the World (Volume 3) is in effect a history of trade and the rise of urban centers. Paris and other cities were already huge, complex centers of commerce and wealth in the early 16th century.
In Asia, the Chinese T’ang Dynasy capital of Ch’ang-an (A.D. 618-907) contained hundreds of thousands of residents, and drew in the wealth of all Asia: The Golden Peaches of Samarkand: A Study of T’ang Exotics.
Even today, you need to rent a bicycle to tour the vast ruins of the old Thai capital of Ayuttaya, which had a population in the hundreds of thousands in the 15th century.
If cities are so fragile, how did they grow to vast size without any high-density fuel other than wood, and no transport other than animals and human energy?
Yes, these were not "modern" cities in terms of energy consumption, but it terms of exotic goods available, plentiful food, high culture and intrigue, they were thoroughly modern.
Rather than attempt an over-arching synthesis of the vast literature on urbanism, I will make a few points which I think are suggestive of the enduring value of cities, and of the ways in which wastrel (and thus unsustainable) cities might lower their energy consumption and increase their sustainability.
1. 68% of all trips within Tokyo are by foot, bicycle or subway/transit. 95% of the trips in Houston are by private vehicle. Houston is not Tokyo, but this is a way of suggesting that when liquid fuels become costly/scarce, not all cities are equally…
BP Looming Disaster
by ilene - June 13th, 2010 5:00 pm
BP Looming Disaster
Courtesy of Allan
Let’s start with the Daily Trend Model, but it gets worse according to the article appearing after the chart.
I lifted the following piece off of a trader’s forum this weekend and although I don’t know enough to comment on the veracity of the content, its scary enough to pass along, just in case it’s true.
Lindsey Williams is out with a new interview, over at Alex Jones. He’s claiming the following info about the BP Deepwater Horizon oil leak. He claims the information came from an oil industry executive whom he knew in Alaska when he lived with these people, and worked with them.
I don’t do a lot of Alex Jones. This information is unconfirmed, so we’ll have to see.
Here’s some of the information in summary form.
1) This is not a conspiracy, it’s an accident, and a disaster.
2) The oil is abiotic oil, from deep within the earth. It is not the fossilized remains of long dead life. This oil is produced within the earth, and the earth is full of it. The Russians discovered abiotic oil, and are now the number 1 exporters of oil in the world; but they had the good sense to drill for the stuff on land. Lindsey says the text books on how oil is formed will have to be rewritten. He stated there is no such thing as Peak Oil.
3) The oil is gushing from the well at pressures between 20,000 and 70,000 pounds per square inch. Lindsey indicates the wells in Prudhoe Bay, AK, came in at about 1,500 pounds of pressure. He says 50,000 pounds of pressure is beyond our technical ability to contain. I think this means that it would have blown the safety valve, even if it had not been defective. Lindsey indicated that the oil is gushing out at the rate of about 4 million gallons per day, but that the gent speaking knew he’d be quoted, and Lindsey suggested that you could put the actual figure much higher.
4) There is no hope of stopping the spill short of a nuclear weapon. It will take months to put this device (bomb) in place, as there will have to be an angle well drilled, and the bomb placed in it. I think this
…
Voices of Reason in Sea of Insanity
by ilene - May 10th, 2010 4:09 pm
Voices of Reason in Sea of Insanity
Amidst all the hoopla, cheering, and insanity of throwing money at currencies thinking it will make them rise, here are a few voices of reason on my radar today.
John Hussman
Greek Debt and Backward Induction
…. The bottom line is that 1) aid from other European nations is the only thing that may prevent the markets from provoking an immediate default through an unwillingness to roll-over existing debt; 2) the aid to Greece is likely to turn out to be a non-recourse subsidy, throwing good money after bad and inducing higher inflationary pressures several years out than are already likely; 3) Greece appears unlikely to remain among euro-zone countries over the long-term; and 4) the backward induction of investors about these concerns may provoke weakened confidence about sovereign debt in the euro-area more generally. …
Looking at the current state of the world economy, the underlying reality remains little changed: there is more debt outstanding than is capable of being properly serviced. It’s certainly possible to issue government debt in order to bail out one borrower or another (and prevent their bondholders from taking a loss). However, this means that for every dollar of bad debt that should have been wiped off the books, the world economy is left with two – the initial dollar of debt that has been bailed out and must continue to be serviced, and an additional dollar of government debt that was issued to execute the bailout.
