Gary's Note: Does our new imperator have a real clue about our energy situation? This should surprise no one, but I'm not really confident the gub'ment could or should do much about it either way. Still, Jim Kunstler wonders what The "O" knows. Send your questions and comments to gary@whiskeyandgunpowder.com. Whiskey & Gunpowder
A lot of readers are twanging on me for refraining to castigate President-elect Obama for deeds yet undone. They're discouraged by the advisors and cabinet secretaries he's picked, ostensibly because the crew coming in are Washington "insiders," meaning they can't possibly see or do things differently. My own starting point for this is the belief that in the years just ahead any sociopolitical entity organized at the giant scale will flounder — this includes everything from the federal government to global corporations to factory farms to centralized high schools to national retail chains. So even expecting Mr. Obama's government to act effectively may be asking too much in a situation that will require mostly local action. ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Change of Guard: Wind Power Is In If you think wind made impressive advances when an oilman was in the White House, just wait for President Barack Obama. The nation's incoming president made renewable and alternative energy a key campaign issue. We've pinpointed a select group of FOUR investments that will benefit the most when an unprecedented infusion of government cash is pumped into this industry. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The meta-situation will be the overall decline of energy resources and the necessary downscaling of our activities. We are obviously in a transitional period between the old profligate energy economy and the new economy of relative scarcity. We have no idea how disorderly this transition will be, but there is certainly potential for tremendous instability in daily life. For a while, perhaps, the federal government may retain some ability to affect the way things go, or give the appearance of doing so. This raises the issue of what Mr. Obama and his team really know about our energy predicament. The president-elect has made some noises — recently on the 60 Minutes show — that he understands something about the current price dislocations in the oil markets resulting from the larger financial turmoil. He alluded to the public's erroneous notion that current low-ish oil prices mean the oil problem is over. But does the incoming president know some of the following details? For instance, does Mr. O know that global oil production appears to have peaked at around 85 million barrels a day, with poor prospects of ever getting beyond that? This single naked fact has broad ramifications, above all whether we can continue to think in terms of industrial "growth" as the benchmark for economic health. There are many interpretations of the current financial fiasco. Some of them are based on long-term technical wave theories. A more down-to-earth view suggests the shock of peak oil — though it doesn't exclude wave theories. Does Mr. O know that world oil discovery has fallen to insignificant levels after peaking long ago in the 1960s. Does he know we are finding no more super-giant oil fields on the scale of Arabia's Ghawar or Mexico's Cantarell, which have supplied most of the world's oil for the past forty years and are now running down? Does he know that you can't produce oil that hasn't been discovered? Does Mr. O know that virtually all the oil-producing nations have entered production decline. Surely someone has whispered in his ear about the IEA's projection that global oil production would fall 9.1 percent in the coming year. Does Mr. O know that oil exports have been trending to decline at a steeper rate than oil depletion? That is, the exporting nations are losing their ability to send oil to the importers (like us) at a rate mathematically greater than the run-down in their production. They are using more of their own oil even while their production is going down. For example, Mexico is depleting overall at more than nine percent a year (with the Cantarell field alone running down at more than 15 percent annually). Does he know Mexico's net exports are crashing? Mexico has been our number three leading source of imports. In a very few years they will not be able to send us any oil. A deluded American public has no idea that this is happening. Will Mr. O explain it to them? ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Announcing Agora Financial's First-Ever "One-Time Dividend"… Tell Me Where To Mail Your $1,500 Check I'll FedEx your check to you on Feb. 16, 2009 — but you must act soon to qualify. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Does Mr. O know that the "old major" oil companies (Exxon-Mobil, Texaco, Shell, et al) produce less than 10 percent of the world's oil now — the other 90 percent coming from the foreign nationals — and that blaming them for the situation is a waste of time. The foreign national companies are changing the landscape of the oil markets. They're making special contracts with "favored customers" rather than just putting their oil up for auction on the futures markets. One thing you can infer from this is that we're entering a period of national oil hoarding based on coming scarcity. The futures markets were based on relative abundance, and they will not operate very well in a climate of scarcity. Consider that the USA will probably not be among the "favored customers" for several oil producing nations. Figure that in with the coming loss of imports from Mexico (and Venezuela and Nigeria). Does Mr. O know that the current drop in oil prices (due to massive financial deleveraging) has resulted in the cancellation or postponement of the very oil production projects that were hoped to offset the coming depletions? It's not worth it for an oil enterprise (private or foreign) to