A Blast from the Blast - "Enough Energy to Melt Glaciers"

An Ad from LIFE magazine in 1962 (courtesy of Ms. Marx)

Summer reading

"As an Anglo European white guy from a very long line of white guys, I want to thank all the brown, black, yellow and red people for a marvelous three-century joy ride. During the past 300 years of the industrial age, as Europeans, and later as Americans, we have managed to consume infinitely more than we ever produced, thanks to colonialism, crooked deals with despotic potentates and good old gunboats and grapeshot. 

Yes, we have lived, and still live, extravagant lifestyles far above the rest of you. And so, my sincere thanks to all of you folks around the world working in sweatshops, or living on two bucks a day, even though you sit on vast oil deposits."

- Joe Bageant, "Waltzing at the Doomsday Ball"

Lloyd's insurance warns on Peak Oil

And so the chorus grows:

Lloyd's adds its voice to 'peak oil' warnings

"One of the City's most respected institutions has warned of "catastrophic consequences" for businesses that fail to prepare for a world of increasing oil scarcity and a lower carbon economy."

That's from the Guardian (UK).

The actual report released by Lloyd's of London in co-operation with Chatham house has more interesting snippets inside it.

• Businesses which prepare for Peak Oil transition will prosper - the rest will go down
• Low cost [liquid] fuels are gone
• Asia is now part of the global energy security mix
• Global oil supply crunch and price spike coming
• Energy infrastructure is vulnerable
• Just-in-time production/warehousing will have to adjust
• Big business opportunities in transition

This is the "easy oil is gone, but we will transition through a rough patch" type Sunday matinee scenario for the whole family. All the really disruptive parts are left out or between the lines.

Yet, some of the graphs are quite telling:

So much for that Middle East spare capacity...

$200USD barrel of oil by 2016, anyone?

Peak Oil risks + Financial risks + Climate Change risks = ?##%&&!!

So, finally the insurance market is ready to start taking into account the consequences of peak oil, even if the scenarios are quite cautious - almost optimistic.

Seeing the Future via advertising

A BP advertisement from 1999.

What does collapse of sovereign debt do to Oil prices?

Financial Historian, Niall Ferguson, talks about collapse of empires and fiscal crises:



And there's also a set of slides to go with the lecture:

FiscalCrises&ImperialCollapsesferguson201005

Now, considering that energy and commodities in general have become one of the biggest financial plays in the business, how do sovereign debt defaults alter this picture?

What happens in the investment world, when:

- countries can no longer grow the way they used to (i.e. consume less oil)
- more money escapes sovereign debt instruments and is looking for good profits (oil derivatives)

No easy answers here, but it does appear as a reasonable assumption that as markets try to discount the coming wave of defaults, more money will be flooding into commodity derivatives - at least as long as the music in the markets keeps playing.

And that possible mega-spike in commodity prices will be the final straw that breaks the back of the sovereign debt camel.

But before there, we still have this one extra round of deflation fighting to be dealt with. Hence, oil prices plummeting with almost everything else, except US government debt.

Once that is dealt with - with more printing - up we go.

Crack up Boom, anyone?

A Musical Interlude

We interrupt the regular transmission with a musical interlude.



Don't take Max Keiser too seriously though.

Anne Korin on Strategic Role of Oil in the World

This is a must view for anybody interested in Energy Security related policy wonkiness:

Click the image to go to the web page. Embedding doesn't work.

Anne's part starts at minutes 6:30. Feel free to jump straight to that and skip the other talking heads.

Hedging Peak Oil

What does BlackRock - the world's largest hedge fund think of peak oil?

This one picked from their 2010 investment presentation:

Hey, at least they have two different scenarios and you get more than 4 years to prepare. It's unfortunate that they take the other fossil flow rates from the IEA data as is. They are surely to be just as wrong as the oil rates have been.

US military: massive oil shortages by 2015

This is starting to sound like a broken record already, but now it's the turn of US military Joint Forces of Command who have prepared a study for military leaders to warn about coming oil shortage:

• By 2012 oil production surplus capacity could disappear
• By 2015 shortfall of oil could reach 10 million barrels per day
• This would slow down economic recovery
• ... which in turn would exacerbate geopolitical tensions
• ... which could turn into resource grab wars

So much for biofuels replacing the shortfall, eh?

There is a further gem in the reporting of the study by Guardian:

"US military says its views cannot be taken as US government policy but admits they are meant to provide the Joint Forces with 'an intellectual foundation upon which we will construct the concept to guide out future force developments.'" - Guardian

That is, "please don't take this seriously, but be prepared for it to be the official stance any time now". Just so that you know.

US Dept of Energy : Oil Crunch 2011-2015

This is starting to look like a coordinated news campaign or a real wake-up:

"A chance exists that we may experience a decline of world liquid fuels production between 2011 and 2015 if the investment is not there"

- Le Monde on interview of Glen Sweetnam, the oil market expert of US Energy administration

The situation is simply the following:

Many major oil producing regions are heading to a temporal investment related production peak or final oil flow peak by 2015

New discoveries and new producing fields are not there to offset the decline

The major additions from unconventional oils and biofuels (esp. US ethanol) are in serious doubt

So called 'above the ground factors' (i.e. politics, pricing, market issues) are making the flow of oil even harder to predict

So everything written here and elsewhere for the past 5+ years is coming to pass.

Except now it is becoming official. Currently it is confined to being mere political 'scare talk', but when it becomes fully priced in the markets, you can consider $80/barrel oil extremely cheap. And by then, it'll be way too late.