Oil prices are now as high as they have been for three years. At this writing, Brent is $74.14 per barrel and West Texas Intermediate is at $68.76. These prices aren’t really very high, if a person looks at the situation from a longer term point of view than the last three years.
Figure 1. EIA chart of weekly average Brent oil prices, through April 13, 2018.
There is always a question of how high oil prices can go, and for how long.
In fact, we have many resources, of many kinds, whose prices of extraction keep rising higher. For example, obtaining fresh water for the world’s population keeps getting more and more expensive. Some parts of the world need to resort to desalination.
The world economy cannot withstand high prices for any of these resources for very long. Certainly, it cannot withstand high prices for a combination of necessary resources, because people need to cut back on other purchases, in order to afford the necessities whose prices are rising. This article is a guest post by another actuary, who goes by the pseudonym Shunyata. He explains in a different way why high resource prices cannot last, whether they are for oil, or natural gas, water, or even fresh air.
Dear Readers:
As you are no doubt aware, Gail has created a fantastic portfolio of blogs that explore our energy/financial/economic system, blogs that reveal many hidden or misunderstood aspects of our situation. I have found these discussions invaluable and share them wherever I am able; to solve our societal problems we need to develop a societal understanding of these issues.
The problem I face is helping other people, like my grandparents, get a foothold in this complex discussion. They can understand why oil might “run out,” but trying to understand the problematic financial situation is more difficult. I like metaphors to explain things – metaphors that allow my grandparents to understand the major elements of the situation. The metaphors I am using are to the oil industry. My grandparents have been following the oil situation for a long time. If a person has been following the oil industry, they may be helpful.
Below you will see how I explain Gail’s detailed writing to my grandparents in three short chapters. I hope you find this outline helpful in your own discussions, and I welcome your suggestions for improving the transparency of the story.
PRODUCTION COST
What if air had to be produced from wells and purchased by businesses and families to conduct their normal affairs?
If air is readily available in the ground, we can always extract what we need, making it easy for businesses and families to operate, or even to grow.
What happens if air becomes harder to extract? Perhaps the easy air is gone and we are increasingly looking at extracting deep water air, or air dissolved in shale stone.
Technology may be able to help; sometimes it can help a lot. But there is an immediate production cost shock in funding the development of that technology. This cost shock occurs whether we are talking about conventional air or solar-based renewable air.
There is a lower but permanent increase in production cost, both to fund the complexity of the technology (a deep water air rig just costs more to operate than a land rig) and to pay off any debt needed to build the new technological infrastructure. This cost increase occurs whether we are talking about conventional air or solar-based renewable air.
This cost increase is a permanent drag on the economy. Wages don’t rise to compensate for the higher cost of air. There is no substitute for air, and air simply isn’t available in the quantities the economy previously enjoyed – unless we stop doing things that we were doing before and redirect those resources toward producing the same amount of air we used to have.
DEBT
In a modern financial system, we use “money” as a proxy for economic activity. In a barter system, I can obtain goods and services by trading my work product for your work product. But carting around packages of finished goods is unwieldy, so we use “money” as a medium of exchange. If you and I are both willing to trade our finished goods for a symbolic piece of paper, then I can trade my goods and services for paper, bring that paper to you and trade it for your goods and services. This medium of exchange makes it easy to trade complex goods and services over long distances, or at different points in time.
How would lending work in this barter system? Someone could produce many finished goods, trade it for symbolic paper, but not immediately trade it for other goods, and “save” their paper for later. Debt is a process of borrowing someone else’s saved symbolic paper to purchase goods and services for themselves. This is helpful when I need to build a deep water air rig but don’t have the money myself. I can borrow someone else’s money and pay them back later, after my rig is bringing in revenue.
This simple borrowing process only works if some people aren’t consuming goods and services in the economy, and are instead allowing others to “borrow” their ability to consume. What if there isn’t enough saving to make large borrowing possible? What if I want to maximize economic activity and don’t want people to defer their own individual consumption?
If we want more funding than barter can provide, this can be done in more than one way:
[a] Money can be loaned into existence. This happens every day, when people decide to buy a car, and take out a loan for that purpose. Or people buy something with a credit card, and decide to carry a balance, rather than pay it off immediately. Nearly all loans today represent new money to the system.
[b] Governments can also obtain money by issuing bonds. Or they can simply issue money certificates without having any backing for the money.
Let’s call the process of adding funding to the economy, over and above what would be available by debt, “money printing.” In each of these cases, symbolic paper is added to the economy without previous work having been performed.
[1] Money printing can be helpful when it represents an investment in growing the overall economy. Investment in deep water air rigs will make air more available in the economy and will spur an expansion of economic activity. In this case the goods and services in the economy eventually “grow into” the amount of money that has been printed and the extra economic activity in the future is used to repay the debt.
[2] Money printing is unhelpful when it simply becomes someone’s savings (i.e. growing wealth inequality). The economy is still obligated to repay the debt (usually through taxes) and economic activity becomes sequestered in wealthy people’s savings, without ever creating demand for someone else’s product.
[3] Money printing is also unhelpful when it is used to fund more air consumption without any investment in air production. For example, a family that borrows money for an air vacation (or for basic daily air subsistence):
- Now has a debt–repayment of which will reduce future air consumption
- Has created no permanent demand for air and does not require permanently expanding air production for the economy–so their vacation air demand tends to increase the cost of air for all other consumers.
PRICE
What happens when we put these two chapters together? When air becomes more difficult to extract:
[1] Production cost goes up permanently.
[2] Economic activity is redirected to maintain air production, and overall economic activity is reduced. With reduced overall economic activity there is a reduced need for air, resulting in excess air supply and a temporary reduction in air price.
[3] If air consumers spend their available money on air and defer other purchases, there is an additional reduction in economic activity, additional excess supply and further reduction in air price.
[4] Reduced price means less revenue to air producers.
[5] Owners of idled air rigs still have debts to pay (money borrowed to build air rig in the first place). They are willing to undercut the market price of air just to get revenue to pay their debts, even if they aren’t making a profit otherwise. This drives the price even lower.
So air prices fall, even though the cost of air production continues to rise.
This begins to look like an economic crisis. A natural response of governments is to print money so that consumers have more money available to purchase air, without deferring other purchases.
This can work for a while, but ultimately fails when there is no overall growth in economic activity to match the increased money supply. The debt comes due (usually in the form of higher taxes). There isn’t enough productive activity in the economy to easily pay back the debt. As a result, consumers must defer even more of their consumption to repay debt, ultimately resulting in even lower air prices.
Eventually either the debt market or air market runs the risk of failing entirely.
[1] When economic activity falters, people can no longer repay their debts (or earn enough income to pay taxes toward government debt). Either of these outcomes is bad both for borrowers and lenders.
[2] If economic activity falters, market forces push air producers to a zero-profit price point. At this point, producers have enough money to keep the rigs running and cover debt payments, but no more. Ultimately this cannibalizes the ability of air producers to maintain existing air supplies. They are unable to purchase replacement machines, if any one breaks. They cannot make new investments.
Clearly, this situation cannot continue. High prices cannot be passed on to consumers, or they will be unable to buy other necessities of life. At the same time, if the producers do not get high enough prices, they cannot continue to provide the air or any other commodity that is needed.
“”A nationwide dollar-buying panic is in full swing, spurred by the plunging value of the Iranian rial, a sluggish economy, and fears that the United States will reimpose crippling sanctions on the Islamic republic.”
https://www.rferl.org/a/iran-hit-by-perfect-currency-storm-/29185332.html
“Iran’s central bank has banned other banks from dealing in crypto-currencies, over concerns the technology could be used illegally.”
http://www.bbc.co.uk/news/technology-43865105
Some EV nonsense in here but a few relevant points, too:
“Saudi Arabia is rumored to want oil prices at $100 per barrel, but if prices rise that high, it could sow the seeds of the next downturn.
“Saudi officials want more revenues for their budget and a higher oil price to bolster the valuation of the Aramco IPO. But that short-term thinking could spell trouble not just for them, but also for oil prices, and ultimately for longevity of oil demand.
“As Liam Denning of Bloomberg Gadfly points out, in the past decade, while oil prices have surpassed $100 per barrel for periods of time, they didn’t stay there for very long. In 2008, when oil nearly hit $150 per barrel, it was quickly followed by the financial crisis and a deep U.S. recession…
“Oil at $100 would essentially amount to a doubling of the price from the past few years, which would quickly put an end to high demand growth rates.
“A corollary to this is that $100 oil would likely impact economic growth. The economic recovery from the financial crisis in 2008 is almost a decade old at this point, much longer than the average upswing. History suggests that we are due for a recession at some point in the not-so-distant future. A spike in fuel prices around the world could help bring that on…”
http://uk.businessinsider.com/saudi-arabia-may-be-sowing-the-seeds-of-another-oil-crash-2018-4
“Climbing U.S. borrowing costs pose a dilemma for SAMA, which must strike a balance between overcoming the worst economic slowdown since the global financial crisis a decade ago and maintaining its currency peg to the dollar.”
https://www.bloomberg.com/news/articles/2018-04-23/saudi-central-bank-to-drain-liquidity-to-counter-fed-libor-rise
“There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders… rising interest rates will eventually begin to have a greater impact, say experts.”
http://www.arabnews.com/node/1289381/business-economy
US interest rates have an impact around the world. Even if the US economy can withstand them, countries which have been stressed by low oil prices for their exports perhaps cannot.
Saudi Arabia is doing a lot of borrowing. To keep the system in balance, its interest rate seems to need to rise above the Libor.
“Food bank use has soared at a higher rate than ever in the past year as welfare benefits fail to cover basic living costs, the UK’s national food bank provider has warned.
