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THE ARTICLE WAS ABOUT OIL!!!!!!!!!!!!!!!!!!.....or do you still believe there are "weapons of mass destruction" hiding in Iraq??
LOL!!!ROFLMAO!!!
Rogue
Sorry to disagree with you.....I'm posting this NOT for "polital reasons". I'm posting it as a bit of history.......maybe some on this board can think it through.
Most of what the writer said is historical "fact". It is very relevent in that it is where we have come today.......and why we must understand as investors where we are heading.
Is is extremely VAGUE to dismiss something as "too political".
The article was about OIL!!!!
Rogue
Walmart(WMT) and Fannie Mae(FNM) made new 52 week lows today. Any comments?
Rogue
NWMV........I wouldn't short it until it has broken down on the charts. It's a low-floater so you can be "killed"
on the momentum.
Rogue
PCZ instead of COP?.....PCZ does look pretty good....I'l keep an eye on it.. Why did you choose it over COP(Conoco Phillips)?
I know this is a micro-cap board but I was wondering if anyone else likes or owns any of the major oils? I think they make some sense at this point even though they've had a good run already. It was pretty timely that Goldman Sachs pounded the table with "BUY" today after many of them had nice(perfect?) technical retracements yesterday.
I'm long a bunch of COP from $102.67. As long as yesterdays lows in the major oils is not breached, I think we could see a good run going forward.
June will be here soon enough......remember all that "talk" of war with Iraq I posted before??
Rogue
Short selling........based on just overvaluation is just plain suicidal. BUT, to keep track of overvalued/financially weak companies and when TECHNICALLY the chart is right(breaking down with overhead resistence) for taking short position makes sense.
I tried to place shorts in the past few months on Taser and Krispy Kreme but the stock was never available when I needed it to sell. I would have had very,very nice gains.
Still holding GM short for over a year. There are probably alot more oppurtunities to make money shorting right now rather than looking for "value longs"......but it's fun looking for value in a generally overvalued market.
Rogue
Nuts, your comment....."Am officially calling the end of the correction in commodity stocks (steels, metals, energy) as of today".
You might be right. Yestrday I took a large position in large cap oil Cononco Phillips(COP). It hit a resting buy order at a minimun Fibonacci retracement level. Most large oils seem to have possibly completed their Fibonacci or Elliot Wave ABC correction and may be poised to move significantly higher.
Rogue
For what it's worth....Walmart(WMT) made a new 52 week low today.
Rogue
GFCI....Stock up only 5% today on all the great news releases from the company website.
Apparently the market doesn't believe all the great acquisition news and "letters of intent"(Exxon/Walmart/Microsoft!!!) today or the market doesn't care.
Pretty impressive "board members" named too.....even that doesn't seem to get interest in GFCI. LOL!!!
Rogue
GFCI....."What an insane world we live in".
Letters of intent for GFCI to acquire Exxon-Mobil, Wal-mart and Microsoft?? LOL!!
Rogue
HEMA being sold off.....I picked up a nice bundle of HEMA down here. Trailing P/E of 5 in a business that DOESN'T have to compete with China and should be able to grow revenues at LEAST as much as the "real" inflation rate down the road.
Too cheap to pass up here IMHO.
Rogue
CPE ..........Callon Petroleum seeing some selling pressure today. Any new's/comments?
Rogue
dickmilde......this may not be "garbage".......
"We are convinced the Fed is buying Treasury offerings out of Caribbean tax haven banks, which is nothing but a Ponzi scheme that has to end in hyperinflation and failure. When situations like this arise, you can be assured that there will be another war or some kind of national emergency."
I have heard rumblings and rumours about the above statement for a few weeks now. It's not only Chapman, and if it's true, it has serious "investment" ramifications. You really think that the demand for our US debt is "insatiable" and we will never reach a point that there really wouldn't be any buyers without a serious "interest rate premium"???
Sure the Fed wouldn't like that.....but we live in an "insane" world. They(the Fed) wouldn't do anything like that(the Caribbean bond Ponzi scheme)....would they??
Rogue
Kozuh......"What good does it do to post an insane world-view ."
I'm sorry, but we live in an "insane" world. I apologize if you found any of the facts and opinions of Chapman unsettling.
Rogue
Train Wreck of the Week
By Bob Chapman
March 26 2005
The World Bank and the IMF are subsidiaries of the US government and have been since their inception. The Bush administration choice of Paul Wolfowitz to run the World Bank has to be a reward for ineptitude. Wolfowitz was a strong voice in the WMD episode that brought us to invade Iraq. Of course, we all now know that no such things existed and that Mr. Wolfowitz’s howlings were pure lies. He was deeply involved in the reconstruction of Iraq, which has been a disaster. Wolfowitz could not run anything; he is an ideologue. He along with other elitists thought we would move him to Iraq, take over the oil wells and privatize them. They would be sold to US oil interests for $0.05 on the dollar. That did not work because the Iraqi people, who they had liberated, disagreed and an insurgency began, which has cost American families more than 4,000 dead and 30,000 wounded. Paul Wolfowitz was a chief planner in this fiasco, which was all about stealing the Iraqis oil. Elections, freedom and democracy came later. The oil fields were never privatized and the war continues.
If Mr. Wolfowitz, as head of the World Bank, presents the same unworkable policies he put into motion in Iraq he will be confronted with great skepticism. What other response could you expect, this is the man who contends there still were WMD’s in Iraq. The appointment of Wolfowitz turns the World Bank into an ugly American bank. The world will see the bank as another extension of failed American policies and the extension financially of Pax Americana.
Wolfowitz's track record at the Defense Department was a disaster accompanied by an epidemic of waste fraud and corruption. Maybe the neocons just want him out of the way, because he has become too much of a burden. Thus, they have awarded him a patronage plum; a reward to a loyal Sherpa, as these megalomaniacs like to call themselves. Then again, Bush is just dumb enough to make such an appointment. Maybe he is paying back his critics. You know how vindictive he and his crew are. Diseased minds do some very strange things.
Our President tells us Paul Wolfowitz is a man of compassion who believes deeply in uplifting the world's poor. Another flagrantly stupid statement. There is absolutely no evidence to support this assertion. Wolfowitz will be a management disaster just as he and his boss Donald Rumsfeld were at the Department of Defense. They do not listen to anyone except themselves. This is a clique of arrogance and ideologues who are totally blind to their own mistakes and under such people our Defense Department is a disaster and we are losing billions of dollars every year. Even in Iraq, the CAP lost $9 billion. It, of course, was stolen. For this feat CFR elitist Paul Bremer was awarded the Medal of Freedom. What a sick joke. He should have been awarded for waste, fraud and corruption something the elitists are masters at.
There is no question, even omitting his failures; Wolfowitz is eminently unqualified for his job. Foreigners have come to the same conclusion and believe Wolfowitz will turn the World Bank into a direct subsidiary of the US government and no longer make loans, just simply give money away to those who follow the US’s imperial line of empire. The bank under Wolfowitz would visually become another pawn in America’s global dominance.
The French tempered their opinions by recognizing the appointment as a proposal. Other governments are preparing for talks on the matter thus; the appointment is not open and shut. Government officials were diplomatic in their comments. Outside of government, comments were harsh. In Der Spiegel (Mirror in English) the headline read: “Wolfowitz, Nein Danke (no thanks).” In Europe, Wolfowitz is considered a unilateralist hawk and Europeans are outraged. It is absolutely the wrong decision. The continent is not pleased. Making matters more difficult is that the nomination follows that of John Bolton, an unspoken critic of the UN, an institution Europe would like to see strengthened. Some in Europe even called the nomination of Wolfie truly terrifying.
Wolfowitz’s appointment is part of spring-cleaning but it is also means the World Bank would be shaped to ensure that the US domestic and business interests will be served as well as that of free trade and globalization. The pursuit of so called free market liberalization and deregulation will be accelerated.
What we are witnessing is an intercine fight among elitists as to the direction toward world government. Europe’s view is slow and methodical. The US advocates want to speed up the process. We believe underlying all this is a fear and skeptism by Europe’s Black Nobility that the American elitists may go it alone, bypass the world government and impose an American world empire. Make no mistake, this appointment is very important for George and the neocons.
America is fast becoming a nation that does not manufacture. If you do not manufacture how can we maintain a technological lead? It is obvious we cannot. We are also outsourcing technology jobs. There has been a loss of 221,000 jobs in six major engineering job classifications. When you do not manufacture, you do not need engineers. What you need you outsource or bring in cut-rate H-1B&L-1 workers. Original proprietary design and core intellectual property are being done in Asia. Due to this outsourcing, R&D budgets are being scaled back. The outcome is a brand name with a sales force selling foreign designed, engineered and manufactured goods, which ultimately Americans will not be able to afford, because most will be without jobs. The jobs will have been sent to another country.