Notice also that the capital that is used to provide the bailout goes from the hands of savers into the hands of bondholders who made bad investments. We are not only allocating global savings to governments. We are further allocating global savings precisely to those who were the worst stewards of the world’s capital. From a productivity standpoint, this is a nightmare. New investment capital, properly allocated, is almost invariably more productive than existing investment, and is undoubtedly more productive than past bad investment. By effectively re-capitalizing bad stewards of capital, at the expense of good investments that could otherwise occur, the policy of bailouts does violence to long-term prospects for growth. Looking out to a future population that will increasingly rely on the productivity of a smaller set of younger workers (and foreign labor) in order to provide for an
…
Commodities Kiss of Death? Is The Reflation Trade Over?
by ilene - February 5th, 2010 11:29 am
Commodities Kiss of Death? Is The Reflation Trade Over?
Courtesy of Mish
Last week the LA Times reported the California teachers pension fund is $43 billion short.
Another pension alarm bell is ringing in Sacramento, this time at the teachers retirement system, where the nation’s second-largest public pension fund is reporting a $43-billion shortfall.
The California State Teachers’ Retirement System said that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries.
Known as CalSTRS, the fund took a big hit during the 2008-09 fiscal year, losing a quarter of its value. Since then, its investment returns have improved, but the growth isn’t strong enough to keep up with a widening funding gap.
What’s worse, CalSTRS Chief Executive Jack Ehnes said in a report to be presented to the board Feb. 5, the fund could be broke in 35 years — the length of a typical teaching career.
To avoid that calamity, Ehnes wants the state Legislature to raise employer pension contributions paid by the state and, indirectly, California’s 1,043 school districts in the next few years.
Rolling The Dice With Commodities
Given there is virtually no chance the legislature will pony up $43 billion, CalSTRS considers rolling the dice on commodities. Hell why not? Taxpayers are on the hook if it does not work out.
Please consider California Teachers’ Pension Fund Mulls Commodity Investment.
The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities.
The governing board of the fund, with $134 billion under management, is scheduled to hear today a staff report in Sacramento that recommends its first-ever commodity investment. The board will decide whether to seek additional research on strategies and portfolio weightings.
“Commodities historically exhibited low correlation to equities and bonds and produced double-digit returns when equities fell,” Innovation and Risk Director Steven Tong and Investment Officer Carrie Lo said in a report to the board. “In effect, commodities may act as an insurance policy, realizing low single-digit returns over the long run but generating large double-digit payoffs in the event of a negative shock.”
Commodity prices have surged since 2001 as global economic growth led by China, the fastest-growing consumer of raw materials, spurred demand for metals,
…
Triple Digit Oil and Economic Change
by ilene - January 19th, 2010 2:02 pm
In the video, Jeff Rubin, former Chief Economist of CIBC World Markets and author of Why Your World Is About To Get A Whole Lot Smaller, discusses the far reach of triple digit oil prices – how it will change our cities, our economy, our lives. – Ilene
Triple Digit Oil and Economic Change
Courtesy of Jesse’s Café Américain
Triple digit oil and the economic change that it would bring is something that intrigues, and will have a cascading impact on the real economy and globalization.
It is not that we will be running out of oil. Rather, we will be running out of cheap oil, light sweet Arabian crude, to be replaced eventually by synthetic oil rendered from tar sands and shale. The implication is $200 per barrel oil and $7.00 per gallon gasoline.
Demand for oil is peaking in developed nations like the US and Canada, and may never exceed the levels of the past few years. But demand growth in the developing nations is increasing, and perhaps dramatically.
World gasoline production has not grown in the past four years.
The oil shock may hit the economy within 12 to 15 months according to Jeff Rubin.
There are several things with which I do not necessarily agree, but his talk his interesting and thought-provoking. We do need to start thinking about how to make sure that peak oil does not translate into peak GDP.
This may require a shift from a global economy to more local economies. And I have been thinking about this for the past five years. It is coming. The only question is when.
Jeff Rubin is a former Chief Economist of CIBC World Markets and the author of Why Your World Is About To Get A Whole Lot Smaller.
Largest U.S. refiner Valero now permanently shutting capacity
by ilene - November 20th, 2009 1:56 pm
Largest U.S. refiner Valero now permanently shutting capacity
Courtesy of Edward Harrison at Credit Writedowns
Valero Energy has just announced it is shutting down its Delaware City Refinery. This is a major news announcement because refiners should be seen as a canary in the coalmine for end-user demand and Valero is one company in the oil patch which has been loath to cut workers to improve the bottom line. This announcement is an indicator that, despite a technical recovery, the economy still has major obstacles to overcome.
