Meltdown

[Lethevich]

charts of some of the major UK housebuilders over the past 12 months

Good, haha. Cowboys, all of them

[BachQ]

Where will Las Vegas be when oil surpasses $200/bbl?

Here's a glimpse:

independent.co.uk: Local bankruptcies [in Las Vegas] have quadrupled. The property market, which rode the wave of a boom for most of the past decade is now below its peak by anything from a quarter to a third (depending on whose figures you believe), while Nevada now boasts, if that is the right word, the nation's highest foreclosure rate. The number of empty homes has caused a health scare after it emerged that mosquitoes – possibly carrying the killer West Nile virus – are breeding in abandoned swimming pools. "With the high oil prices, people don't have much disposable income to spend on gaming and entertainment. So we are looking at a short-term slump, certainly. In the longer term, everything depends on what's going to happen to oil prices."

[BachQ]

charts of some of the major UK housebuilders over the past 12 months

I don't see a trend ......... Is there supposed to be a trend, like a downward slope or something?

[BachQ]

Where has our beloved George W. Bush been the past 8 years?

NYT: Over the last 25 years, opportunities to head off the current oil crisis were ignored, missed or deliberately blocked, according to experts ...  What's more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America's oil addiction.

[DavidRoss]

Where has our beloved George W. Bush been the past 8 years?

NYT: Over the last 25 years, opportunities to head off the current oil crisis were ignored, missed or deliberately blocked, according to experts ...  What's more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America's oil addiction.

Over the past 25 years?  We studied the obvious coming oil shortage in high school in the '60s.  1973 made it so effing obvious--and obvious that it was a national security issue as well--that even Texans were dumping their gas guzzlers.  There is no crisis we face--domestic or global--that could not have been averted or minimized if only we were an intelligent species. 

[BachQ]

Mexico's Cantarell oil field, the 3rd largest in the world, is in steep decline, and epitomizes the "poster child" for peak oil.  Mexico is in serious, serious trouble.

BLOOMBERG, 7 Jul 08: Crude output from Mexico's Cantarell, the world's third-largest oil field, is falling at the fastest pace in 12 years ... Production at the Gulf of Mexico development dropped 34 percent in May from a year earlier, the biggest decline since October 1995, according to data compiled by the government and Bloomberg.

[BachQ]

Telegraph.uk 8 July 2008: In a dire warning, the British Chambers of Commerce said the economic outlook for the UK business sector was "grim and ominous" and the downturn could be "longer and nastier" than previously expected.

[BachQ]

Wall Street Journal 7 July 2008: Oil's historic ascent from $100 to nearly $150 a barrel in just six months is lending weight to a far grimmer prediction: Crude could reach $200 a barrel by the end of the year. Oil at that price would wreak deeper havoc on the world's airlines and automobile industries. In the U.S., $200 crude would push the price of gasoline to well over $6 a gallon ....

[drogulus]

    I don't think it's obvious when you should change over to a new fuel from an old one in a fluctuating price environment. Even now it makes sense to use gasoline in cars. There are hundreds of millions of them and you can't junk them all right now. What you can do is accelerate the replacement of current ones with more efficient new ones. We could have had the foresight to gradually increase efficiency standards (in fact many did have that foresight but they lost the political battle). Even if we had done that the economy would still be dependent on oil to a large degree. You just can't get around the fact that oil, coal, and natural gas are vitally important to our energy system and would be even if we had done everything right.

    The main reason we use so much oil is that until recently it was relatively cheap. Let me emphasize this: Planning for the future aside, it was correct to use it. We didn't plan the transition because we could not agree on how to do it, or what new energy mix would be planned for, or what other goals besides maximum efficiency were to be pursued. For instance, we used to think that nuclear was environmentally bad, when in comparative terms it's quite good. The "no nukes" mania almost killed energy planning in this country, forcing us back onto fossil fuels to an even greater degree.

    The silver lining of this crisis is that now we can go back to pre-"China Syndrome" energy planning and take a realistic look at what role nuclear power generation will play. I think the larger role it plays the easier the rest of the transition will go. All those plug-in hybrids we hope to see will need electricity to charge them, and nuclear is just the thing for that.