As we stated in an earlier issue: What is the sense in getting a college degree, the cost of which is at least $150,000, that you have to pay off for the rest of your life, when you cannot get a job. 373,000 discouraged college graduates dropped out of the labor force in February. That is not very encouraging.
Doesn’t anyone get it out there? We are ripping the heart out of our country. You cannot compete against slave wages. We are being forced down to the level of the third world. Our economy is disappearing as our trade deficit explodes and all Americans can think of is to speculate in real estate. Foreigners hold trillions of our dollars. It is only a matter of time before we start to get those dollars back. That will be followed by a further fall in the dollar, which will eventually end up losing its status as the world’s reserve currency.
The elitist government in America is deliberately destroying our country and all we get from Congress is a new bankruptcy law that turns debtors into indentured slaves.
We are convinced the Fed is buying Treasury offerings out of Caribbean tax haven banks, which is nothing but a Ponzi scheme that has to end in hyperinflation and failure. When situations like this arise, you can be assured that there will be another war or some kind of national emergency.
Wal-Mart will pay an $11 million fine for using illegal alien slave labor. Wal-Mart did not admit it was guilty. It paid the fine because it knew the government needs the money for its wars.
We have a new National Defense Strategy. We will preemptively strike any nation (rogue nation) that disagrees with us. Washington calls it active deterrence. They will solve regional problems in their infancy, but invading and destroying any seeds of disagreement. In the present case, strategy is being formed with the assistance of Britain.
GM will cut 28% from its 38,000 “US” white collar workers, or 10,640 will lose their jobs. As we predicted, this will happen for years to come as production is moved to China and the third world, destroying the industrial economies of Michigan, Ohio, Indiana, Ontario, and Quebec. These will be targeted reductions; nevertheless jobs will be gone forever. This year GM’s earnings will fall 75% to 85% and their $100 billion in bonds are in junk status. This is the beginning of the end for the US car and truck industry. Nobody seems to get it. Our country is being destroyed. Are we the only ones with the guts to write about it? Yes, we are a lone voice among a populace that is too dumb to understand what is being done to them.
The US has just coerced Guatemala, its latest victim, into repealing an important law to lower the price of pharmaceuticals and promote generic competition. All of the CAFTA countries are already members of the WTO, which requires countries to adopt US-style patent systems, featuring 20-year patent protections of all products, including pharmaceuticals. The bottom line is compulsory licensing, and requiring CAFTA members to establish special monopoly protections for pharmaceutical regulatory data. The US imposed provision would establish a five to ten year period during which generic firms could not rely on the brand name companies’ tests. As a result, brand name companies would get protected monopolies even if a product were not a patent. As a result of Pharma and US government pressure, Guatemala capitulated.
We hear that AIG has 500 people in its Connecticut office working on derivatives. GM is the owner of Ditrich, which writes home loans. Wait until defaults start to build on GMAC loans and Ditrich credit lines. GM will head for the sewer. Be short GM. Like the carnage that was World War I, the current Iraq War could spell, at least for some time, the plague that is free trade and globalization. Like today, that period was marked by imperial overstretch, great-power rivalry, unstable alliances, rogue regimes and terrorist organizations. The world is following the same path today and is not better prepared for the calamity now than they were then.
During WWI, global markets were disrupted and disconnected first by economic warfare, then by post war protectionism. Throughout the world warfare continued, China in civil war and then foreign invasion by Japan and, of course, the Russian revolution. Germany had hyperinflation and depression. The problem that brought about WWII was sealed at Versailles. The reparations visited upon the German people by the allies were impossible to meet. They were deliberately designed to bring about another war. International bankers and elitists financed both sides in WWII, just as they had countless times since the 12th century financing both sides of every war for profit and power. War is an elitist racket. CFR types point to rising tariffs and the restructure of migration as the course of deglobalization, when in fact it was elitist wars and a financial system they decimated, as they have today. The rise then and now of revolutionary terrorists organizations were planned and financed by elitists to create chaos. These episodes have always been followed by deglobalization. This time may be the exception. It all depends on how things work out. They will not pull the last plug and go for world government unless they believe they have a good chance of success. All these events have been and are still planned by the elitists. They are not coincidence nor are they perpetrated by rogues or rogue regimes. Planning economic imbalance, recession and depression today to effect world government is easier than it has ever been. What with monstrous debt worldwide, but particularly in the US and UK, it is very easy to have a financial crisis to accompany another war, which again leads to deglobalization. Impositions of tariffs, higher interest rates, along with hyperinflation, are not a cause - they are a result of actions that were deliberately planned. Deglobalization is an after thought. Americans and people throughout the world have been lulled into a sense of false security via tremendous borrowing and almost no savings. Savings, so they think, are not needed because our government and Federal Reserve tells them that. They spend merrily along, as they enter their financial death spiral. These deceivers tell us that a current account deficit of 8% is sustainable. Of course, they believe that because they want to believe that.
The elitists know anyone holding dollars will take large losses and they could care less. They know the dollar is going down, because they planned it that way. Interest rates are going up another 1% this year. They should be going up at least 3%, but Mr. Greenspan wants the financial and monetary situation to be decent for his departure. Starting next February, real negative changes will begin. The first negative action will be a 2% increase in interest rates. That would send the ten-year US Treasury note from 6-1/2% to 8-1/2%. That will devastate bond, stock and real estate markets and that is only the beginning. Forty percent of mortgage holders who have adjustable rate mortgages will see considerably higher house payments. Payments many will not be able to make. We do not see a housing boom continuing next year with 30-year fixed mortgage rates of 7-1/2% to 9-1/2%. In fact, those rates will cause a 40% loss in housing equity. That also means government debt service will rise dramatically and tax receipts will fall as the economy falls. The dollar index will go to 65 to 70 from today’s 82 and the US dollar will no longer be the world reserve currency. After that fall, all currencies will then fall versus gold. Globalization will end via contagion. That is when everything goes south at the same time and everyone tries to escape at the same time. That is the day that liquidity ends, it evaporates.
The United States is now an empire, which is being gutted. Large military and super weapons. A military that is paying a horrible price in Iraq and cannot beat a bunch of ragtag insurgents, because its leadership has betrayed them. Four thousand dead, thirty thousand wounded as globalization and free trade rips the heart out of our country. Our President and our Congress are expediting the collapse of our country. The Council on Foreign Relations tell us we need 500,000 more troops because the number we now have are insufficient for all the small wars we currently have or might have to wage. We cannot win in Iraq and Afghanistan; how could we possible win against China or Russia? If China goes after Taiwan, we will sit and watch. War is an integral part of free trade and globalization. Be assured when this whole mess comes unglued, free trade and globalization, the dreams of the elitists, will be demolished again and it will take another 50 to 100 years to rebuild the world economy. The elitists should take note. This time we are not going to be Mr. Nice guy.
Rogue
EGSR.......Now what does everyone make of this news today?
Technically it seems as if the stock is going to be sold off and we might see a test of its 52 week low at .31 soon.
Opinions?
Rogue
Happy Easter to ALL!
Rogue
Monday, March 28, 2005
High-Octane Outlook
A veteran investor finds some undervalued stocks in an energy market that will stay strong
By SANDRA WARD
An Interview With Jim Falvey -- Since April 2003, Falvey -- based in Boston -- and his partner Monroe Helm -- based in Dallas -- have been combining their 40 plus years of collective experience researching energy stocks to assemble winning portfolios for their Dallas-based CM Energy Partners with $73 million in assets under management. Falvey provides the global macro energy outlook and Helm drills down to the nitty-gritty on exploration and production companies, as well as oil-service stocks.
CM's Monomoy Natural Resources Fund, gained 21.4%, net of fees, in its first eight months of operation. In 2004, it returned 23.8% after fees. So far this year, the fund has delivered gains of 11.2%, again after fees, through February.
A veteran energy analyst, Falvey worked at Smith Barney and Morgan Stanley, where he met Helm. Falvey moved to the buy side in 2000 when he took the helm of the Putnam Global Natural Resources Fund. While the fund performed handsomely under Falvey, it proved to be an inauspicious time to join Putnam, which would soon find itself on the wrong side of regulators and mired in a burgeoning scandal surrounding practices in its mutual funds. Falvey decided the time was right to branch out.
To understand why he's got the largest net long position since Monomoy was started, listen in.
Barron's: What's your outlook for oil and commodities?