“Figures from the Trussel Trust show that in the year to March 2018, 1,332,952 three-day emergency food supplies were delivered to people in crisis across the UK – a 13 per cent increase on last year. This marks a considerably higher increase than the previous financial year, when it rose by 6 per cent.”
https://www.independent.co.uk/news/uk/home-news/food-bank-uk-benefits-trussell-trust-cost-of-living-highest-rate-a8317001.html
A particular problem in the UK is the penalties regime: there seems to be a determination to penalize as many people as possible by stopping their benefits for any, even the most trivial, infraction of the rules, and also to delay initial payments to those made redundant and claiming for the first time.
If people are close to edge, badly-paid when in work and unable to save emergency money, then they will very quickly find themselves in very serious trouble.
I tried to volunteer at the local food bank in order to see what is really happening, but they had a surplus of pensioners already.
Xabier, have you enjoyed, as I didn’t at all, Ken Loach’s stodgily didactic ‘I, Daniel Blake’? It harps on those very themes. The mobile cinema only comes out to Islay around three times a year so I have to take my chances!
I find the trailer is more than adequate when it comes to a Ken Loach film…… But, in essence, he is right about the crushing of human dignity by the welfare system.
Yet they need more low IQ people
“Dogus, one of Turkey’s biggest companies, has neither denied nor confirmed widespread reports that it is restructuring its debt. But economists and analysts fear the company could be a canary in the coal mine for Turkey’s corporate debt problems.
“For years, economic growth has been fuelled by cheap international credit. Corporates took out large loans in dollars or euros. But with the currency sliding, the cost of servicing that debt is rocketing…
“The lira’s volatility is fuelling broader concerns about the health of the economy — worries that caused President Recep Tayyip Erdogan to last week call snap elections for June, analysts say.
“Corporate debt is now roughly 70 per cent of gross domestic product according to our estimate,” said Ugras Ulku of the Washington-based Institute of International Finance. “More than half of that is in foreign currency. So whenever the lira gets weaker, even though we haven’t so far seen widespread defaults, the depreciation eats up profits or distorts balance sheets.”
“As the central bank holds a crucial monetary policy meeting this week ahead of the polls, Mr Ulku warns that the situation could deteriorate further if the lira, which has lost about 7 per cent of its value against the dollar this year, keeps depreciating…
“Turkey relies on short-term “hot money” flows that can dry up if sentiment in global financial markets suddenly shifts. The central bank’s foreign currency reserves stand at below $90bn — covering only half the debt that is maturing or needs to be rolled over…”
https://www.ft.com/content/c9ad507c-4712-11e8-8ee8-cae73aab7ccb
“Turkey is experiencing a collapse. The crisis in the real economy has turned into a financial crisis. Turkey’s largest companies are moving abroad. President Erdoğan admitted this,” Özdağ said.
“Özdağ said the government planned to “declare economic martial law” after the economic collapse “so they can seize foreign exchange accounts in banks and convert them to Turkish Lira…”
https://ahvalnews.com/good-party/turkey-experiencing-collapse-opposition-deputy-leader
Just as people in Argentina had their dollar accounts seized during the big crisis. If you save in another currency, best to do so abroad -which of course incurs additional risks.
Oh well, we are born ‘naked, screaming and poor’, and that’s how one dies. 🙂
I am sure that if they borrow in dollars and the Turkish currency depreciates, there is likely to be a problem. This is one of the big issues in international debt,
One needs to be blind or blind stupid drunk to invest in or even visit Turkey.
Istanbul is one of the greatest cities on Earth…. but I doubt I will get to visit again before the collapse hits…
is the food any good there? i guess it’s cosmopolitan, almost by definition.
I haven’t been to Istanbul since the 90’s but I’ve travelled quite widely in Turkey and generally found the food fantastic:
“Frequently used ingredients in Turkish specialties include: lamb, beef, rice, fish, eggplants, green peppers, onions, garlic, lentils, beans, zucchinis and tomatoes. Nuts, especially pistachios, chestnuts, almonds, hazelnuts, and walnuts, together with spices, have a special place in Turkish cuisine, and are used extensively in desserts or eaten separately. Semolina flour is used to make a cake called revani and irmik helvasi. Preferred spices and herbs include parsley, cumin, black pepper, paprika, mint, oregano, pul biber (red pepper), allspice, Urfa biber and thyme. Olives are also common on various breakfasts and meze tables frequently. In Turkey ‘iftars’ (the breaking of fasts) are generally opened with date palms. “Beyaz peynir” and yogurt are part of many dishes including börek, manti, kebab and cacik.”
https://en.wikipedia.org/wiki/Turkish_cuisine
Second best to Italian, perhaps with better savoury pastries, and less greasy than Iranian. Some Italian dishes may in fact be derived from the Ottomans. Pleasant memories!
A coffee and dessert here… is worth the flight to Istanbul ….
http://www.hafizmustafa.com/
English https://translate.google.co.nz/translate?hl=en&sl=tr&u=http://www.hafizmustafa.com/&prev=search
https://duckduckgo.com/?q=hafiz+mustafa+1864&t=hg&iax=images&ia=images
I like pork on my fork.
Turkish delight… is delightful….
I’d take Istanbul over Paris… without a second thought…. but then I get quickly bored with these over-hyped European destinations where I inevitably run into Americans who will only visit places that they think are safe… and that to a great extent resemble the familiar of home…. if you mention somewhere like Indonesia… or Thailand.. or god forbid any country with the word Stan in it …. (stan = country btw)… they recoil in horror… Rather ironic given they reside in DelusiSTAN….
The whirling dervish shows are out of this world.
Alarm Fast Eddy, a threat for your harem plans is on making its way to New Zealand!
https://www.zerohedge.com/news/2018-04-23/new-zealand-braces-super-gonorrhea-its-matter-when-not-if
Vigorous screening of candidates suggested.
Could it be that we have began already to lose the war against the germs? And that we have hit the Seneca cliff on antibiotics, and be living the last decade of external life support?
There’s also some interesting stuff on viruses being transported by the earth’s magnetic field through the atmosphere, particularly when the field is weak and not shielding the earth as well from solar EM radiation.
Dirty Bob picks up a dose after a ‘golf trip’ in Thailand with his mates….
He returns to Mrs Bob … and says you will never guess what happened… I was golfing and afterwards I got this drip … I went to the doc and he said there’s this new VD that is spread by the earth’s magnetic field.
Now that sounds much better than ‘I caught it off a toilet seat’
Golfing trip? Play some bad holes?
Sorry
As long as it does not affect lambs… I will be fine.
The young lady whom I heard talk about her Peace Corp experience in. Panama talked about the HIV problem there. One of the things she was trying to do was to try to explain what it was and how it could be prevented. Also, the fact that there were tests for it and that the government was providing medicine for it, Quite a few of the men would be working away from home for long periods of time, and would bring it back home with them when they returned.
Cooking with Fracked Gas Poses Potential Problem
https://www.bu.edu/research/articles/cooking-with-fracked-gas/
I expect that even with the possible mixing with chemicals that won’t burn completely, it is still a whole lot better than the burned biomass and burned dung that a lot of the world uses. It may not be as good as regular gas, if there are undesirable elements left in the gas. It seems like that would be somewhat fixable, in the processing that goes on between the wells and what is delivered to homes and factories.
What Zombies Tell Us About Our Times
Sarah Juliet Lauro discusses the origins of the zombie, from enslaved worker to liberated rebel in revolutionary Haiti, to the consumer zombie of the 1960s, and today’s anxiety about societal collapse.
https://kpfa.org/episode/against-the-grain-april-23-2018/
Penn State says wilderness is too risky for outdoors clubs
https://apnews.com/79dc2da81c644ef9bb97b844d88be
Need better link.
https://www.twincities.com/2018/04/23/penn-state-says-wilderness-is-too-risky-for-outdoors-clubs/
America’s Fentanyl Problem Is Reaching a Whole New Group of Users
https://www.motherjones.com/politics/2018/04/americas-fentanyl-problem-is-reaching-a-whole-new-group-of-users/
Hows that ‘War on Drugs’ going? Like all those other wars, its being lost. This empire can’t tell the truth from the lies, they are so far down the rabbit-hole. Thats why none of its solutions are going to work; they believe their own half-truths.
A half truth is like a half-brick, it travels further….
‘In Shakespeare’s words regarding the architects of the New World Order:
“Hell is empty and all the devils are here.”
Our indelible task is to send the “devils” of our time (Trump, May, Clinton et al), the self-proclaimed architects of democracy and the “free market”, down to where they rightfully belong.
“One may smile, and smile, and be a villain!
”https://www.globalresearch.ca/william-shakespeare-and-the-new-world-order-hell-is-empty-and-all-the-devils-are-here/30493
Soft Repression, Chinese style
https://news.yale.edu/2018/04/20/china-uses-softer-tools-repression-says-yale-political-scientist?utm_source=YNemail&utm_medium=email&utm_campaign=ynalumni-04-23-18
300 millions barrels of oil — a new Ghawar!!!! We are saved!!!
https://www.zerohedge.com/news/2018-04-23/new-alaskan-oil-rush
Correct me if I am wrong, but will that not last us but about 3.5 Days?
You are not wrong.
It will be 3.5 more days of fun…I takes it were I finds it
https://medium.com/@FeunFooPermaKra/history-repeats-itself-as-the-story-of-the-easter-islands-downfall-begins-to-unfold-globally-b7f3556e0501
What had happened was that the warrior clans had taken over, and the island was engulfed in blood-soaked madness. Groups hoarded large amounts of obsidian blades formerly used for toolmaking in preparation for any incoming attacks. Villages were burned to the ground during battles of unimaginable brutality, followed by cannibal feasts held by the few survivors.