[BachQ]

TELEGRAPH.UK, 7 Jul 08: The great oil shock of 2008 is bad enough for us. It poses a mortal threat to the whole economic strategy of emerging Asia. The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete. No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century.

[BachQ]

Telegraph.UK Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system. ...  "We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse..."

[BachQ]

Telegraph.uk 8 July 2008 German industrial output fell at the fastest rate for a decade in May, raising concerns that Europe's economic powerhouse is succumbing to the twin effects of the oil and credit shocks. In Italy, Fiat announced plant closures and temporary layoffs at factories in Turin, Melfi, Imola and Sicily in order to face an economy "in crisis". Car sales in Italy have fallen by almost 20pc over each of the past two months.

[drogulus]

     
      Hey, this is fun!

How Oil Prices Could Collapse

July 6, 2008 - by Youssef M. Ibrahim

Do you think $140 a barrel is insane? Last week the president of OPEC Chakib Khelil predicted $170 a barrel by summer's end. More sobering, this week the U.S. Energy Information Administration forecast world energy use to grow fifty percent by 2030.

If that pans out, it would mean the world will need to burn more than 120 million barrels of oil that day. We have it, but can we afford it? Nope, and that is why the oil domain is crumbling.

Hundred of thousands of hybrid cars are being disgorged from Japan to Europe, deeply cutting gasoline use. Those who dismissed solar energy a decade ago as esoteric now embrace it. Fly over entire countries like Israel and Cyprus and much of southern Europe, all with plenty of sun but no oil, and watch millions of solar panel reflectors stare back at you.

And that big bad wolf of energy, nuclear, will come back. It has already saved Europe's economies from successive ravages of oil. Massively adopted forty years ago as the energy solution by France, the world's fifth ranking economy, nuclear today produces seventy percent of that country's electricity and huge exports to Europe.

There will be a monopoly for oil until we invent something else that can move the car engine. But even General Motors is hard at work on an alternative engine because at $5 a gallon money talks.

Efforts redoubled elsewhere into coal and wind, with these giant wind energy columns now peppering landscapes across Europe and even in oily Texas.

As it happened before, alternatives will crack this energy gig. Right now the world of oil is split among new provinces like America, Canada, and the North Sea — which have given much of what they have — and old provinces like OPEC, Saudi Arabia, and Venezuela, where the rest of the stuff lies.

This is where the rubber is hitting the asphalt and producing mind-boggling prices. As we run out of the "secure" province supplies located under Western control, we are falling to oil controlled by potentates and failed regimes.

The North Sea oil, for example, was discovered in the 1960s between the UK and Norway. Oil companies under international contracts flung that territorial sea wide open, taking it all the way up to a peak of six million barrels a day in 1999 from virtually zero in 1970. They worked under universal rules of law. These are not the rules by which Saudi Arabia and OPEC play.

The same oil companies working in Saudi Arabia discovered all that oil in the 1930s and 1940s and set up production until nationalized and kicked out as partners in the 1970s. They now work there only as hired hands. As a result potential production of millions of barrels is locked down. The same goes for OPEC.

To be sure readers of this column have argued these are capitalist rules — their oil, their move. But globalization demands leveled playing fields, not monopolies. What is sure is that the time for an alternative to oil is now.

And it can break the bank as it did before. Back in 1973 Arab oil producers led by Saudi Arabia imposed a cutoff of oil to the USA and Europe. Prices shot up to the equivalent of $100 a barrel in today's dollars and we were familiarized with what is known as the global oil crisis. While some menaced war, oil companies took off looking for new provinces and found them — like the North Sea, which started pumping from zero in 1971 all the way up to its six million barrel a day peak of 1999. So much new oil was found elsewhere that OPEC's share of world supplies dropped to forty percent from nearly sixty percent.

And prices collapsed as a result, until they resumed their climb two years ago.

Wanda knew it and said it too often. That's the legendary Wanda Jablonski, whose life as a prescient journalist, business editor, and publisher is being grandly celebrated this week with a new book properly titled Queen of the Oil Club, by Anna Rubino.