Falvey: We've been focused on commodities pretty intently, and I've been a big believer that the past decade was the period for paper assets -- spurred on by falling interest rates -- and the current decade is the period of hard assets. It is a function of underinvestment: Nobody has liked the basic-material stocks and energy stocks. Everybody was addicted to the tech drug. It was hard to attract capital to the sector. Also, we continue to see an oil-demand surprise.
Q: The China factor?
A: The market seems to be speculating on whether we get a hard landing or a soft landing in China. I don't think we are going to get any landing. People forget China is the No. 2 oil consumer in the world right now. And the Chinese often say one thing while doing another. Last fall, people came back from their summer vacations and China announced that growth in heating-oil imports had slowed and then reported, soon after, that oil consumption was actually up 24%. China had 15½%-to-16% oil-demand growth last year, and some people are expecting growth to be half that. I think growth will surprise on the upside. The weak dollar will help that. The global demand for oil will continue.
People are also overlooking the demand from countries besides China. Indonesia is now a net importer of oil, despite being a member of OPEC and because of underlying population growth and subsidized prices. The price of gas in Indonesia right now is much below what we're paying here in the States. Latin American demand last year was pretty strong, as well. Some of these producing countries are having pretty big population booms, and Latin American demand last year was up around 4%, and we expect similar growth and oil demand. And Brazil has price controls on its domestic gasoline. A lot of these producing countries subsidize their domestic prices. Iraq is a different situation admittedly, but consumers there pay 5 to 10 cents a gallon for gasoline right now, while the black market price is $2 a gallon. Increased military needs, domestic smuggling to surrounding countries, and damaged infrastructure now make Iraq a net importer of 400 million barrels a day of refined product.
"The market's speculating on whether we get a hard or soft landing in China. I don't think we're going to get any landing. China is the No. 2 oil consumer. And the Chinese often say one thing while doing another."
The price of gas in Indonesia right now is much below what we are paying here in the States. And Brazil has price controls on its domestic gasoline.
Q: What about Russia?
A: There are huge bottlenecks and logistical constraints in terms of getting incremental oil out of there. Turkey is not going to let any more tankers go through the Bosporus. Infrastructure needs to be built and the most straightforward way to do it is to build pipelines across the various republics. But politics makes that complicated. Putin's crackdown on the oligarchs in Russia and the government's seizure of Yukos is another complication. Many Western companies doing business in Russia have deals that get taxed at the export price, but they only realize the domestic price and that's a pretty big discount to the export price they are being taxed at.
Many people say Russia can get back to the 12½ million barrels a day it was producing in the mid-'Eighties. I'm skeptical of that because it needs capital to do it. Also I'm skeptical of the quality of the existing reserves. Russia is reluctant to relinquish too much control to the Western oil companies. A lot of the major oil companies face challenging fiscal terms in some of these producing countries.
West Africa is another great example where a lot of the oil deals were inked in the late 'Nineties when oil was at $20 a barrel. Now that it's at, say, 50, those governments want a little bit more of the take.
Q: Where do you see the price of oil settling? Is it in a new range?
A: We're a big believer in higher pricing parity for commodities overall. How does oil fit into that? A normalized price around $45 is realistic. Consensus is gradually creeping up from $25 a barrel a year or two ago to $33 right now. But somewhere in the mid-40s is definitely here to stay.
Q: But Exxon Mobil's CEO, Lee Raymond, is not a big believer in that.
A: Evidently, he is getting a lot of pressure from the administration in terms of what prices are right now, as are BP and Shell in the U.K. The biggest concern for these companies is that eventually high prices are going to impact demand. That's something OPEC is worried about as well. But they are also getting a lot of pressure to ratchet up their spending, based on these higher oil prices, and the opportunities are somewhat limited. People forget the big push into deepwater drilling in the late 1990s and early 2000 period. These are very capital-intensive projects. They take a long time to come to fruition and there has to be a pretty high oil price to justify doing them.
There has been a lot of froth and speculation in the commodities markets. Too many commodity funds are speculating, and $55 oil was probably a little bit of a stretch. But $50 a barrel in the near term is definitely realistic, given the underlying supply demand fundamentals. The International Energy Agency in Paris just raised its demand forecast again.
Last year, the average price of oil was more than $40 and demand was the highest it's been since 1976. But in the scheme of things, $40 oil isn't expensive when you consider inflation. In real terms, the price in 1980-81 would have been about $90 a barrel. So gasoline demand this year is up 1½% in the face of a $2-a-gallon pump price. People are spending less than 5% of their disposable income on gasoline and heating-oil needs. That's basically half of what they were spending back in the early 1980s.
Q: People have finally discovered energy stocks, which are up about 20% since the start of the year. Can that continue?
A: Seasonally, energy stocks typically do well coming out of the winter. Oil slid from 55 to 40 from October to December, and the stock market went up 9%. So, it would seem that the market was off to another good year this year. Oil, it was assumed, was going to continue to trend back to a more normalized price of around the mid-30s. As a result, investors were underweight energy and long sectors with heavier potential growth. But energy rebounded strongly, and many of people tried to reposition. As people got more comfortable with the higher oil price and ratcheted up their price assumptions, they realized many of the energy stocks are still relatively cheap. Exxon Mobil basically trades at 14 times forward earnings, whereas the market trades at 18 to 19 times forward earnings. Exxon has a 23% return on capital, and it should be trading closer to parity with the market.
Q: Do you own any Exxon?
A: We do not own Exxon. We own some other cheaper stocks. A smaller domestic integrated oil company such as ConocoPhillips trades at 9 times earnings. That's an extremely cheap stock and a very well-run company, and they are doing the right thing in Russia in terms of buying an equity interest in an existing Russian company, as opposed to sinking money into a straight production-sharing contract or field. We like the management team there very much, and we don't think they get a full value for their downstream business. ConocoPhillips is flush with cash, and we'll likely continue to see pretty aggressive dividend increases.
The same thing goes for Occidental Petroleum. With $55 oil and the prospect of rising interest rates, the outlook is not great for the market and some of these big-cap names. Exxon has had a great move, partly a function of getting re-weighted. The weight of Exxon in the S&P Barra Growth Index went from 1% at the beginning of 2004 to 7% at the start of this year. More broadly in 1980, energy and basic materials were over 30% of the S&P 500, and right now they are around 11% of the S&P 500 and will probably kick in about 15% of the profits.
Q: But is the weighting going back to 30%?
A: No, because the impact of oil is half of what it was on gross domestic product. But we do think something in the mid-teens is realistic.
Q: What about dwindling reserves driving more mergers and acquisitions?
A: There is definitely something to that. The North Sea is in decline. Reserves in Alaska and the U.S. are in decline. We import about ten million barrels a day of oil right now. Up until recently, it was cheaper to buy reserves on Wall Street than it was in the oil patch because asset values had gotten so out of whack and these companies were flush with cash. Developing reserves is tricky because of geopolitical risk and geologic risk. Then there's execution risk in building big rigs and shipyards outside of a company's control, typically in faraway locations.
Development times are five to seven years from first leasing and contracting the acreage to punching the hole in the ground to actually producing oil.
In West Africa, for example, we are looking at 10-year development times right now. When we talk about depletion, we're not just talking about quantity. We've depleted a lot of our light sweet crude oil, and you need higher oil prices to justify development of heavier crudes. There is a tremendous amount of oil up in the Canadian Oil Sands, but it's heavy in nature and very costly to develop.
Q: Where do you come down on the great debate about reserves?
A: There is some speculation that Saudi Arabia could produce 15 million barrels a day. They produce just under 10 million barrels a day now. We think realistic capacity for them is probably just over 11 million barrels a day.
Q: Does that eventually get you to $70 a barrel?
A: It could get there, but that would have a major impact on demand. The key question is what price will impact the U.S. consumer. It is a little frightening when you see people surveyed on various financial networks talking about oil going to $70-$80 a barrel and then Exxon Mobil's Mr. Raymond talks it down. But the higher oil goes, the more impact on demand it will have.
Q: And, at that point, the profile of these stocks changes?
A: The profile of the overall market will change, too, so relatively speaking, the profile of the oil stocks is fine, but on an absolute basis they are not.
Q: How are you picking the stocks in the sector right now?
A: Primarily on valuation. We are also looking for resource plays. Given the fact there is a question about reserves, we have to think about where the next potential resource play is. We have been a big believer in higher oil and natural-gas prices for the past few years. Coal has been a great resource play the last couple of years. One of our biggest holdings is Consol Energy It has 1 trillion cubic feet of gas reserves that aren't being recognized in its stock price. Consol will very likely spin off the gas business to shareholders.