And they didn’t have high capacity fire arms (AR-15) that can shoot 100 plus rounds a minute…
+++++++++++++++++
Great article; from it I excerpt this (moai are statues… I believe);
‘Blind, fanatic belief trumped rational thought. The trust in the infallibility of the moai remained unshaken, their omnipotence undoubted. As long as people just continued to worship and honor them, they believed, the moai would take care of them; no matter what trials and tribulations the future held, their ancestors’ promises of plenty were not questioned. Lifeless artifacts were believed to magically feed, clothe and shelter the people who loved them so fervently, even more so now that there was nothing else left to love.’
https://medium.com/@FeunFooPermaKra/history-repeats-itself-as-the-story-of-the-easter-islands-downfall-begins-to-unfold-globally-b7f3556e0501
Substitute technology for ‘moai’ and you see how inevitable the end of our petri dish experiment is. The western world did dabble with religion for a while, and will return there for a while…on its whistling way….down…
Like the Iranian I met, who believed that the severe water crisis in Iran (40% of agricultural land will become unviable according to their government) was not due to people stupidly over-pumping, but due to the fact that the theocratic dictatorship had ‘broken the moral law and the gods were punishing Iran.’ Seriously!
https://www.zerohedge.com/news/2018-04-23/8-10-pedestrians-stuck-van-toronto-hit-and-run
Justin cried twice… once for the people run over… and once for the driver of the van… Justin spends 3 hours per day crying about something … Justin is .. a crier…. (and a tosser)
https://imgur.com/a/rVsgn18
The sad thing is… that probably was not staged… Trudeau is a verifiable snowflake.
Kate Middleton’s delivery of her third royal baby cost less than a typical birth in the US
http://www.businessinsider.com/kate-middleton-royal-baby-lindo-wing-st-marys-delivery-cost-2018-4
Ha, aren’t we serfs so lucky!
But hold on, the total costs of yet another ‘royal brat’, now lets look at that figure. How many third world villages/towns…..cities? could that sum support.
This is soft p*rn for the headless losers who need an icon to adore.
Smile!!!!
And the royals all have 3 babies now: never mind overpopuation, more babies!
Some one has to subsidize the poor and the anchor babies lets not forget the new arrivals that are the product of first cousins…that can get expensive.
Royal families need to have a lot of babies…. so they can get married and create even more inbred MORE ons…
http://chrisspivey.org/wp-content/uploads/2013/06/Prince+Charles+HRH+Prince+Charles+Turns+60+qhCjEJDFq5Tx.jpg
http://1.bp.blogspot.com/_NPeIdlHaoaQ/TVL8Laq3ltI/AAAAAAAAH7w/wWLwZX8JjXQ/s1600/prince_charles.jpg
Look at how close those eyes are together… that’s what you get when you parents are first cousins….
What are the possible causes and consequences of higher oil prices on the overall economy?
https://www.frbsf.org/education/publications/doctor-econ/2007/november/oil-prices-impact-economy/
During the mid/late 20th century (1960-1999), a barrel of oil cost $19 on average; during the years immediately prior to the Great Recession (2000-2008), the average price of a barrel of oil had increased to $47; and during the years immediately following the Great Recession (2010-2012), the average price of a barrel of oil had further increased to $81. During the same three time periods, the average price of a metric ton of copper increased from $3,085, to $3,713, to $6,817; the average price of a metric ton of iron ore increased from $36, to $57, to $124; and the average price of a metric ton of potash increased from $114, to $185, to $343. (Prices are inflation adjusted.)
The simple fact is that we cannot grow our global economy and improve our global material living standards on $55 oil, $6,817 copper, $124 iron ore, and $343 potash like we did on $19 oil, $3,085 copper, $36 iron ore, and $114 potash. It should come as no surprise that our Non Renewable Resource-dependent global economy experienced the Great Recession during 2009. Nor should it come as a surprise that we have yet to recover from the Great Recession. Nor will our industrialized and industrializing economies ever recover, so long as price levels associated with the vast majority of Non Renewable Resources remain at their inordinately high levels.
Christpoher Clugston
Scarcity: Humanity’s Final Chapter
the average price of a metric ton of copper increased from $3,085, to $3,713, to $6,817; the average price of a metric ton of iron ore increased from $36, to $57, to $124; and the average price of a metric ton of potash increased from $114, to $185, to $343. (Prices are inflation adjusted.)
There must be some sort of magic holding BAU together
Thats why we worship economics: It’s magic!
Here is a chart that shows it from Reuters
https://imgur.com/a/8LqqRR6
https://imgur.com/a/Wbuznql
Well, being American they have never experienced Socialism or Communism.
And the young are mostly historically ignorant, to a staggering degree.
Tire rotation at Tesla costs $185!
https://np.reddit.com/r/teslamotors/comments/8eaqa3/discussion_why_does_the_model_3s_tire_rotation/
More than 175 Americans die daily from opioid overdoses in the US
https://www.bloomberg.com/view/articles/2017-12-08/trump-is-a-no-show-in-the-fight-against-opioids
People don’t think our civilization could ever collapse, because they think we are too big to fail.
“In all three of the last recessions dating back to the early 1980s, interest rates were cut by 4.5%-5% in order to sustain economic demand. In the downturn following the financial crisis, the Bank had to go a step further with additional stimulus from quantitative easing, opting to pump £445bn into the economy by buying government bonds from the financial industry to help consumers and companies keep on spending. The IPPR said an interest rate cut of that size would not be available any time soon given the current historically low level of rates.”
https://www.theguardian.com/business/2018/apr/22/bank-of-england-dangerously-ill-equipped-for-next-recession-says-ippr
A big rate cut helps offset an increase in oil/energy/food prices. If the only way the world economy can operate is on low interest rates, it becomes impossible to cut enough further. Rates go negative, and this doesn’t work well.
In addition to rate cuts, people have to be persuaded to forget all about the crisis, or to assume that it is all over, and leap straight back into ramping up credit card debt, regardless of the real precariousness of their situation.
I smile when I recall all the pious articles about the ‘New Austerity’, the ‘end of conspicuous consumption’, and so on, which lasted for all of a few months after the 2008 Crunch….
About all that zero% rates and massive debt accumulation. It’s fun while it lasts but watch out for the grownups-
“The Return Of The Bond Vigilantes”
ZH 4-18-2018
“With mounting private and public debt, the U.S. economy is poorly positioned to reach consensus economic growth expectations
“The Bond Vigilantes are saddled up and ready to make a comeback – and it’s market unfriendly.”
In “The Great Bond Massacre” from late 1993 to late 1994, the yield on the US ten year note rose from 5.2% to 8.0% as investors grew fearful about the implications of large federal spending increases.
For the first time in years the bond vigilantes, “a self-appointed group of citizens – the bond vigilantes – who undertake law enforcement in their community without legal authority, typically because the legal agencies are thought to be inadequate” have surfaced – with the ten year U.S. note yield now approaching three percent.
This morning the yield on the ten year U.S. note has hit a new four year high of 2.99%.”
Bottom Line
Given rising private and public debt to levels never seen, an imminent pivot by global central bankers away from easing, the threat and possible consequences of trade policy and the poor demand/supply balance for Treasuries, among other factors – the return of The Bond Vigilantes will have an outsized and negative impact on the trajectory of domestic economic growth.”
Despite protestations from the bullish cabal that interest rates are still low (by historic standards), the return of The Bond Vigilantes (who are now saddled up and ready for a comeback) is another threat to the decade old Bull Market in stocks.”
https://www.zerohedge.com/news/2018-04-23/return-bond-vigilantes
“This morning the yield on the ten year U.S. note has hit a new four year high of 2.99%.”
tonight it’s down to 2.97…
the actual % difference to 3.00 is very tiny…
it’s hard to believe that hitting a very psychological level of 3.00 will set off an economic meltdown…
we’ll see, soon enough… or we’ll see the whack-a-mole tactic where this becomes the next thing that needs immediate Fed attention, and the rate falls…
“Britain cannot rely on gas imports from Europe to help keep the lights on during extremely cold weather, a report out on Monday warns, underlining the vulnerability of the country’s energy supplies to market volatility.
“During the cold snap at the start of March — dubbed the “Beast from the East” — domestic demand for power surged as households and businesses turned up their heating. Britain’s interconnector with France, however, exported power to the continent on two of the coldest days — February 28 and March 1 — new research shows.
“Wholesale power prices in the UK rose five times the average for the quarter, peaking at £990 per MWh, but prices on the continent climbed even higher to meet strong French demand. French consumers use more electricity for heating than their British counterparts.
““While the European interconnector is an important part of Great Britain’s electricity infrastructure, it responds solely to price,” said Andy Koss, chief executive of Drax Power. “Therefore, if Europe has a cold snap, the country is at the end of the line, leaving consumers vulnerable to security of supply and higher prices.”
“The interconnector with France represents about 50 per cent of the UK’s total interconnector capacity. The remainder is accounted for by links between the UK and the Netherlands, and Northern Ireland and the Republic of Ireland. Prices remained lower in the Netherlands so gas kept flowing to Britain…”
https://www.ft.com/content/b13babaa-4632-11e8-8ae9-4b5ddcca99b3
But I’m sure having millions of mandatory electric cars charging off the creaking grid as well will turn out juuust fine.
http://www.bbc.co.uk/news/uk-40723581
It never gets extremely cold in England. Put on a sweater.
It can *feel* pretty cold out here in the Hebrides with the wind-chill. Our winters will be bracing if we ever lose the AMOC.
https://weather.com/news/news/2018-04-12-gulf-stream-slowing-climate-change-study
Must make smart meters mandatory so heating from electricity can be shut down when cold or lack of electricity.
Also eliminates wages of meter readers. I think that was the main reason for the meters. Also, perhaps, time of day pricing.
True, but it gets rather damp.
That’s enough to kill – after one’s will to live has been sapped by reading the Daily Mail. 🙂
And why is Putin not mentioning any of this…. just a subtle hint….
How Much Longer Can Pemex Hang On?
It lost $18 billion in Q4 on declining revenues and production, has $102 billion in debt, and now its world is changing.