Reading the book, it becomes clear that we heard it all before but did not pay attention. Although Wanda had a weakness for those oilmen who run the business, she always posed the alternate question. She was so insistent a voice in raising questions about oilmen and their world that they had a less flattering moniker than "queen of their club," giggling that she was a "buster" of a delicate part of male anatomy.

As you read Wanda's story and that of the oil she singlehandedly turned from a simple commodity into "black gold" and the stuff of global crises and wars, you can pick up the message: look for the alternative, now.

     

     

[BachQ]

Do you think $140 a barrel is insane? Last week the president of OPEC Chakib Khelil predicted $170 a barrel by summer's end. More sobering, this week the U.S. Energy Information Administration forecast world energy use to grow fifty percent by 2030. If that pans out, it would mean the world will need to burn more than 120 million barrels of oil that day. We have it, but can we afford it? Nope, and that is why the oil domain is crumbling.

Sorry, the planet does not have 120 million bbl/day of oil.  We peaked out at 87 million bpd, and as oil extraction becomes increasingly expensive, with demand becoming increasingly ravenous and unquenched, oil prices will go SKY HIGH.

I have no doubt that many alternatives to fossil fuel will become prevalent, but meanwhile the transition away from oil is going to be VERY UGLY.

[BachQ]

Int'l Herald Tribune (Reuters): Britain's economy is coming unglued quickly: Britain, one of the big winners from the free flow of capital and services globally in the last decade, is rapidly becoming one of globalization's losers because of its reliance on property and finance. With financial services contracting and the international flow of capital that financed a debt binge in an almost total freeze, the British economy, housing and financial markets are in a headlong race lower.

[BachQ]

Guardian.uk: Buckle your seat belts - the housing crisis has not yet run its course, and the recession will continue well into next year. ... In short, when it comes to bad news on the US economy, we're just at the beginning.

[drogulus]

Sorry, the planet does not have 120 million bbl/day of oil.  We peaked out at 87 million bpd, and as oil extraction becomes increasingly expensive, with demand becoming increasingly ravenous and unquenched, oil prices will go SKY HIGH.

I have no doubt that many alternatives to fossil fuel will become prevalent, but meanwhile the transition away from oil is going to be VERY UGLY.

    That was a guy I quoted, not me. Peak oil is properly applied to individual oil fields, not oil in general, though all the easy to pump fields were developed long ago. Peak oil in general is a more fuzzy concept because new fields come on line as old ones decline. The new ones are on average smaller and more expensive to pump, but that is more a long term affair than the steep curve that's associated with individual fields like the Saudi Ghawar field, the worlds largest, which has been in decline for the last few years.

     I don't believe in the "ravenous and unquenched" demand that you fear, except to the extent that it describes the present situation. Prices will go up, and then come down as demand tapers off, which will happen due to worldwide slowdown and the usual substitution that happens in these cases. As the rapid changes in the auto market situation show, some changes really are quite rapid once they get going. Factor in changes in consumer driving habits and you have a very different picture from even one year ago, when the SUV was still dominant.

[BachQ]

Peak oil is properly applied to individual oil fields, not oil in general, though all the easy to pump fields were developed long ago.

The concept of peak oil can also be applied to the aggregate of known oil reserves/oil extraction.  For example, the graph below shows that oil extraction has peaked (in the aggregate) for non-OPEC nations:



Again, even powerhouse oil fields like Mexico's Cantarell are experiencing declines (see above post).  We need to divorce ourselves from oil as soon as possible.

[BachQ]

NYT: On Tuesday, IndyMac, one of the nation's largest independent mortgage lenders, faced what amounted to a run on the bank. As depositors rushed to withdraw money, IndyMac's share price, already in a free fall, spiraled even lower.

[Florestan]

We need to divorce ourselves from oil as soon as possible.

Fine. Get yourself a life bike and ride it in the woods. This way you'll modestly contribute to saving the planet and certainly spend your time much more pleasantly than copy-pasting all day long.