Q: What about liquefied natural-gas stocks?
A: We haven't done much with liquefied natural-gas stocks because LNG projects are very capital-intensive and require long lead times. When we approach an investment, we are bottom-up valuation people and try to get to know management teams extremely well. We're interested in managements that use their cash and manage their balance sheets effectively. We try to identify potential resource plays. Lately, we've been trying to identify takeout candidates. There is going to be more consolidation in an industry throwing off $50 billion of free cash a year with effectively no debt.
Q: What's one of your picks?
A: Quicksilver Resources is an exploration and production company with acreage in the Barnett Shale outside of Fort Worth, Texas, and on the Manville and Horseshoe coal bed methane plays in Canada. It has about a $2 billion market cap. Barnett, which has been a hot resource play the past year, should continue to positively surprise investors going forward. Quicksilver is the third-largest acreage holder there. It has 1 trillion cubic feet of proven reserves. We think there is the potential for another 4 trillion cubic feet because of their acreage in Texas and Canada, which would effectively make the stock almost double. They would be a good fit for a large North American E&P company, such as Encana.
Q: Any other favorites?
A: We continue to like some of these Canadian oil companies, just on valuation relative to U.S. companies. U.S. investors are getting more educated and actually looking outside the U.S. for value and more liquidity in specific names. We've been optimistic about Canadian National Resources as a takeout candidate as well. It's a conventional exploration and production company with good exploration prospects in West Africa and Canada, and it is an oil-sands play, as well.
There has been speculation, too, about Chinese oil companies buying a U.S. oil company. I don't see that with a Bush administration in place. The Chinese will probably look north of the border instead.
FALVEY'S PICKS
Company Ticker Recent Price
ConocoPhillips COP $104.79
Consol Energy CNX 46.28
Quicksilver Resources KWK 47.04
Canadian Natl Resources CNQ 55.36
Cabot Oil & Gas COG 52.65
Gastar Exploration YGA CN C$4.20
Q: Anything else look attractive?
A: We've liked Cabot Oil & Gas, a smaller U.S. E&P company, with just under $2 billion in market cap. This has good resource potential. There has been a lot bearish sentiment in terms of natural-gas inventories. We think natural-gas production will probably continue to fall short of expectations and gas prices themselves will actually stay higher than people think. In the U.S., there's a dearth of new prospects, but we think Cabot is on to something in Louisiana, particularly in the Clear Branch project. Cabot trades around 4 times forward cash flow.
Q: What's a more normalized multiple on cash flow?
A: The E&P companies have traded historically at about 6 times cash flow. Therein lies the big debate right now in terms of what kind of normalized price assumptions people are using. We continue to believe that we are in a new era of higher pricing parity for both oil and gas.
People were using around $19 a barrel as the historical norm and gradually raised it to 21 and then to 23. In the past year, they raised it to 25. And now we've seen it go to 32.
The other thing we do is look outside the U.S. and try to take advantage of valuation relative to U.S. companies. We've been a big believer in BHP as the cheap natural resource play. It's a big metal and mining conglomerate in Australia with a nice oil and gas business attached to it that it wasn't getting full value for. It was at this time one of our biggest holdings.
Q: And it is something that people can still make money on?
A: It's had a pretty good run, but I think it will continue to trend higher, though I don't think it is going to see quite the move it's made in the past year and a half.
Q: Anything else outside the U.S. that is overlooked and represents pretty good value?
A: We own Posco, a Korean steel company that is very cheap, relative to its U.S. counterparts.
Q: How big a representation are the steel companies in your portfolio? There is also great debate that the steel companies might have peaked.
A: At the end of last year, there was a lot of debate about whether China was turning into a net exporter, not an importer. But you have to look at the quality of the steel they are actually putting in the market. And again, people are too focused on the rate of growth as opposed to the absolute demand and consumption. And then, too, people are forgetting about India and its potential. The potential there, if not as great as China, will be almost as great over the next 15-to-20 years.
There has been speculation, too, that we will see an increased supply of steel coming on in 2006 and 2007. Maybe there will be some increased supply, but we have big infrastructure and logistical problems globally. So the supply may come on, but there will be bottlenecks getting it where it needs to be.
Q: Any other picks?
A: Gastar Exploration is a small E&P company with a very promising development in the Deep Boosier trend in East Texas. This is an emerging and unconventional gas play. They also have a very attractive coal bed methane gas in Australia, which is not reflected in the stock at all.
Q: What about all the speculation about a sale of Unocal?
A: Unocal has been a take-out candidate for 10 years. It may ultimately happen. But if you look at some of the past acquisitions made by the big integrated oil companies, only a few have really been accretive. Big oil companies will want to see prices come in a little bit and they'll wait the cycle out a bit before coming in and buying this. Parts of Unocal are attractive, especially their Southeast Asia gas reserves in Taiwan.
Q: What are you expecting from the market as a whole?
A: I'm neutral on the market from here on out, given the backdrop of a higher oil price environment and potential for increasing interest rates. Longer term, the market will probably find a bottom once it gets comfortable with commodity prices in a new range. And we have had upward earnings estimate revisions coming from companies across the market for the past year and a half or so. It is a little bit stretched right now.
Q: Thanks, Jim.
Rogue
BEING STREET SMART
By Sy Harding
THE FED HAS TRIED TO WALK THIS TIGHTROPE BEFORE! March 24, 2005 .
The market saw a slice of reality this week. Inflation is out of the bottle.
Of course those who buy gasoline, clothing, food, healthcare, or construction materials, have known that for several years. The Commodity Research Bureau's inflation index has surged up 70% over the last four years.
The Federal Reserve, which prefers to look at the government's quirky Consumer Price Index instead, has been in denial for quite some time, noting the lack of wage inflation, and the lack of pricing power by corporations. That is, thanks to the anemic employment recovery, workers have not seen their wages rise to any degree. And although their healthcare, energy, and material prices are rising sharply, many companies have not been able to pass those increased costs along to consumers. That is most noticeable with U.S. automakers and the airlines, where discounts must even be offered to move the product.
However, other industries, notably those producing gasoline, food, or in home construction or most anything connected with furnishing or landscaping those homes, have had no problem raising prices.
This week the Fed finally acknowledged that inflation may be a potential problem. I suspect they've known all along. However, when the Fed began raising interest rates in June of last year it was supposedly not to ward off inflation, but merely to get rates back up to more normal levels.
The market knows better, and was nervous in advance of the Fed's FOMC meeting this week, concerned the Fed might be more aggressive with its interest rate hike this time. However, on Tuesday, the Fed again hiked rates only 1/4%, and said it believes it can continue to hike rates slowly, "at a measured pace".
But for the first time it expressed concern about inflation, citing evidence that businesses are beginning to gain pricing power, the ability to pass their rising costs along to consumers in the form of higher prices. That's all it took to send the markets, stocks, bonds, and gold, into a nose-dive, on fear that the Fed will have no choice but to be more aggressive with its future interest rate hikes to prevent inflation from getting out of control.
That concern received support on Wednesday when the Consumer Price Index, which measures inflation at the consumer level, was released and showed an increase of 0.4% in February, an annualized rate of 4.8%. That's well above what economists consider to be acceptable. More worrisome, the unexpected increase in the index could not be blamed on what might have been a temporary spike up in oil and energy costs in February, since the 'core rate', which subtracts the cost of food and energy, rose 0.3%.
It puts the Fed in a very difficult situation.
Rising interest rates eventually slow the economy by increasing the cost of credit card debt, bank loans, mortgages, etc. That in turn slows spending and lessens the threat of rising prices. But the Fed can only go so far in raising interest rates, or it will slow the economy too much. That has happened too often in the past. The last such experience was the Fed's string of rate hikes in 1999 and 2000, which went too far and sent the economy over the edge into the 2001 recession.
Yet rising inflation is just as big a problem for the economy, since inflation also cuts into the spending needed to keep the economy growing. As an illustration of how that works, if I pay $20,000 this year for the same amount of gasoline and food as I spent $15,000 for last year, then I have $5,000 less this year than I had last year to spend on other things.
So the Fed must try to find a balance, raising interest rates enough to slow spending enough to counter the trend of rising prices, and yet not so much as to slow economic growth too much.
There may be no such balance point where both problems can be solved, and the stock market is thinking about that.
Inflation may be too far out of the bottle to be reversed with only periodic interest rate hikes 'at a measured pace', while the economy, with lagging employment, record consumer debt, a record budget deficit, record trade deficit, declining U.S. dollar, declining corporate earnings, etc., is too fragile to withstand more aggressive hikes.