For the fourth quarter of 2017 the company posted a zinging loss of 352.3 billion pesos ($18 billion), blaming a weaker peso exchange rate, new reporting rules and higher financing costs. The loss compares to a profit of 72.6 billion pesos in the year-ago period. While the group’s sales increased by some 30% over the duration of 2017, largely due to higher oil prices, costs ballooned by 115%.
https://wolfstreet.com/2018/04/12/how-much-longer-can-pemex-hang-on/
Whatever Pemex’s new top management might say, the group’s vital signs are still extremely weak. Between 2016 and 2017, its production of crude oil slid 9.5%, from 2.15 million barrels per day to 1.95 million, its lowest level since 1980. Its average daily level of natural gas extraction also fell 12.5% to 5.06 billion cubic feet per day.
Ouch! Pemex is of course Mexico’s big oil company. It has been hurt by low oil prices and the government’s need for a high tax rate. The big run up in debt referred to in debt is an attempt to bridge the gap.
Finally the author is acknowledging that one of the problems is that viable oil reserves – and production — is declining… I had commented on his site (not the Wolf site) about this previously and he initially rejected that theory…
If you look at the comments section you see all sorts of cognitive dissonance … nobody wants to touch the end of oil meme… because that hits too close to home… it pushes the fear button ….
They do not understand IQ that tells me all I need to know about them.
Michael Moore brings ‘Flint Water’ to Michigan capitol, tells governor to drink it
http://thehill.com/blogs/in-the-know/384265-michael-moore-brings-flint-water-to-michigan-capitol-tells-governor-to
Otago Update – Fast Eddy’s Log Doomsdate 23/04/2018
We’ve landed on this moonscape and have been unpacking a lot of ‘stuff’… because stuff is what humans live for….
It’s only April but it is quite chilly at night. I asked the neighbours if this weather is normal – and they said yep – April is normally chilly…. So that debunks the XXX XXXX theory (again).
My chief engineer spends all her time at wine tastings so I have been left alone to work out this Rayburn thingy… which is quite important because it means the difference between life and freezing to death…
Apparently it can burn wood or coal … but coal burns hotter so is better….
I Google and can’t find anyone selling coal nearby —- so I call the shop that distributes Rayburn and the lady says — coal is only allowed in rural areas so there is not a lot of demand for it… she tells me she will email a contact — but then goes off on how coal is really bad for the planet… XXX XXXXXing and all that kllllimmmate porrrrn BS….and how I should burn wood only….
But would does not burn as hot as good coal… and a load of coal will burn the entire night… and I hate getting up in the middle of the night to add more would so as you can imagine — I am thinking F789 THAT!
She is of course barking up the wrong tree with all of this…. I ask her how much COAL I will need for the winter… she estimates around 2 tonnes…
TWO TONNES.. I exclaim… wow that’s a lot eh….
She says yes it is quite a lot (murmuring beneath her breath about XXXXX XXXXXX…)
Meanwhile I am thinking — if burning coal does lead to warmer weather in Otago then that would be a good thing… so she should be happy that I am going to go exclusively with coal… a little warmer would be great … unless she is a skier… but I doubt that… she didn’t sound like someone who would ski…. skiing is not green enough due all the coal used to power the lifts….
So now I am eagerly awaiting my first delivery of hard black wonderful coal…. I can’t wait to shovel the first scoop into the stove…. and feel the intense heats… and watch the black smoke go up the chimney….
More updates later
About 2 cubic yards
Pingback: Are High Oil Prices Sustainable? – The Southern Examiner
Oil’s ‘artificial’ surge to multi-year highs could spark a new crisis, economist warns
https://www.cnbc.com/2018/04/19/oils-artificial-surge-to-multi-year-highs-could-spark-a-new-crisis-economist-warns.html
There are four very familiar cures for over population, they ride horses.
-JMG
https://imgur.com/a/IgLgBOt
and yet, JMG thinks this (IC) civilization will follow a similar stairstep downward path as past civilizations…
lately, I’ve become convinced by others that this one will be different…
IC is a worldwide network of JIT systems…
it’s entirely different than past civilizations…
the four horsemen will be hyper busy this time…
“and yet, JMG thinks this (IC) civilization will follow a similar stairstep downward path as past civilizations…
lately, I’ve become convinced by others that this one will be different…”
I presume “others” refer to the guy who thinks it’ll happen on June 1st. Greer’s staircase decline is really a linear decline (plotted along the edges of the “stairs”), where the entire IC is still functioning but to incrementally lesser degrees over time. I suggest a metamorphic/stepwise decline, where over time entire segments of the current IC become absent or unrecognisable as they cannot be supported any more. By “segments” I don’t just mean “peripheral countries”, but also standards of living, services, prices, various jobs etc.
A good way to understand this is by imagining the entire FF energy system as a moiety of two systems – one that produces and another that disperses energy. As long as the production system remains “hotter” than the dispersal system, everything is fine. However, over time, the dispersal system (commerce, consumption, most modern jobs etc.) demands more heat and it isn’t forthcoming from the production system (resource extraction, more efficient production & products etc.), leading to equilibrium. The only solution is cooling the dispersal system, and that necessarily involves metamorphosis/phase change.
“I presume “others” refer to the guy who thinks it’ll happen on June 1st.”
oh no… I’m still guessing 2030s…
“over time entire segments of the current IC become absent or unrecognisable as they cannot be supported any more. By “segments” I don’t just mean “peripheral countries”, but also standards of living, services, prices, various jobs etc.”
I’d say this is a good probability, and is unlike all past civilizations…
“segments” or parts of IC will fail sporadically…
at some point, these failures will accumulate to a tipping point and the whole system will fail…
I think it’s obvious that we are already seeing “segments” failing…
I see no global ‘stepping down’ at all.
I see stepping down in some countries….
But then I see stepping up in other countries – particularly China….
So that overall the global economy is growing… it is not collapsing…
And that has always been the case… ebb and flow… some countries become prosperous… others sink into poverty….
Collapse when it comes — will involve all countries … it will involve a drop in global GDP… which will lead to a deflationary death spiral…
And then the power will go off – permanently…
What is new and sobering is that many of the countries currently “stepping down” may be doing so irreversibly. In the past there was always the possibility that accelerating growth somewhere on the planet and/or the discovery/development of native resources could pull a struggling economy out of a slump. But now nations like Venezuela and Iran are withering on the vine with little hope of re-invigoration.
Nothing’s getting better in those nations and then, at some unknowable point, they will be sucked into the global, deflationary collapse you envision, FE, and things will get a whole lot worse. Depressing.
One must not dwell on that … one must live as if BAU will live forever… but at the same time understanding that it is about to end imminently…. that requires keeping two diametrically opposing thoughts in one’s head at the same time…. if that is proving difficult (and it most definitely is)… Abilify might help….
“I’d say this is a good probability, and is unlike all past civilizations…”
It is exactly like past collapses, except more quick, pervasive and complex.
I wonder about Venezuela. It’s true that the present government and economy are a mess, but those oil and gas resources are there for others to exploit, once the present crowd is gone. For any natives still around, there might be an economic resurgence for them (i.e., paying jobs, a new sound currency) based upon further exploitation of those resources. See Iraq, Libya as MENA examples.
We will see… It will probably be a little bit linear collapse, little bit staircase collapse, little bit instant collapse. If your dark chocolate doesn’t show up at the store, maybe some apples will. If your Tesla breaks down maybe you can find an old Honda. Lots of FF made stuff in stock (laying around) we haven’t “used up” yet. Lots of potential for (forced) simplification of life.
Oil Is Fast Approaching $70. Is the Economy Ready for It?
If crude continues to move higher, it could begin to stifle economic growth
Oil prices are headed toward $70 a barrel, a weight on the U.S. economy that is bearable for now but could pose trouble if prices keep climbing.
The last time U.S. oil prices were at $70, in 2014, they were in the middle of a steep collapse. Many investors believed then that prices would soon stabilize, or even recover. Instead, they continued to plunge, eventually hitting a bottom in 2016 at $26. That tumble caused acute pain for oil producers, whose troubles rippled out into stocks, bonds and the broader economy.
This year’s rally is a sign of how much has changed in a few years. Global growth has picked up, while U.S. unemployment has fallen. A gambit by the world’s largest oil producers to cut production has been succeeding in eliminating a massive glut, with help from soaring demand.
Oil prices have climbed more than 60% since last summer’s lows, and U.S. producers are exporting more crude than ever.
U.S. crude-oil futures, front-month contract Source: WSJ Market Data Group .a barrel 2014 ’15 ’16 ’17 ’18 20 30 40 50 60 70 80 90 100 110 $120 For now, some investors say oil prices are lodged in a range that could benefit the U.S. economy by bolstering the recovering energy industry without curtailing demand.
Yet even with the economy chugging along, rising oil prices dredge up fresh concerns. If crude continues to move higher, it could begin to stifle economic growth. Higher consumer prices for gasoline and other energy products act like a tax, while pushing inflation higher and increasing pressure on the Federal Reserve to raise interest rates more aggressively.
That, in turn, could slow growth and weigh on the stock market, which has already been knocked around by trade tensions, rising bond yields and recent bouts of volatility. Inflation concerns pushed the yield on the 10-year Treasury note to the highest since 2014 on Friday, while major U.S. stock indexes closed lower, wiping out much of the recent gains after a string of upbeat earnings.
“Nothing can suck cash flow out of the economy faster than rising oil prices,” said Joseph LaVorgna, chief economist for the Americas at Natixis .
When oil prices fell below $40 a barrel, financial distress from the energy sector started to spread, said Jason Thomas, director of research at the Carlyle Group .
But if oil prices continue rising, they could boost inflation expectations, which would raise bond yields and the cost of financing.
“We’re starting to move out of that Goldilocks zone,” Mr. Thomas said. “Certainly $10 to $15 a barrel more there starts to be this drag.”
President Donald Trump tweeted Friday that oil prices are “artificially Very High!”—a sentiment that would have been unthinkable even a few months ago. Oil prices tumbled after his comment, but recovered to settle at $68.38 a barrel Friday.