Valero Energy Corporation (NYSE: VLO) announced today it intends to permanently shut down its Delaware City refinery due to financial losses caused by very poor economic conditions, significant capital spending requirements and high operating costs. The shutdown will affect approximately 550 employees at the plant.
Valero notified refinery employees today of the impending shutdown, and will immediately begin negotiations with the refinery’s unions regarding the effects of the plant closure and the employees’ severance packages. A safe and orderly shutdown of the refinery will commence immediately. Valero remains committed to its marketing businesses in the Northeast and will continue to reliably supply its customers, partially through higher throughput rates at the company’s other refineries.
“The decision to permanently close the Delaware City refinery was a very difficult one,” said Valero Chairman and CEO Bill Klesse. “We have spent the last year diligently trying to avoid this situation, and I have worked closely with Gov. Markell in an effort to find a different outcome. Earlier this fall, we shut down the gasifier and coking operations in an attempt to improve reliability and financial performance, but the refinery’s profitability did not improve enough. Additionally, we have sought a buyer for the refinery, but feasible opportunities have not materialized. At this point, we have exhausted all viable options.
“We realize that the decision to close the refinery affects many employees, their families, and the community. We are thankful to our employees for their service, and we will treat them fairly during this difficult period.”
In the fourth quarter of 2009, the company expects to report a pre-tax charge of approximately $1.7 billion to $1.8 billion, or $2.00 to $2.15 per share after taxes, related primarily to asset impairment, employee severance and other shutdown costs. The company estimates the cash
…
Personal correspondence with Phil regarding how oil speculation affects oil prices.
by ilene - November 14th, 2009 1:06 pm
Personal correspondence with Phil regarding how oil speculation affects oil prices.
Phil to Ilene:
This is a complicated issue as it’s not just the act of creating a contract.
Let’s say there are 100,000 barrels of oil in the world and 10 are sold each day and they are shipped from various places in various amounts but generally there are, at any given time, 30 days of oil at sea (300 barrels). If I am taking straight delivery, I would contract with the producers to deliver me 1 barrel of oil per day for a year or 5 years or whatever for $50 a barrel. My interest is to have a steady supply and the producers interest is to have a steady demand. He wants to charge as much as possible, I want to pay as little as possible.
Enter the speculators. Rather than me (the actual user) haggling with the producer directly (as is done in most business transactions), the speculator steps in and offers to buy as much oil as the guy can produce for $40. I can’t do that because I only need one barrel a day but if the guy can make 1.3 or 1.6 barrels a day or he can add a new pump and make 2 barrels a day, knowing he has a buyer at $40, he will be thrilled (assuming the profits work selling 2Bpd at $80 vs 1Bpd at $50).
In a perfect world, the speculator is simply taking on some risk and will make the difference between the $40 they are paying and the $50 I am willing to pay and they will sell the excess for $40-50 and make a nice overall profit.
But then the speculators get greedy. They know I NEED 1 barrel per day and perhaps there was some seasonality to pricing or natural fluctuation but all the speculator has to do is wait for the price to rise and then hold it there. If supply is uneven, they can divert some to storage. They are still buying it, creating demand but they are not delivering it so there is suddenly a “shortage” where none existed before. As they accumulate more barrels in storage (say 100) they realize that getting the price up to $60 makes them not only $10 a day more per barrel they sell me,…
AMERICAN PIE
by ilene - October 21st, 2009 10:14 pm
Jim Quinn presents a most dire prediction of our national journey into a hellish nightmare, the worst yet to come.
Was it all foretold in this incredible song? – Ilene
Don McLean – American Pie – Live On Imus In The Morning
AMERICAN PIE
Courtesy of Jim Quinn at The Burning Platform
.jpg)
.jpg)
.jpg)
.jpg)
I can still remember
How that music used to make me smile
And I knew if I had my chance
That I could make those people dance
And maybe they’d be happy for a while
But February made me shiver
With every paper I’d deliver
Bad news on the doorstep
I couldn’t take one more step
I can’t remember if I cried
When I read about his widowed bride
But something touched me deep inside
The day the music died
Drove my Chevy to the levee but the levee was dry
And them good old boys were drinking whiskey and rye
Singing this’ll be the day that I die
…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(