In its nervousness, although still near its December peak, the stock market has already given back all of its previous small gains for the year, with the S&P 500 now down 3% year-to-date, and thanks to last year's flat and unenthusiastic market, only 3% above its level of 12 months ago. Precious little reward for the risk. The NASDAQ is displaying even less enthusiasm for what is going on. It is down 8% year to date, has given back all its gains of last year, and is back to its level of December, 2003.
The market's response this week to the Fed's few words acknowledging that inflation might become a concern, does not bode well for what its response might be if the Fed were to hint at, or actually take a more aggressive stance.
Yet, the market's response to more signs of rising inflation without the Fed taking action, might be just as bad.
Either way the Fed comes down will likely be a negative for stocks, but will make a difference to bonds and gold.
Meanwhile, there was still more support this week for my warnings through the winter to enjoy the rally while it lasts, because the market is likely to experience a serious decline when its favorable seasonal period ends in a few weeks - if not before. And that profits this year will likely have to come from positioning for the downside, in short-sales and bear-type mutual funds.
Rogue
The Tipping Point
March 22nd 2005
By Ian Gordon
I have often wondered what the catalyst will be to tip the economy back into a recession or worse; that is, the point from which it becomes obvious that the Kondratieff winter is underway. Following the stock market crash in October 1929, there was a Federal Reserve induced recovery in stock prices and the economy into the spring of 1930, much like we have just experienced. This time, however, the Federal Reserve’s response to the stock market decline has been much more panicked than that of its predecessor. Hence the recovery in stocks, the economy, and consumer confidence has been much stronger than that which occurred at the onset of the previous Kondratieff winter, but so has the amount of debt that has been added to the economy. In my opinion, it’s the debt that will ultimately destroy the economy and put a perilous financial system under horrendous pressure; but what is it that will force the issue?
I think that it will be the resumption of the bear market in stocks, much as it was in April 1930. More than 50% of American families are invested in the stock market and are dependent on stock investments for their retirement funds. This is a significantly larger proportion than the 5%-10% American families invested in stocks in 1929. Therefore, it is likely that the winter bear market will have much larger ramifications than it did between 1929 and 1932, when the stock market lost 90% of its September 1929 value.
It looks like the bear market has restarted. There’s an old investment rule which says ‘three steps and a stumble’. This means that when the Federal Reserve raise rates three times in succession the market should fall. The problem for this rule is not that it is an inaccurate forecaster, it is, but it’s the lag time between the signal and the ensuing stock market decline. According to Norman Fosback in his book Stock Market Logic, “Eventually all sell signals have led to substantial price declines-about 30% on average, although in some cases a long delay has ensued before the decline has materialized.” The rule is now in force. The Federal Reserve has now raised rates not three times in succession, but six and with another increase due this week.
Raising interest rates to save the dollar was also tried during the previous Kondratieff winter, but at that time the dollar problem was nothing like it is now. Then the United States was the world’s largest creditor nation, today it’s the world’s largest debtor. Confidence in the monetary role of the dollar is now in rapid decline. In the early stages of the last Kondratieff winter depression the response in Europe to developing monetary troubles was to send gold to the United States. Following Britain’s abandonment of the gold standard in September 1931, there was a growing doubt about the reliability of America’s credit and gold flowed out of the United States back to Europe.
During 1930, the Federal Reserve had steadily lowered interest rates from 4.5% at the beginning of the year, to 2% at the end, and finally down to 1.5% in mid-1931. However, the dollar crisis later in the year forced the Federal Reserve to raise the discount rate to 3.5%. To offset this, the central bank still increased the money supply.
‘What’s good for General Motors is good for America’, so we are led to believe. If that’s the case then things don’t look good for America. The world’s largest car manufacturer announced a loss of $1.50 per share last quarter. As a result its $300 billion + debt trades near junk status and that reality is threatened by the rating agencies. That debt is 2/3rds of Canada’s debt. The ramifications are not pretty. Junk debt not only means higher borrowing costs, but means that it becomes an ineligible investment in many funds. General Motors doesn’t make any profit on the cars that it sells, but relies on its financing arm to provide the revenues. That obviously didn’t work in the last quarter and probably won’t again, because the economy is deteriorating and the US consumer has probably financed all the SUV’s he wants anyway. Soon GM’s finance arm will be in repossession mode. Harley Davidson is now worth more than General Motors. All this spells serious trouble for this car company and also its sister, Ford. Does bankruptcy loom for both and many other high debtors as winter gets colder?
The share price of General Motors has lost 70% from its bull market high at $94.62 on 29/04/00. However, there are reasons to believe that this price deterioration is likely to get a lot worse. For a start, as I show below, the stock bear market likely resumed last week. If this is so, then it would seem highly unlikely that the share price of General Motors, given its fundamental problems, could rise in the face of an overall stock market decline. An initial price target is $25 per share or even the October 1992 low of $22.62. This would bring the share price close to the October 1987 crash low near $19.50. It doesn’t look good to me.
Another important company indicating deteriorating chart conditions is Fannie Mae (FNM/NY). If it wasn’t for the mythical belief by many investors that Fannie Mae is guaranteed by the US government, its share price would likely be a lot lower, given its significant derivative losses and management scandals.
Fannie Mae has just reintroduced the 40 year mortgage to make housing more affordable. This according to Eric Englund is a desperate measure to keep expanding its own balance sheet in order to maintain its solvency. The company has a debt to equity ratio of 43-1, which is massive leverage. Fannie Mae retains a $900 billion mortgage portfolio and in addition guarantees $1.3 trillion in mortgage backed securities. Eric believes it is a matter of when, not if, the credit bubble bursts and mortgages go into default, Fannie Mae’s equity position would be decimated. “In the end the boom-bust cycle (as brought on by central banking) cannot be repealed. When the bust hits, Fannie Mae’s extremely leveraged balance sheet will collapse like a house of cards - forty-year mortgages be damned.” Ibid. 1.Fannie Mae Resurrects the Forty-Year Mortgage in an Attempt to Remain Solvent. Eric Englund. www. financialsense.com
Fannie Mae (FNM/NY). Closing Price $55.01; March 18 th, 2005.
Fannie Mae’s share price closed 32% below its record high recorded at the end of December 2000 at $89.37. The stock price has formed a large declining broadening top that appears to be in danger of breaking down. A weekly closing price below $48.00 would confirm this breakdown and suggest that FNM would move to the next area of support just below $20.00. Technical indicators suggest that $48.00 will not hold. In this case the share price descent should become much more rapid.
US stocks are in the Kondratieff winter bear market. Not that you’d know it. Most investors and investment advisors have been persuaded by the recovery in stock prices following the initial bear market low in October 2002. However, in my opinion the recovery has been engineered by the panic response of the Federal Reserve to the initial stock market sell-off. If you don’t think 12 rate cuts since April 2001 from 6% to just ¾% by November 2002, combined with the added cash infusion of trillions of dollars, isn’t panic, I don’t know what is. Anyway all that it has done has added massively to the credit bubble, which is most apparent in real estate and to a lesser extent, the recovery in stock prices. Alan Greenspan has apparently been forced to reverse his low interest rate policy to induce foreigners to continue lending money to the USA. Rising interest rates are not good for stocks or the economy. They weren’t, after the Federal Reserve raised rates from 4.5% to 6% between August 1999 and May 2000, nor were they when rates were raised from 3.5% to 6% between 1928 and 1929. How soon we forget. No one seems to be talking about rising rates now.
I must remind you that there are several reasons why I believe that the rise in stock prices since October 2002 is a countertrend rally in a bear market and not the beginning of a new bull market.
Bear markets are images of the preceding bull market. Massive bull markets like the one experienced during this Kondratieff autumn from 1982, when the DJIA was 777 points, to January 2000, when the Dow topped at 11,750, are followed by massive bear markets. The previous autumn bull market took the Dow from a low of 66 points in 1921 to a high of 381 points in September 1929. The winter bear market took the DJIA down to its bear market low in 1932 of 41 points. That’s below the point from whence the autumn bull market began and 90% below the bull market peak.
The Kondratieff winter bear market is as vicious to share owners as the preceding bull market was generous.
Bull markets begin from a point of extreme investor pessimism. Indeed they begin when most people hate the very word ‘stocks.’ We are nowhere near there. Confidence is far too high.
Bull markets begin when the media is absent. There’s no CNBC; no ROBTV. Newspapers give little attention to business and to stocks. Investment Funds won’t be advertising on television. Most of them will be fighting to survive. No one will have an interest.