A major force behind rising oil prices has been a policy reversal from the Organization of the Petroleum Exporting Countries. In 2014, the group opted to continue pumping oil at high rates in an effort to protect its market share against encroaching U.S. shale producers. Two years later, OPEC reversed course, enlisting other major producers such as Russia in a coordinated production cut that has helped to nearly eliminate a supply overhang.
Going, Going, Gone The world’s glut of stored oil has quickly disappeared
“The conversation is changing,” said Antoine Halff, senior research scholar at Columbia University’s Center on Global Energy Policy. “A year ago the conversation was ‘lower for longer’ and the ‘age of abundance’” for oil, he said. Now, “the idea of cheap oil forever is being challenged.”
A booming global economy has also been key, keeping demand high as excess oil and fuel gets soaked up by consumers around the world. The first quarter was likely the strongest for global oil demand growth, year over year, since the fourth quarter of 2010, Goldman Sachs said.
Demand has remained strong even as oil and fuel prices have been rising, and many analysts believe that prices still aren’t high enough to prompt big changes in behavior.
And with the U.S. now on track to overtake Russia as the world’s largest oil producer, a large swath of the U.S. economy stands to benefit from higher prices. Oil prices are even higher abroad, which has made it lucrative for U.S. producers to ship more crude overseas. Brent, the global benchmark, climbed to $74.06 a barrel Friday.
“In the past, any time oil prices have gone up it was as a result of supply constraints and the U.S. was at the mercy of foreign oil,” said Joseph Tanious, senior investment strategist at Bessemer Trust. “But U.S. oil production has picked up in a meaningful way—there could be also some benefits to having modestly rising oil prices.”
Oil’s rise has started to lift energy companies’ share prices, which had been slow to react to higher prices. Oil-and-gas companies have taken over as the U.S. stock market’s priciest segment, according to Credit Suisse analysts. Energy shares have gained 1.5% so far this year after a nearly 10% gain over the past month.
But even some producers worry about what will happen if higher oil prices stick around too long.
“We’re going to lose demand. It’s going to move more toward alternative energy,” Scott Sheffield, chairman of Pioneer Natural Resources Co., said at an energy conference last week. “I don’t think it does anybody any good to see $70, $80 crude.”
Write to Stephanie Yang at stephanie.yang@wsj.com and Alison Sider at alison.sider@wsj.com
https://www.wsj.com/articles/oil-is-fast-approaching-70-is-the-economy-ready-for-it-1524394800?mod=e2twe
Looks like someone at the WSJ might be following Gails work?
I love how they never talk about US economic growth. They also instead point to the fake unemployment numbers or stock market as their evidence that the economy is in great shape…
Notice how this writer says global growth is good then proceeds to cite data about the US economy, to make it appear that they are connected together.
More than half of states of America lack enough unemployment funding the next recession
In 2009, mired in the depths of recession, Ohio’s unemployment trust fund went broke, prompting the state to borrow $2.6 billion from the federal government so it could keep sending checks to unemployed workers.
Now, with the state unemployment rate down to 4.4%, the debt has been repaid and the trust fund has started to rebuild, but not enough to leave Ohio with sufficient funds to manage another economic downturn.
That challenge exists across the country: Low unemployment has led to a recovery in state unemployment funds, but the recovery is mixed and incomplete. State unemployment trust fund reserves hit $55.2 billion last year, up substantially from $9.5 billion in 2010. Despite the rebound, more than half of U.S. states lack enough unemployment funding to be prepared for another recession, Labor Department data show.
Economists and policy experts say many states—including powerhouses like New York, California and Texas—are missing an opportunity to rebuild their funding during good economic times. Complicating their outlook, the federal government may not be in a strong position to help the next time the U.S. economy goes south, because federal budget deficits are approaching $1 trillion.
“Given how robust the recovery has been, this is a high number of states to not be meeting the recommended federal solvency measure,” said George Wentworth, senior counsel at National Employment Law Project, a group that advocates for the unemployed. “When there is another recession these systems are going to…provide considerably less economic security.”
For a trust fund to be recession-ready, it must have enough in reserve to pay out benefits at a recession level for a year. As of the beginning of 2018, 24 states and jurisdictions including Washington, D.C. and Puerto Rico exceeded this standard, while 29 states and territories including the Virgin Islands fell below it, according to a Labor Department report.
By comparison, in 2000, when the national unemployment rate matched today’s 4.1%, 30 states met the solvency standard.
In the majority of states, trust fund money derives from taxes on employers, with a few states requiring employee contributions. If states run out of funds, the federal government typically provides a backstop.
State trust funds owed $47 billion to the federal government in 2011, according to a Century Foundation paper by Andrew Stettner. By the end of 2017 their debt had been reduced to about $1 billion.
To pay back the federal government and recover funding, states have pursued different strategies. Nine states reduced the duration of benefits to fewer than the traditional 26 weeks.
North Carolina is among those nine. The cuts might have helped to encourage individuals to find work. In the second quarter of 2017, the percentage of workers claiming unemployment benefits was lower in North Carolina than in any other state. The average weekly benefit was $252, 46th in the nation.
The state’s fund is now big enough to make payouts through a recession, but some policy experts say cutting benefits will come with costs. During a recession, the duration of benefits and average payment could prove insufficient to cover a wide swath of unemployed workers.
“If there is a tremendous economic downturn, it will not provide the assistance to the families or have a stabilizing role,” said Bill Rowe, deputy director of advocacy at the North Carolina Justice Center, an organization aimed at alleviating poverty.
States figuring out how to address low funding levels are faced with limited options that often boil down to how much to cut worker benefits or raise employer taxes.
That debate is still playing out in Ohio.
For Steve Bruns, president of Ohio-based Bruns General Contracting, part of the legislative solution lies in limiting the length of worker benefits. He hopes the state can bring the fund back to solvency, as taxation scars from the last recession still linger.
Mr. Bruns’s construction company was paying nearly three times as much in taxes per employee to the state in the wake of the recession, as Ohio paid off debt to the federal government. The firm cut costs on energy, employee perks and building operations as a result of recessionary pressures exacerbated by the extra taxation, he said.
“We were scrambling trying to figure out how to make ends meet,” Mr. Bruns said. “(The taxation) was just another burden you had to deal with.”
With others arguing the employer tax is minimal and necessary to save worker benefits, Ohio’s newest legislation proposal—House Bill 382—continues to stall.
“Everyone recognized the system was not adequately funded but kept kicking the can down the road because no one wanted to do the heavy-lifting to actually fix the problem,” said Don Boyd, director of labor and legal affairs at the Ohio Chamber of Commerce, of the prerecession days.
“I don’t think we’ve done an adequate job of addressing the issue to try and make sure we have enough in our trust fund to weather the next storm.”
A spokesman for the Ohio Department of Job and Family Services declined to comment.
Write to Sarah Chaney at sarah.chaney@wsj.com
https://www.wsj.com/articles/a-downturn-that-costs-jobs-could-catch-the-u-s-unprepared-1524424830?mod=e2tw
$3 gasoline is coming soon as demand jumps and crude oil prices rise
https://www.cnbc.com/amp/2018/04/18/3-gasoline-is-coming-soon-as-demand-jumps-and-crude-oil-prices-rise.html
higher prices for oil products, and this:
https://www.cnbc.com/2018/04/20/bonds-and-fixed-income-data-fed-speeches-on-the-agenda-for-investors.html
“The yield on the 10-year Treasury note hit 2.96 percent Friday, hitting its highest level since Jan. 10, 2014.”
who is worried?
$3 gas??? In Canada that would be considered a gift as we’re paying over $6!
I paid under 4 today for dino Dont forget the exchange rate an smaller gallon
In my parents and grandparents generations a man could go to work and earn enough to both buy a house and comfortably sustain his family, with two or three children.
Now a man and woman can be married and not earn enough to own their own property or afford to even have a child, even if living a frugal life.
This destruction of families and the creation of circumstances in which people cannot afford to have children should be thought of as genocide. ……
This is the statement of someone who grew up in an era of fossil fuels, and expects the situation to go on forever.
The fossil fuels led to overpopulation. Perhaps that is what you should be complaining about.
You act like there was nothing your generation could possibly do. You know scientist invented a cure for overpopulation called birth control and abortion.
This evening I listened to a young lady talk about her experiences working as a Peace Corp Volunteer in Panama. She told about all the things she was working on–mostly in the area of cleaner water supply and better sanitation. She also showed a chart of what all of the volunteers were working on. No one was working on birth control. All of them were working on ways to (indirectly) increase population. This is just plain crazy.
Do-good foundations are also fighting illnesses, but not handing out birth control. People selling goods to the poorer countries are trying to sell more of their goods, but birth control does not seem to be high not the list of things being sold.
The industrialized countries very quickly dropped their own population growth rates down once birth control pills became available. In fact, quite a few other countries (including China) got the idea as well. But there are many countries (especially in sub-Sahara Africa) that have seen their populations mushroom.
I suspect that they subscribe to the notion that healthier Africans will live to get educated, and that – healthier, educated and much longer-lived – they will see that there is no need for large families,as most children will survive infancy: therefore no need for them, the NGO’s, to touch the political and ideological hot potato of birth control ‘imposed’ by Western imperialists….. Yes, quite crazy.
I suspect the churches. Whenever religion is strong, many kids are welcome. And on the other side, if you get pregnant to young or without a man, then it is to punish you for having sex.
I will never understand, why people don’t see, that more and more people are a problem, and not a solution.
I would say, “Wherever multiple wives are encouraged, many children are to be expected.” This is a much bigger issue than “religion.” Multiple wives does, in fact, go with many of the religions of the world.
No, I see it differently. When I look from my atheist region of germany at the US, I see many families with a lot of children who are evangelic. So also the cristian religion is proud of having many, many children. But you are also right, in the book “Countdown”, the author says, multiple wives are in constant competition.
According to the UN having a child is a human right…Nigeria will have over one billion people by 2050..They get a right, you get a right, everybody gets rights!!!!!!! We live in Disney Land! WEEEEE!!!!!!!