drill in deepwater or venture into arctic regions when oil is priced at $50-a-barrel — if it costs $80 to get the stuff out of the ground. It's not worth digging up tar sands in Canada at that price. This halt in activity is going to boomerang back on the U.S. in a year or so, with depletions ongoing everywhere and no new oil to take its place. Does Mr. O know that we're just as likely to see shortages as a resuming rise in oil prices here in the U.S. during his coming term? Does Mr. O know that the current re-inflation program being run by the Treasury and the Federal Reserve is so egregious that it may lead to loss of the dollar's legitimacy, to the renunciation of dollar holdings by other nations, to the down-rating of U.S. Treasury debt instruments, and finally to an inability of the U.S. to purchase foreign oil — which comprises two-thirds of all the oil we use every day? Does Mr. O know that we are not going to run the U.S. automobile and truck fleet on any combination of alt.fuels? Continuing it by other means is a fantasy that will only disappoint us. The motoring era is coming to an end. Heroic investments in highway infrastructure to create jobs will be a tragic waste of our dwindling capital. The pressure for Mr. O to make these misinvestments will be enormous, perhaps insurmountable. There are probably not a thousand people in the U.S. who agree with what I am saying — meaning the consensus to keep the cars running at all costs overwhelms reality at the moment. Does Mr. O's concept of "change" include the possibility that we may have to live very differently in this society? ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Agora Financial's First-Ever "One-Time Dividend" — Available Only to NEW Members Tell Me Where to Mail Your $1,500 Check Two Conditions to the "One-Time Dividend": You Must Act Before Midnight Jan. 1 to Qualify — and You Must Give Me Your Address, So I Know Where to FedEx Your Check Full story and check-claiming instructions here. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Chances are, if Mr. O knows any of these things he might be crucified in the polls and the media by acknowledging them. The only "change" that America really wants to hear about is evicting George Bush from the White House. They're sick of him and all the disturbance he has caused in their financial affairs. But beyond that, the American public is deathly afraid of the kind of changes we actually face — such as, the end of consumer culture, the gross loss of value in suburban real estate (which forms the bulk of the middle class's private wealth), the prospect of food and fuel scarcities, the need to re-localize our lives, the need to physically shape up to stop the costly and unnecessary drain on our medical resources, to grow more of our own food, to work harder at things that actually matter, and to save whatever we can for a difficult future. If Mr. O introduces any of these themes into the national discourse, the public and the media and the bloggers will all dump on him for failing to prop up the wild party that American life became in recent decades. Regards, Parting Shot: Be sure to check Jim out at www.kunstler.com where you can read more. I recommend Jim's latest, World Made By Hand, and remind Whiskey Shooters to keep an eye out for that sequel. Jim makes an important point above. Whatever one's political bent, the coming realities are going to require local action. The hypertrophied systems — including federal governance — are going to be failing. All the better. Things work better when people just worry about their immediate environment — their own doorsteps, as it were — instead of trying to stick their noses and fingers further afield…where they don't belong. In response to Jim's "Zombie Economics" article in two parts, a dismayed and now former Shooter writes, "That's it for me. Just too much 'zombie.' Kunstler's vision for America makes 'investing' seem quite pointless." There, there, dear Shooter. I know it can all seem overwhelming…but our raison d'etre is to face the reality (things get really bad in big ways quite frequently) and figure out how to be ready. If it seems like we're striving to depress and scare you, it's because we can't help but tell the truth. Don't lament the calamities…because those hits'll just keep on comin'. Just be sure you have a plan. A Whiskey Shooter unwittingly did the bulk of today's editorial work for me by sending in a fantastic Parting Shot… "Thanks for running Kunstler every once in a while. Money and lifestyle are inter-dependant. I invest to live, not live to invest. Kunstler makes me ask myself if my investing goals are in line with how I see myself and the world five or 10 years out. Thank you. I'll raise a shot glass to that. Salut. Till next time, |
Whiskey & Gunpowder Special Reports New "Backlash" Set to Rocket Oil Past $150...and Send Gas Soaring to Over $6 per Gallon The 10 Shocking Reasons for China's Pollution Problem Geothermal Energy: Investment in the Future Here's One Coal Stock That's Set to Skyrocket Investing in Exchange Traded Funds The Real Story Behind the True Gold Bull Market If someone forwarded you this copy, please look here to start your own subscription. Wanna let us know what you thought of today's issue? Now you can... click on this link. Whiskey & Gunpowder is a free e-mail service brought to you by a team of rebellious brigands. If you have not already done so, please click here to confirm your subscription. This will help us ensure you get every Whiskey & Gunpowder without interruption. Are you having trouble receiving your Whiskey & Gunpowder? You can ensure its arrival in your mailbox here. Please note: we sent this e-mail to finan4@finanmart.com because you subscribed to this service. To end your Whiskey & Gunpowder e-mail subscription, click here. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. © 2008 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. |