New bull markets begin from very low valuations. That’s low PEs, low book values, etc. We are at extreme highs; common at bull market tops, not bear market bottoms.
High dividend yields are evident at bear market bottoms; something in the order of 6%-8%. The current S&P yield is a paltry 1.60%. That’s common at market tops.
Technical indicators are overbought, but have not yet given a sell signal. The key point reversal high (a higher high but a close below the close of the previous weekly bar) given the week ending March 12th, is a reliable indicator of trend change. Fundamentals are getting more bearish (rising interest rates; GM earnings; dollar etc), and are likely to be supported by the market to the downside. Stocks are oversold, which suggests a short term bounce to the upside, which should be contained at the 10,800 level. When minor support at 10,360 is broken, the low at 9708 will act as support. Thereafter the initial bear market low at 7200 becomes the target. Through that level the chart shows little support until about 4000, but 5000 might be the target for this next leg down. The ultimate low targets are considerably below this level.
Conclusion:
I am often called an extremist. I guess I am, since I understand how extreme a Kondratieff winter is likely to be. It will probably be extremely bad for the economy and for stocks and extremely good for gold.
It takes things like General Motor’s troubles or South Korea’s determination to reduce dollar holdings to shake complacency and force a general shift in perception from positive to negative.
This shift in sentiment changes investment mood from bullish to bearish.
Evidence suggests the resumption of the winter stock bear market. Since this will be the third leg of the bear market, it is likely to be vicious.
The continuation of the bear market in stocks is likely bullish for gold. Gold and paper always act opposite to each other.
Vancouver, March 19th, 2005
Rogue
Global resource wars: The Rosetta Stone
Kurt Cobb
from Resource Insights
March 26th, 2005
A slab of black basalt which now sits in the British Museum contains a decree honoring the Egyptian king, Ptolemy V Epiphanes. The decree was written in three languages: Greek, hieroglyphics, and demotic (a simplified form of hieroglyphics). The black slab is known as the Rosetta Stone and became the key to understanding hieroglyphics because on this stone the ancient pictographs were seen for the first time side-by-side with other better understood languages.
Some 200 years later we find ourselves back in the part of the world where the Rosetta Stone was discovered, trying to figure out another conundrum. What is the nature of the connection between an ill-planned war in Iraq; the steadily increasing pressure on dissent in the United States; the ongoing estrangement between the United States and its traditional allies; the increasing strains with the country's Canadian neighbor; and the forbearance shown to China as opposed to the increasing distrust of Russia? Is there a compelling overriding theme that connects them all? By lining them up side-by-side the theme becomes clear if you know on what basis to draw in the connections. The one common thread is a global scramble for the remaining energy resources in the world, especially oil and natural gas. Let's take a look at that thread.
By itself the invasion of Iraq seems reckless, even senseless. The avowed mission of the United States was to protect itself from weapons of mass destruction. (Even if Iraq did have them, so do many other countries and they resist using them against us for fear of obliteration.) When that turned out to be baseless, the second publicized mission was to liberate the Iraqis and give them a democracy. Something may come of this yet, but it will probably not be to our liking. The true mission is explained by Paul Bremer's (the American administrator in Iraq) unsuccessful attempt to privatize the national Iraqi oil company.
The Bush administration understood that as long as oil in the Middle East and elsewhere is controlled by state-owned companies, it will flow only as fast as they need it to in order to finance social and military spending. Private companies, on the other hand, would seek to exploit the remaining oil reserves as quickly as possible to enrich their shareholders. The result would be more oil flowing at lower prices. If the American military could convince other Middle Eastern oil powers to open their fields to private development (perhaps through the threat of invasion), it could achieve the same goal elsewhere without additional armed conflict.
This, I believe, was the strategy, even if the implementation has been largely disastrous and ineffective. The Iraq invasion was not designed merely to swipe the oil. This would only leave Iraq an impoverished, hostile satellite intent on stopping the flow of that oil. (We've seen some of that sentiment already.) In addition, even if the United States gained effective control of all Middle East oil, hoarding it would ultimately lead to the collapse of America's trading partners or to a war with them. That's why the notion that the U. S. would simply keep the oil for itself makes no sense. In reality, the free flow of cheap oil allows America to remain the dominant military power and the largest, most powerful economy. Hoarding would certainly jeopardize this.
Now why, if this is really the American objective, does the U. S. government need to stifle dissent at home? Don't Americans believe that they have a birthright to cheap energy? While a clear majority of Americans supported the invasion, the dissenters have a strong American ethic of anti-imperialism on their side, an ethic that tends to gain adherents as military engagements drag on. The administration said that we are in a generation-long battle with the forces of militant Islam and so, at the very least, it expected to stay on in Iraq for many years. So, the administration told Americans that we would be out in six months in order to gain support knowing full well that it would have to quell dissent in order to stay on much longer.
Our disagreements with European governments about Iraq are often portrayed as differences over approach, soft versus hard. Or these disagreements are simply put down to French and German greed or corruption. In fact, the Europeans are now competing with us for ever-dwindling supplies of energy. Why didn't they sign on for the Iraq invasion then since they, too, would stand to benefit from larger supplies of cheap oil? The answer has already been given. This would insure continued American dominance. The Europeans are less and less inclined to accept that. They are also far less dependent on oil than America; Europeans use only half as much per unit of economic output. And, they have a ready supplier in Russia which not only has large reserves of oil, but also of natural gas, both of which are already being conveniently piped to its European neighbors. In short, the Europeans have relatively less grim energy prospects than the United States, they have a natural aversion to wars born of experience, and they now see the U. S. as a resource bully who must be resisted.
The frictions between the U. S. and Canada come at a time when natural gas supplies in North America are thought to be peaking. The U. S. imports half of all the natural gas that Canada produces. At some point, Canada will need to keep more for its own use even as America's appetite for methane grows. Canada then is also finding out that the United States is a resource bully, and it may regret entering into NAFTA which obliges it to send so much of its precious energy south.
The American forbearance of China (whose rapid growth along with that of India is probably the biggest reason for tight global energy supplies) may seem puzzling to the untrained eye unless it is seen as only a temporary measure. America's current ruling ideologues need Chinese loans to finance the first leg of their global resource war. The Chinese need America's markets into order to modernize the Chinese economy and provide employment for ever-increasing numbers of people coming from the countryside. The contradiction in the Bush administration's tax-cutting, deficit-creating policy is that it leaves the country so vulnerable to blackmail and even economic collapse at the hands of the Chinese who could simply choose to stop lending to us at any time. (They don't do it because for now it would cause huge, perhaps revolutionary, social problems for them. A sudden breakdown in the recycling of dollars back to the United States would surely cause a severe worldwide recession and possibly even a depression. That would mean huge masses of unemployed in China.)
But, someday the Chinese will decide to wean themselves from the American market. That will mean that America would then have to find other lenders (unlikely, in my view) or raise taxes substantially to pay for America's global military presence. It's likely by that time, however, that the country will be so weakened by the intervening years of war and debt buildup that collapse may be the only possible outcome.
Beyond this America's bases in several former Soviet republics rich in oil are no puzzle. Our threats against Venezuela's populist president, Hugo Chavez, who is signing agreements with the Chinese and openly criticizing U. S. influence in Latin America, is no surprise.
In Iran the concern over nuclear weapons is not really that they will be dropped on America. An Iranian nuclear attack on America would only result in the reduction of Iran to rubble, and the Iranians know this. What American military planners fear is that Iran will frustrate their plan to privatize Middle East oil as Iran acts as an effective counterweight to American power. The Iranians, however, will probably get nuclear weapons even if America bombs its facilities because those facilities are thought to be widely scattered and duplicated, even triplicated.
What makes this fateful global engagement so pitiful is that is has no chance of succeeding at its aim: Guaranteeing the continuance of the energy-intensive American way of life. There are no number of ships or tanks or planes, no size of troop deployments, no buildup of smart missles or bunker-busting nuclear bombs that can solve this problem because none of these can produce one more drop of oil under the earth. The real problem is depletion and the approach of world peak oil production. In fact, all of America's military activity will only serve to deplete what oil is left even faster without providing us any of the alternatives that we desperately need: massive conservation, development of alternative energy sources, and a complete restructuring of the way we live that is consistent with a lower energy future.
Kurt Cobb
from Resource Insights
March 26th, 2005
Rogue
The Energy Crunch to Come
by Michael Klare
published by TomDispatch
The Energy Crunch to Come
Data released annually at this time by the major oil companies on their prior-year performances rarely generates much interest outside the business world. With oil prices at an all-time high and Big Oil reporting record profits, however, this year has been exceptional. Many media outlets covered the announcement of mammoth profits garnered by ExxonMobil, the nation's wealthiest public corporation, and other large firms. Exxon's fourth-quarter earnings, at $8.42 billion, represented the highest quarterly income ever reported by an American firm.