See japan to understand what a declining birth rate looks like
I know. But have never been there. Maybe it has to be like waves? Japan is weird, no rights for woman and still they have no babies!
Speaking of Japan:
“New export orders [from Japan] — a lead indicator on global demand — fell for the first time in nearly two years.”
https://www.businessinsider.com.au/japan-manufacturing-pmi-global-slowdown-2018-4
I love Japan we were planing on retirement in Japan before the SPFs went poof…They are even allowing you to bring in care givers with you now.
In 1895 Vanderbilt wrote a book in which he complained about the Rockefeller oil plan as oil will run out. I blame all leaders since that day who went along with oil and unlimited immigration.
even without overpopulation, dependence on a finite resource with no easy replacements in sight will eventually result in the same predicament, only taking a little longer.
we are in a box. Earth is buried deep in a gravity well and we have seen how hostile the space environment is and how desolate/hostile the other solar system planets are. the nearest star is Alpha Centari at about 2 light years. unless we think fast and can conquer space travel to other worlds, we are staying in place until cooked or frozen.
Doom, actually it’s over 4 light years away. Hope that won’t discourage Elon!
Just a slight correction, not a big issue. If the Oort Cloud exists, then it is thought that it could extend out as far as 3.2 light years. This would mark the absolute outer edge of the Solar System. The nearest star, Proxima Centauri, is about 4.25 light years.
If you are planning a trip there, you may like to pack a picnic lunch or two.
make that
A Journey in Other Worlds: A Romance of the Future, by John Jacob Astor; 1894; D. Appleton, New York.
A science fiction novel by the incredibly wealthy businessman and member of the prominent Astor family, John Jacob Astor IV, in which he offers an imagining of life in the year 2000. Astor, an amateur inventor himself (patents included a bicycle brake and turbine engine) makes a number of speculations about future technologies (some more accurate than others), including descriptions of a worldwide telephone network, solar power, air travel, space travel to the planets Saturn and Jupiter, and terraforming engineering projects
FE, John Astor proposed solar back in 1894!! Rag on.
Astor’s mention very appropriate here because of his fate.
quite ironic:
“Astor died in the sinking of the RMS Titanic during the early hours of April 15, 1912. He was among the 1,514 people on board who did not survive.[2] Astor was the richest passenger aboard the RMS Titanic and was thought to be among the richest people in the world at that time, with a net worth of nearly $87 million when he died (equivalent to $2.21 billion in 2017).”
so he died on some of the cutting edge tech of his time…
oh, well…
if he survived for a long life, he still would be dead by now… 😉
Go on welfare, then you can reproduce just as much as you like, from what I observe – nearly all the large families belong to the lowest social classes.
On the other hand, unlike most previous generations, in most civilizations, you are most unlikely to be conscripted into the forces to fight a war, which is no small thing.
Every epoch has its own dominant evil. One’s expectations of life are not rights.
Not being able to own property or have a family is actually quite small beer compared to an agonizing death or being maimed for life at the very beginning of adulthood, or when you already have a family.
Every day I walk past an American war cemetery containing the graves of thousands of mostly very young men who died horribly in WW2, far from home, and consider how lucky I have been in comparison to them.
Why health care costs are making consumers more afraid of medical bills than an actual illness
https://www.cnbc.com/2018/04/22/why-health-care-costs-are-making-consumers-more-afraid-of-medical-bills-than-an-actual-illness.html
Cleveland Clinic is focused on “standardization of care.” How is this going to help healthcare costs? We already have a system where every injury requires imaging studies of various kinds, and every incidental finding must be followed up upon, even if the chance of a serious problem (like cancer) is less than 1%. This results in a lot of over treatment, I expect.
Everyone, even those who are 95 years old, can get surgery, if the standard of care suggests it. At some point, the whole situation becomes absurd. We seem to be past that point.
One big issue today is people whose health is compromised by being hopelessly obese. There seem to be diet based ways of fixing this problem, but it is rare to hear anyone consider this approach. Instead, we are brain-washed into thinking that we can add ever-more healthcare and somehow fix the system.
Most Americans eat unhealthy food because healthy food is too expensive. A double cheeseburger at MacDonald’s cost around 1.50 and has the same calorie content as a 5.00 salad. And poor people eat unhealthy food because it’s one of the only indulges they get.
Rich people eat unhealthy food too. They think that the salad with dressing is good for them. The salad is good; the oil in the dressing not good for them (vinegar is OK). Neither rich nor poor does very well in terms of health.
Healthy food is not expansive. But you have to cook or prepare it in one way or the other. The commericals have told us for decades, spending time on household chores is wasted time. You have to go out and get “experiences” .
I do not consider my diet to be super healthy but judging by what I see in peoples carts I am way above them.
Food is cheep in my market if you buy on sale. This month flour was $8.00 for 10 kg bag
Pasta $1.00 a kg Pasta sauce 90 cents for 680 ml Prices are in Canadian $
Thats what I mean: you can buy flour, potatos, milk, tomatoes, apples, cheese, eggs, onions. This is not expansive, but you have to spent some time preparing a meal 🙂
Indeed
Americans pay the same amount of taxes as countries where they have universal healthcare.
I don’t quite understand the system. Here is an article about the health care system, could maybee be of interest for you more directly concerned?
http://evonomics.com/the-american-healthcare-system-shows-why-we-cant-trust-free-market-ideologues/?utm_source=newsletter_campaign=organic
We need a free market in medicine. End the AMA monopoly backed by the federal government guns.
“We need a free market in medicine.”
We have tried that– double the cost, and we are 31st worldwide (between Cuba and Costa Rica).
It is time to move on, get well, live longer, and do it for half the price.
World Bank recommends that countries eliminate minimum wage, dismantle wrongful dismissal rules and contractual protections for workers
https://boingboing.net/2018/04/21/are-there-no-workhouses-4.html
Perhaps the World Bank has figured out how “bad off” the world is? I suppose the view is that by doing this, goods and services could become a little more affordable, so more people can work, and thus the total welfare in some sense can improve–not to mention the businesses that can stay afloat a little longer, if rising energy prices are squeezing the amount that can be paid to workers.
Not a good situation, however it came about.
The world bank wants more slaves, so they can sell more debt in the form of loans, so they can keep making a profit, so they can enrich themselves at the expense of countries and the working class that inhabit them.
These f*** should be burned at the stake.
Sounds like the nature of the economy as a dissipative structure at work.
Yes, there is something particularly disgusting about well-paid career bankers. with index-linked pensions, and tax-funded job security, demanding the abolition of the pitiful minimum wage.
Dennis Meadows said in an interview back in 2014. That he talked to the head director at the World Bank about peak oil. And the director told him that peak oil was not allowed to be talked about at the World Bank. It was simply a taboo. And anyone who tried to bring attention to it would be instantly fired or transferred to another department.
https://imgur.com/a/wzEfL1B
you are proving neither
A return to the system that worked in medieval England for a 1000 years. The owning class owns everything including the means of production. The people obey. The sheriffs kill al who do not obey. The past and the future and basically today’s world.
They can continue making that point when we are breaking down their doors, and finish making it on the gallows.
Let the streets run with their blood. It can be cleaned up with their Brooks Brothers suits.
This recommendation makes sense…. fighting over a smaller pie is not helpful
Tesla’s report card: An ‘F’ from the Better Business Bureau
https://www.mercurynews.com/2018/04/20/teslas-report-card-an-f-from-the-better-business-bureau/
More than 700 million workers living in poverty in emerging and developing countries
https://economictimes.indiatimes.com/news/international/business/more-than-700-million-workers-living-in-poverty-in-emerging-and-developing-countries-ilo/articleshow/63856381.cms
Solution is more energy per capita, if that is possible. It doesn’t look like that is going to happen.
The sooner these people are killed off the less human suffering.
I bet you are the life of every party and family get together…./s
“The sooner these people are killed off the less human suffering.”
does it then follow that human extinction will be good because it will reduce human suffering?
Define “good”.
the game of MONOPOLY explains our necessary financial evolution in MONOPOLY only one player can win by bankrupting all the other players in the same way our financial system will bankrupt every person on this planet The winning player in monopoly owns everything in the same way the financial system will own everything. This will lead to a totalitarian system emerging which will keep things plodding along for many generations enough time to discover an alternative energy source If there is only forty days to the good old days then keep on prepping by spending your fiat because in forty days our fiat currency will be dead and buried
yahoo!
I think I’ll cash out all of my assets (not that much, really)…
then divide it by 40…
and spend spend spend until June 1st…
especially on dark chocolate…
“… keep things plodding along for many generations enough time to discover an alternative energy source…”
know how humans get most of our energy?
we burn stuff…
wouldn’t you think that if there was some “alternative energy source”, it would have been discovered by now?
we burn stuff…
first, mostly wood…
then coal…
then oil…
then natural gas…
aren’t humans so incredibly ingenious?
“we” figured out that not only does wood burn, but so does coal and oil products and natural gas…
genius!
I hope those geniuses can keep the toilet paper production going after June 1st…
@Davidetc, we get it. You’re a really edgy and ruthlessly pragmatic guy privy to special knowledge about “the nothingness of eternal death”, as well as possessing a dangerously funny sense of humour. I’m not suggesting that writing “burn more xyz” every second post isn’t absolutely hilarious, but there are only so many iterations of such chaotic, earth-shattering hilarity my feeble ribcage can handle!
Yea, how about something more exciting?
https://78.media.tumblr.com/2446ef9e8202b3221cf0b7ed999601ea/tumblr_oqvxudQStS1wnxc69o1_400.gif
“@Davidetc, we get it…”
sure, I’m borderline Asperger and oddly enough I usually post in bigger quantities when I’m the most tired…
huh, maybe that’s why the next day I shake my head at some of my own posts…
so what to do, what to do? hmmmm…
well, as Keynes said: “in the long run, we’re all dead”…
oh, I know!