"This is the most profitable company in the world," declared Nick Raich, research director of Zacks Investment Research in Chicago. But cheering as the recent announcements may have been for many on Wall Street, they also contained a less auspicious sign. Despite having spent billions of dollars on exploration, the major energy firms are reporting few new discoveries and so have been digging ever deeper into existing reserves. If this trend continues -- and there is every reason to assume it will -- the world is headed for a severe and prolonged energy crunch in the not-too-distant future.
To put this in perspective, bear in mind that the global oil industry has, until now, largely been able to increase its combined output every year in step with rising world demand. True, there have been a number of occasions when demand has outpaced supply, producing temporary shortages and high gasoline prices at the pump. But the industry has always been able been able to catch up again and so quench the world's insatiable thirst for oil. This has been possible because the big energy companies kept up a constant and successful search for new sources of oil to supplement the supplies drawn from their existing reserves. The world's known reserves still contain a lot of oil -- approximately 1.1 trillion barrels, by the estimates of experts at the oil major BP -- but they cannot satisfy rising world demand indefinitely; and so, in the absence of major new discoveries, we face a gradual contraction in the global supply of petroleum.
Signs of an Energy Crunch
It is in this context that the following disclosures, all reported in recent months, take on such significance.
* ConocoPhillips, the Houston-based amalgam of Continental Oil and Phillips Petroleum, announced in January that new additions to its oil reserves in 2004 amounted to only about 60-65% of all the oil it produced that year, entailing a significant depletion of those existing reserves.
* ChevronTexaco, the second largest U.S. energy firm after ExxonMobil, also reported a significant imbalance between oil production and replacement. Although not willing to disclose the precise nature of the company's shortfall, chief executive Dave O'Reilly told analysts that he expects "our 2004 reserves-replacement rate to be low."
* Royal Dutch/Shell, already reeling from admissions last year that it had over-stated its oil and natural gas reserves by 20%, recently lowered its estimated holdings by another 10%, bringing its net loss to the equivalent of 5.3 billion barrels of oil. Even more worrisome, Shell announced in February that it had replaced only about 45-55% of the oil and gas it produced in 2004, an unexpectedly disappointing figure.
These and similar disclosures suggest that the major private oil companies are failing to discover promising new sources of petroleum just as demand for their products soars. According to a recent study released by PFC Energy of Washington, D.C., over the past 20 years, the major oil firms have been producing and consuming twice as much oil as they have been finding. "In effect," says Mike Rodgers, author of the report, "the world's crude oil supply is still largely dependent on legacy assets discovered during the exploration heydays." True, vast reservoirs of untapped petroleum were discovered in those "heydays," mostly the 1950s and 1960s, but these reserves, being finite, will eventually run dry and, if not replaced soon, will leave the world facing a devastating energy crunch.
The notion that world oil supplies are likely to contract in the years ahead is hotly contested by numerous analysts in government and industry, who contend that many large fields await discovery. "Is the resource base large enough [to satisfy rising world demand]? We believe it is," affirmed ExxonMobil president Rex W. Tillerson in December. But other experts cast doubt on such claims by pointing to those disappointing reserve-replacement rates. "We've run out of good projects," said Matt Simmons, head of the oil-investment bank Simmons & Co. International. "This is not a money issue.... If these companies had fantastic projects, they'd be out there [developing new fields]."
That the major oil firms see few promising new fields to invest in right now is further suggested by reports that these companies are sinking their colossal profits in mega-mergers and stock buy-back programs rather than in exploration and field development. ExxonMobil, for example, spent $9.95 billion to buy back its own stock in 2004, while ChevronTexaco put out $2.5 billion to do the same. Meanwhile several big companies, including ChevronTexaco, are said to be eyeing California-based Unocal Corp. as a possible acquisition, and ConocoPhillips recently announced a $2 billion investment in Lukoil, the Russian energy giant. These moves are consuming funds that might have gone into new-field exploration -- yet another indicator of diminished expectations for major new discoveries. "If they had attractive things to invest in, they'd be investing their little heads off," explained PFC Energy managing director Gerald Kepes. But the great exploration opportunities of yesteryear "have largely dried up."
It is true, of course, that the private energy firms are largely barred from investment in Mexico, Venezuela, and the Persian Gulf countries, where oilfield development is the exclusive prerogative of state-owned companies. Hence, a major goal of the Bush administration's energy policy is to persuade or compel these countries to open up their territories to exploration by U.S. firms -- which, it is claimed, possess the advanced technological know-how that would make possible the discovery of previously unknown fields. But the energy professionals who run the state-owned companies insist that they do not need outside help to search for oil and that they have already mapped their countries' major prospects. Here, too, there has been a marked slowdown in new discoveries over the past decade or so.
The worldwide decline in new discoveries has profound implications for the global supply of energy and, by extension, the world economy. Given a recent surge in energy demand from China and other rapidly-developing countries, the U.S. Department of Energy (DoE) predicts that, for all future energy needs to be satisfied, total world oil output will have to climb by 50% between now and 2025; from, that is, approximately 80 million to 120 million barrels per day. A staggering increase in global production, that extra 40 million barrels per day would be the equivalent of total world daily consumption in 1969. Absent major new discoveries, however, the global oil industry will likely prove incapable of providing all of this additional energy. Without massive new oil discoveries, prices will rise, supplies will dwindle, and the world economy will plunge into recession -- or worse.
Where Is Oil's Peak?
Just how soon such an energy crunch will arrive and just how severe it is likely to be are matters of considerable debate. To a great extent, this debate hinges on the concept of "peak oil," or maximum sustainable daily output. In the 1950s, a petroleum geologist named M. King Hubbert published a series of equations showing that the output of any given oil well or reservoir will follow a parabolic curve over time. Production rises quickly after initial drilling and then loses momentum as output reaches its maximum or "peak" -- usually when half of the total amount of oil has been extracted -- after which production falls at an increasingly sharp rate. In 1956, using these equations, Hubbert predicted that conventional (that is, liquid) U.S. oil output would peak in the early 1970s. His prediction provoked much derision at the time, but earned him considerable renown when U.S. output did indeed achieve its peak level in 1972. Because of insufficient data at the time, Hubbert was unable to apply his equations to non-U.S. production. He did, however, predict that global output -- just like U.S. output -- would eventually reach a peak level and then begin an irreversible decline.
Today, the concept of global peak oil is widely accepted in the energy field, though debate rages over when this moment will actually occur. Those who believe that oil supplies are abundant tend to put this date far in the future, well beyond our immediate concern. The DoE, for example, noted in its International Energy Outlook for 2004 that it expects "conventional oil to peak closer to the middle than to the beginning of the 21st century." But other analysts are not so sanguine. "It is my opinion that the peak will occur in late 2005 or in the first few months of 2006," says Princeton geologist Kenneth S. Deffeyes in a new book, Beyond Oil. A more conservative estimate by Mike Rodgers of PFC Energy locates the peak somewhere in the vicinity of 2010-2015. If either of these predictions proves accurate, global oil supply can never climb high enough to satisfy the elevated consumption levels projected by the DoE for 2025 and beyond.
Where one stands on this critical issue depends on one's estimate of how much petroleum the Earth originally possessed. Those like Deffeyes, who contend that peak oil will arrive soon, believe that our petroleum inheritance amounted to roughly 2,000 billion barrels when commercial oil drilling first commenced in 1859. Since we have already consumed approximately 950 billion barrels and are now burning some 30 billion barrels each year, in this scenario the halfway point of total world extraction -- and so the moment of peak production -- should be just a year or two away. By contrast, those who hold that peak oil is safely in the distance claim that the world's total inheritance is closer to 3,000 billion barrels. This more optimistic figure would include the 950 billion barrels already consumed, "proven" reserves of approximately 1,150 billion barrels, and as-yet-undiscovered fields believed to hold another 900 billion barrels. This latter amount, it should be noted, represents the equivalent of all the known oil in the Middle East, Asia, and Africa combined.
Where might these mammoth still-undiscovered reservoirs lie? This is no idle question, given that the major oil companies have scoured the world for over a century in the search of new sources of supply -- and, in recent years, have come up virtually empty-handed. True, a handful of impressive finds -- in the 1 billion barrel range -- have been uncovered off the west coast of Africa, and one very large field (the 10-billion barrel Kashagan field) was discovered in Kazakhstan's portion of the Caspian Sea.