BAU tonight, baby! 😉
Tesla app down, Model S and X owners cannot unlock cars.
https://pbs.twimg.com/media/DbV74wCX0AAouc4.jpg:large
I presume this only applies to people who have locked themselves out of their cars, and need Tesla to let them back in.
Venezuela’s collapse one of the worst in modern history:IMF
https://au.news.yahoo.com/world/a/39989671/venezuelas-collapse-one-of-the-worst-in-modern-history-imf/
Amazing how the situation in Venezuela seldom even makes the nightly news. I agree it is a major collapse. And it is not in the Middle East. It is south of the US border. And given the state of Mexico’s oil fields, I feel that Mexico is not going to be far behind Venezuela either. Not a good situation for us in the US. I think at one time Mexico and Canada made up the bulk of US oil imports.
Government Intervention is triggered by a Keynesian belief that aggregate demand can be increased by lower interest rates and by increasing government deficits thereby somehow spurring economic growth. Debt grows faster than income growth and eventually has to be restructured, i.e., everyone loses in the end. Since 2007, global debt has grown by US$57 trillion and it’s had disastrous results. Greece, Detroit, Puerto Richo, Venezuela are just the beginning of this trend. Soon, it will be followed by larger countries like China and United States.
https://www.perchingtree.com/return-of-great-depression/
As a former Mexico resident, and someone who, viewing the Western Media, Venezuela should of collapsed 2 years ago, I would check my sources.
I don’t have a clue– but obviously the analysis is wrong.
Maybe some other analysis is warranted?
No country will well and truly collapse… until BAU collapses…
Collapse = power going off permanently.
Venezuela is currently a paradise.. a kind of Club Med … compared to what it will be when BAU goes down.
Nicaragua looks interesting at the moment. Social security reforms leading to violence.
Haven’t they heard of QE in that country?
“The country also faces hyperinflation, with prices expected to rise 13,000 percent…”
yes, why can’t QE help with something like that?
isn’t QE a lot like economic duct tape?
can’t it fix just about anything?
Some people think that any country can do QE, with favorable results. In fact, MMT people seem to advocate something related to this.
If it is too obvious that the country cannot repay the debt, then it cannot work.
The MMT concepts of the oil market are way off. Strong belief that oil price is set by SA. Too much focus on theory and not enough on resources!
http://moslereconomics.com/page/91/?s=oil
I know a person that collects gold wedding bands I bet you could sell one a week without setting off the alarm.
“The oil-rich nation has seen a “spectacular” drop in crude production falling by half in the last 18 months, he said, which is a major problem for the cash-poor economy.”
we wouldn’t want this kind of fact based idea to become common knowledge here in the good ole USA, now would we?
How do we cope with robots stealing our jobs?
http://www.atimes.com/automation-american-leadership/
author: Robert Skidelsky
“Robert Skidelsky, a member of the British House of Lords, is Professor Emeritus of Political Economy at Warwick University.”
old Bob here is a very smart man…
and totally clueless about the FF basis of modern prosperity…
“… note that the US economy has been at full employment for just 30% of the period since 1980, compared to 70% of the period between the late 1940s and 1980.”
and why would that be, Bob?
any clue?
sometimes, these clueless authors get quite annoying…
Luddites meet Blade Runner: shot-g-un those Google drones as job stealers?
Amazon drones…
Amazon drones.
Surprise package grabber
Baby, your chemistry of life bigotry is saddening. Silicon life forms have equal rights. How do we cope with worthless unneeded humans. Let’s start with sterilization and move on from there.
Capitalism’s Betrayal Of The Working Class Could Be Its Undoing
https://www.huffingtonpost.com/entry/capitalism-betrayal-working-class_us_5ad6476ae4b016a07ea15354?ncid=tweetlnkushpmg00000067
on the surface, it may appear that capitalists are “betraying” the working class by limiting pay increases and reducing benefits…
but, it seems like in so many of these MSM articles, there is always that big swing and a miss, as one clueless author after another gives their analysis of what is going wrong with the modern economy…
the big miss here is the usual one… cheap (FF) energy resources are diminishing and per capita energy is not increasing (likely will be decreasing soon enough)…
capitalism worked fairly well for a century with cheap FF…
the end of that cheap energy will “be its undoing”…
It will also be the undoing of radical socialists – going very strong in Europe at least, certainly among the young – who rather naively imagine that they can capture and enjoy the profits of industrialised (but ‘good’ solar-windy) State Capitalism so wickedly kept from them by the Neo-Liberals.
They will see the end of Bourgeois Capitalism, only to stare into the abyss…..
Yes, and the problem is the new socialists might have found captive audience among the impoverished lower-middle and working class for a while, i.e. before the next leg down on the staircase.
Recently, now we can witness some turning of the mood towards isolationism, less global cooperation, simply imagine wave of turning inwards. For the moment people will be fine with inward (or pretending) looking oligarchs and nationalists, as this won’t deliver the true goods – improvement or even stabilization of situation, they will start looking elsewhere, and incoming ultra socialist without the debt Wurlitzer giga machine spinning can’t do much at this point anyway..
That’s why I always stress the need for debating the possible sequencing within collapse scenarios as this will be very difficult, likely impossible to safely navigate through the stages. But this is planet of doers after-all, so one has to make decisions at crossroads and soldier on somehow.
World, I agree with you about the need to debate / discuss possible collapse scenarios. Despite Fast Eddy’s advice I’m learning and prepping the doomstead to get as many days, weeks and months as possible. Right now I’m a community member going about my business not attracting any attention ( well maybe some with the solar installation) but at some point I’ll need to go full doomer – hence my interest in collapse scenarios.
When one lives on a tiny (and highly energy-intensive) tropical island city like Singapore with no natural resources of its own whatsoever and with millions packed into it, I really wonder just how I can prep… We Singaporeans are probably ‘toast’…
I sometimes wonder if it might actually have been better for me not to have known of any of the terrible things Gail and others spell out for us all. Then I could have just gone on my daily life happily, blissfully ignorant of what’s coming.
Where ignorance is bliss, ’tis folly to be wise.
This is one reason for my not working on a book. What are people really supposed to do, even if they know what seems to be ahead? It is not like a problem we can fix.
“I sometimes wonder if it might actually have been better for me not to have known of…”
my inevitable death…
oh, well, I guess I’ll just keep on prepping…
especially for the 22nd century…
I hear it’s going to be worse than the 21st…
if I can obtain enough supplies for the next 300 years, that would be better…
ps: BAU tonight, baby! 😉
You will get plenty of attention when BAU goes down… assuming you have food… or grow food…
If you enjoy it as I do Fill your boots. It is hard work but I enjoy it more than golf.
Reports of heavy gunfire ongoing near Saudi’s King’s palace in Riyadh, Saudi Arabia. The king has reportedly been evacuated to a bunker at a military base in the city. Casualties unclear. The king has reportedly been evacuated to a bunker at a military base in the city.
https://twitter.com/ghanemalmasarir/status/987763255371354112?s=21
Long live the king!
https://imgur.com/gallery/iJsjQU0
long live The King:
I guess they shot down a drone! Nothing major ..False alarm..
security shoots down a drone flying too close to the palace:
https://www.mirror.co.uk/news/world-news/heavy-gunfire-reported-near-saudis-12404855
the “king” was not in the palace at the time…
Actually now people are saying they do think the first reports might be true, but the Saudi’s are trying to downplay it. I doubt we will ever know…
Where is FE when he is needed……………
Moving from one part of New Zealand to another.
Gail,
we will definitely hold you responsible if Nestlé comes to the idea to purchase us “air from wells”! I think there are already some cities as polluted that people breathe air from cans but i cant provide personal experience. But for sure Victoria Beckham will die to run as testimonial for “air from wells”! I think it could be more successful if not sold in cans but in sacks.
Jan
I am sure that someone sells air purification filters for homes. Air in cans, I think is still a ways off.
We use https://en.wikipedia.org/wiki/HEPA for air
My insurance covers bottled air delivered should we need it.
https://i.imgur.com/OLOLE5h.gif
‘It’s about expanding Earth’: could we build cities in space?
https://www.theguardian.com/science/2018/apr/21/expanding-earth-could-we-build-cities-in-space
Our world is not finite ! We were all wrong : it will expand in space !
Didn’t really read it. Just a few sentences there and there . I find my lack of faith disturbing. According to their comments, it seems that The Guardian readers are neither all easily fooled. Other believe this story is our natural destiny. It’s a necessity, for our earth will be destroyed soon or late by an asteroïd or whatelse cataclysmitic event. And Humanity, the purpose of the Universe, can’t end, can it ?
“Where were you when I laid the foundation of the earth? … Have you comprehended the expanse of the earth? Declare, if you know all this. » – Book of Job 38
Too much focus on growing out. Growing in is also possible, a matter of micro growth or the growth of subdivision.
If each academic area works in a silo, it is perfectly possible to come up with ridiculous ideas such as this. Readers don’t seem to understand what is wrong, either.
I am 100% certain that humans will not expand its populations into space.
It is important to remember the golden rule when reading MSM articles:
The MSM does NOT exist to inform. It exists to control what we think.
When I glance at that article … keeping in mind the golden rule … I conclude as follows:
The Ministry of Truth absolutely does not want people to get anxious about how the world is about to collapse into a sea of starvation, disease, violence and spent fuel ponds…
So they issue edicts to the MSM outlets to run stories that appease the masses … this is one of those stories … don’t worry masses… when we burn the Earth out we will just move on to bigger and better things on other planets… technology will take care of us….
Do the reporters who write this drivel believe what they are writing? Probably — because they want to have hope as well…
Hard Sun (tv series) — whenever anyone gets wind of the end of the world the first thing they say is ‘but I have children!!! — and they get upset with the messenger — they exhibit extreme angst…..
The masses must remain ignorant and oblivious — at all costs.
the five stages of grief–Kubler-Ross.
I should stop probably reading The Daily Mail… A village in Cumbria that will allow its residents to produce more energy than they consume. The article doesn’t go into a great deal of detail but colour me sceptical:
http://www.dailymail.co.uk/news/article-5640681/200million-Utopian-eco-village-500-houses-old-iron-given-green-light.html
Let’s ride to the Future on an e-road that not only produces more energy than our journey takes, but maintains itself magically too!
Entropy, finite resources, the fall of empires – old wives’ tales!
Just believe!
It seems that, just as our financial arrangements have grown increasingly divorced from physical reality these past few decades, so has our thinking. As you said previously, Xabier, moral categories hardly apply – and yet something in me is irritated and embarrassed by our growing collective aversion to reality.
What would be we think of an individual human who refused to look realistically at his (of her or xer or zer ffs) circumstances, insisting that he is far too brilliant and clever and important to worry about how he will pay his bills?
But then, I suppose, if we hadn’t learnt to delude ourselves so thoroughly and therefore so plausibly, the bailiffs would have emptied the house long ago.
Turns out we live in an era of double-edged swords and no-win situations. What fun. 😀
It must have been wonderful in 1850: anticipating ever-growing wealth and science (and peace, because traders and bankers would see the folly of war in so inter-connected a world) and even the revolutionaries thought that they could turn industrialism to the benefit of all, once the bourgeoisie had been eliminated ( a belief not dead yet). We had only to take the path which was so clearly set out for us……
I feel like our industrial civilization is currently running on a lot of momentum and embedded energy. It only seems like we can keep increasing debt and printing money. Physical reality will catch up to our financial promises and, when its effects start to kick in there will be hell to pay. Enjoy each day to the fullest.
Never miss a dawn or sunset…..
+++++++++++
HaHaHa…”no petrol cars allowed. The houses will be constructed with local materials!
Residents will grow there own food!!!” I guess that mean there will not be a
Grocery store in the planned community.
“The residents will work from their homes.”
The delusions are utterly laughable when you deconstruct them.
Yup…Evolution doesn’t go backwards…..
laughable is the right word…
“No petrol cars will be allowed at the site, which could open by 2021, but there will be driverless electric cars for residents.”
then again, laughable falls short in describing this ludicrous idea of a “community”…
You’re so cynical.
http://www.portmillom.co.uk/index.php/projects
I stopped reading when they used foolproof and nuclear in the same sentence.
It could work with space elevators and asteroid mining. The problem with people like you is that you are using your brain instead of feelings.
You are right–this doesn’t really work. It depends on the village drawing huge amounts of resources from elsewhere. These, of course, are not counted in the “energy surplus.”
One type of food that plays a bigger part in historical food supply than they do now is root vegetables and other starchy plant foods. These include potatoes, sweet potatoes, turnips, carrots, beets, green plantain, and breadfruit. Corn is another starchy plant food, but more demanding in its nitrogen inputs. If residents could grow and eat more of such foods, they could grow a relatively large amount of their food supply in a fairly small space. Making these more of a focus of their diet might even help their health (even though it goes against what we have been taught in recent years).
People in Puerto Rico survived due to the abundance of root crops planted.
Interesting! People can live very well on root crops. Some of them need to be cooked. If there is a little biomass around for burning, they are “good to go.” The value of protein has been oversold. Root crops already have significant protein. We can live quite well on it, without getting fat.
We certainly raise, and eat, far too much cheap and poisoned meat.
Still, thinking in terms of total systems, and hedging one’s bets, meat (and bone, blood, skin, wool, fur and sinew – providing) animals might survive when the root crops have been devastated by new pests and diseases.
And of course vice versa, hence the importance of mixed systems: however, old-fashioned mixed farms are, of course, dying out rapidly, as they are financially non-viable unless hobby projects for the rich.
Not much to be done but marvel at how far we have risen, and how much further there is to fall…
This small excerpt seems more relevant than ideas for prepping.
‘……………. I cannot tell you how
beautiful the city appeared, and a little terrible.
I thought, We have geared the machines and locked all together
into inter-dependence; we have built the great cities; now
There is no escape. We have gathered vast populations incapable
of free survival, insulated
From the strong earth, each person in himself helpless, on all
dependent. The circle is closed, and the net
Is being hauled in. They hardly feel the cords drawing, yet
they shine already. The inevitable mass-disasters
Will not come in our time nor in our children’s, but we
and our children
Must watch the net draw narrower, government take all
powers–or revolution, and the new government
Take more than all, add to kept bodies kept souls–or anarchy,
the mass-disasters.
These things are Progress;…….’
https://www.poemhunter.com/poem/the-purse-seine/
Real poetry, visionary and prophetic, not like the new (Somali) ‘Youth Laureate of London’, who just writes about her menstrual problems, as far as I can see.
Why the special emphasis on being Somali?
I for one have been It is a level of hell that you are best to avoid.
violets are blue
roses are red
oil declining
everyone dead
Hey, I really like that poem!
@Shunyata
So many people are stuck in the old economic paradigm. The game has changed – the big boys will service their debts with printed money, a luxury which won’t extend to the smaller fishes.
The big companies, the richer outfits, etc will go on .Those who can’t pay the higher prices will die and be gobbled up by those who can enjoy cheap money for virtually no cost.
It is just a massive resource grab, no more and no less. Yes, the higher prices will go on.
Are environmentalists hypocrites?
https://www.csmonitor.com/Environment/2018/0420/Are-environmentalists-hypocrites
HAYNES AND BOONE, OIL PATCH BANKRUPTCY MONITOR March 31, 2018
https://www.scribd.com/document/376939191/HAYNES-AND-BOONE-OIL-PATCH-BANKRUPTCY-MONITOR-March-31-2018
You might find some of these charts useful for future article Gail..
Thanks! One thing I found interesting is that there are an awfully lot of Texas bankruptcies, and not a single North Dakota bankruptcy. I suppose that that has to do with the fact that no company would be set up in North Dakota, for the purpose of Bakken oil extraction. Texas is very much more the center of the “oil patch.”
Oil Shortages Now Loom
https://www.barrons.com/articles/oil-shortages-now-loom-1524255705
Sorry forgot this was behind a paywall. I know how to get around them..so if Gail or others ever need something translated just ask.
Oil prices have rallied so far this year, as OPEC-led efforts have helped erase a big global surplus. Now, the market may soon face a shortage of crude supplies that would support further price gains.
Stockpiles of the commodity among the industrialized nations that make up the Organization for Economic Cooperation and Development stood at 2.84 billion barrels at the end of February, only 30 million barrels above the five-year average, according to a report from the International Energy Agency.
“The global market has tightened considerably in recent months,” says Matthew Parry, head of long-term research at research consultancy Energy Aspects. The Organization of the Petroleum Exporting Countries is “very close to achieving its originally stated aim of bringing OECD stocks back to parity with their five-year average.”
“What we are seeing happening, and will occur much more frequently going forward, is that one-off [supply issues or threats] will start to have a more pronounced impact upon prices,” says Parry.
When OPEC reached an agreement in late 2016 with some major non-OPEC producers, including Russia, to curb production, stocks were at roughly 348 million barrels above the five-year average, he says.
OPEC member Saudi Arabia has led the way, curbing supplies by around 0.7 million barrels a day between the third quarter of 2016 and the first quarter of this year, says Parry. Overall, “much of the adjustment is not really a deliberate supply-cutting effort, but geopolitical troubles that forced supplies down,” such as the 0.6 million barrel per day contraction in supplies over this period from Venezuela, which suffers from an economic crisis, or “problems with aging wells naturally depleting, such as those that have impacted Angola and China.” Still, OPEC would not have achieved its goal without the recent strength in demand worldwide, says Parry. He views the supply drawdown as “largely a consequence” of stronger-than-expected demand.
For the past couple of months, the IEA has underestimated global demand, with its first-quarter 2018 estimate at 98.1 million barrels a day–which is likely about 0.3 million barrels a day short of true global demand, according to Parry.
Growth in U.S crude production, meanwhile, shouldn’t be seen as “anti-OPEC,” he says, because “supply possibilities change with developments in technology and innovation, and will continue to do so going forward.”
Energy Aspects is “reasonably optimistic” on U.S. supply growth of roughly 1.6 million barrels a day in 2018, but that’s below the U.S. Energy Information Administration’s recent growth estimate of two million barrels a day–and “we see looming infrastructure constraints playing a role in 2018,” says Parry. He says the oil market may soon come up short on supplies, as OECD stocks could be over 100 million barrels below their five-year average by year end.
“Geopolitical tensions have certainly been in the driver’s seat recently as far as price moves, and their influence has gained precedence as the previous stock overhang has been diminished,” says Parry.
The more recent price climb, with West Texas Intermediate crude futures jumping by 8.6% for the week ended April 13, came as the market grew concerned over a potential response to the alleged chemical attack in Syria that killed civilians earlier this month. U.S. President Donald Trump, in a combined effort with France and the U.K., ordered airstrikes against Syrian leader Bashar al-Assad’s regime on April 13, raising the risk of retaliation from Syrian allies, and major oil producers, Russia and Iran. The U.S. had already issued new sanctions on Russia, in part due to what it referred to as Moscow’s attempt to subvert Western democracies, and the U.S. is due to decide on May 12 whether to extend sanction waivers under the nuclear deal with Iran. While the U.S. strikes on the Assad regime in Syria are “not material by themselves for the oil market, especially as they avoided targeting Russian bases, the risks of an escalation with Iran will not go away,” says Parry.
He wouldn’t be surprised if WTI prices broke through $80 a barrel “toward the latter stages” of next year. The U.S. benchmark settled at $68.40 a barrel Friday—seven cents below Wednesday’s finish at the highest since December 2014. “We envisage further stock draws over the remainder of 2018, potentially bringing stocks down by, on average, 0.5 [million barrels a day]” this year, says Parry.
Myra P. Saefong writes about commodities for MarketWatch.