Most other recent discoveries have been relatively small, and often located in deep offshore waters or other remote locations where the costs of production are high. "The reason [investment] is not increasing," Mike Rodgers has observed, "is that, in so many regions of the world, the fields have gotten so small that even though you might be able to drill a well and get a positive rate of return, the incremental value doesn't mean a lot." It is conceivable, of course, that Iraq and Saudi Arabia could harbor large fields that have simply escaped discovery in earlier sweeps. Perhaps these could indeed be located through the use of advanced seismic technology, as advocated by the Bush administration.
Put all of this together, however, and none of it comes remotely close to the scale of discovery needed to generate that additional 900 billion barrels of oil, which is why the recent oil-company reports are so significant. If the more optimistic estimates of global oil are on the mark, it stands to reason that the major firms should be finding more new oil every year than they are producing; yet the very opposite has been the case for the last 20 years. If this continues to be the case, it is hard to imagine that the approach of global peak oil can be that far in the future.
Whether peak oil arrives in 2005, 2010, or 2015, and whether the maximum level of daily oil output turns out to be 90 or 100 million barrels will not matter much in the long run. In any of these scenarios, global oil production will level off and begin to decline at a level far below the anticipated world demand of 120 million barrels per day in 2025. True, some of this shortfall may be absorbed by the accelerated development of "unconventional" petroleum fuels -- liquid condensate from the production of natural gas, fuels derived from tar sands and oil shale, liquids extracted from coal, and the like -- but these materials are exceedingly costly to produce and their manufacture entails too many environmental risks to make them practical substitutes for conventional oil.
Even with increased production of such substitutes, the inevitable contraction in global petroleum supplies would only be postponed for a few years. Eventually, scientists and engineers may develop entirely new sources of energy -- for example, geothermal, biomass, or hydrogen-based systems -- but at current rates of development, none of these alternatives will be available on a large enough scale when petroleum products become scarce.
So while the major stockholders of Exxon, Chevron, and the other oil giants may be exulting at the moment, the rest of us should be deeply disturbed by their recent reports. Despite all the optimistic talk from Washington, we are facing a substantial and inescapable threat of global energy scarcity, which can only have dire consequences for our economy and the world's. Indeed, we are beginning to see hints of that today, with rising prices at the neighborhood gas pump and a perceptible decline in consumer spending.
This coming scarcity cannot be wished away, nor can it be erased through drilling in the Arctic National Wildlife Refuge, which contains far too little petroleum to make a significant difference even in U.S. oil supplies. Only an ambitious program of energy conservation -- entailing the imposition of much higher fuel-efficiency standards for American automobiles and SUVs -- and the massive funding of R&D in, and then the full-scale development of alternative, environmentally-friendly fuels can offer hope of averting the disaster otherwise awaiting us.
Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author, most recently, of Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency (Metropolitan Books).
Copyright 2005 Michael Klare
Rogue
Will The End of Oil Mean The End of America?
by Robert Freeman
March 21st, 2005
In Zen and the Art of Motorcycle Maintenance, Robert Pirsig tells the story of a South American Indian tribe that has devised an ingenious monkey trap. The Indians cut off the small end of a coconut and stuff it with sweetmeats and rice. They tether the other end to a stake and place it in a clearing.
Soon, a monkey smells the treats inside and comes to see what it is. It can just barely get its hand into the coconut but, stuffed with booty, it cannot pull the hand back out. The Indians easily walk up to the monkey and capture it. Even as the Indians approach, the monkey screams in horror, not only in fear of its captors, but equally as much, one imagines, in recognition of the tragedy of its own lethal but still unalterable greed.
Pirsig uses the story to illustrate the problem of value rigidity. The monkey cannot properly evaluate the relative worth of a handful of food compared to its life. It chooses wrongly, catastrophically so, dooming itself by its own short-term fixation on a relatively paltry pleasure.
America has its own hand in a coconut, one that may doom it just as surely as the monkey. That coconut is its dependence on cheap oil in a world where oil will soon come to an end. The choice we face (whether to let the food go or hold onto it) is whether to wean ourselves off of oil—to quickly evolve a new economy and a new basis for civilization—or to continue to secure stable supplies from the rest of the world by force.
As with Pirsig’s monkey, the alternative consequences of each choice could not be more dramatic. Weaning ourselves off of cheap oil, while not easy, will help ensure the vitality of the American economy and the survival of its political system. Choosing the route of force will almost certainly destroy the economy and doom America’s short experiment in democracy.
To date, we have chosen the second alternative: to secure oil by force. The evidence of its consequences are all around us. They include the titanic US budget and trade deficits funding a gargantuan, globally-deployed military and the Patriot Act and its starkly anti-democratic rescissions of civil liberties. There is little time left to change this choice before its consequences become irreversible.
The world is quickly running out of oil. In the year 2000, global production stood at 76 Million Barrels per Day (MBD). By 2020, demand is forecast to reach 112 MBD, an increase of 47%. But additions to proven reserves have virtually stopped and it is clear that pumping at present rates is unsustainable. Estimates of the date of “peak global production” vary with some experts saying it already may have occurred as early as the year 2000. New Scientist magazine recently placed the year of peak production in 2004. Virtually all experts believe it will almost certainly occur before the end of this decade.
And the rate of depletion is accelerating. Imagine a production curve that rises slowly over 145 years—the time since oil was discovered in Pennsylvania in 1859. Over this time, the entire world shifted to oil as the foundation of industrial civilization. It invested over one hundreds trillion dollars in a physical infrastructure and an economic system run entirely on oil. But oil production is now at its peak and the right hand side of the curve is a virtual drop off. Known reserves are being drawn down at 4 times the rate of new discoveries.
The reason for the drop off is that not only have all the “big” discoveries already been made, the rate of consumption is increasing dramatically. Annual world energy use is up five times since 1945. Increases are now driven by massive developing countries—China, India, Brazil—growing and emulating first or at least second world consumption standards. Fixed supply. Stalled discoveries. Sharply increased consumption. This is the formula for global oil depletion within the next few decades.
The situation is especially critical in the US. With barely 4% of the world’s population, the US consumes 26% of the world’s energy. But the US produced only 9 MBD in 2000 while consuming 19 MBD. It made up the difference by importing 10 MBD, or 53% of its needs. By 2020, the US Department of Energy forecasts domestic demand will grow to 25 MBD but production will be down to 7 MBD. The daily shortfall of 18 MBD or 72% of needs, will all need to be imported.
Perhaps it goes without saying but it deserves repeating anyway: oil is the sine qua non of “industrial” civilization—the one thing without which such civilization cannot exist. All of the world’s 600 million automobiles depend on oil. So do virtually all other commodities and critical processes: airlines, chemicals, plastics, medicines, agriculture, heating, etc. Almost all of the increase in world food productivity over the past 50 years is attributable to increases in the use of oil-derived additives: pesticides; herbicides; fungicides; fertilizers; and machinery.
When oil is gone, civilization will be stupendously different. The onset of rapid depletion will trigger convulsions on a global scale, including, likely, global pandemics and die-offs of significant portions of the world’s human population. The “have” countries will face the necessity kicking the “have-nots” out of the global lifeboat in order to assure their own survival. Even before such conditions are reached, inelastic supply interacting with inelastic demand will drive the price of oil and oil-derived commodities through the stratosphere, effecting by market forces alone massive shifts in the current distribution of global wealth.
If the US economy is not to grind to a halt under these circumstances it must choose one of three alternate strategies: dramatically lower its living standards (something it is not willing to do); substantially increase the energy efficiency of its economy; or make up the shortfall by securing supplies from other countries. President Bush’s National Energy Policy published in March 2001 explicitly commits the US to the third choice: Grab the Oil. It is this choice that is now driving US military and national security policy. And, in fact, the past 60 years of US policy in the Middle East can only be understood as the effort to control access to the world’s largest supply of oil.
Witness, for example, the deep US embrace of Saudi Arabia since World War II. One quarter of all US weapons sales between 1950 and 2000 went to Saudi Arabia despite its horrifically repressive, literally medieval tribal nature. The CIA’s overthrow of Mohamed Mosadegh in Iran in 1953 after he nationalized his country’s oil is another example. So, too, was the US strategic embrace of Israel during the 1967 Six Day War. The US was deeply mired in Vietnam but needed a “cop on the beat” to challenge Arab states—Egypt, Iraq, Syria, Yemen—that were “going Soviet.” It has stuck with that relationship ever since.
More recent examples of national strategy in bondage to the compulsion for oil include US support for Saddam Hussein in the Iran/Iraq War; its support for Osama bin Laden in the Afghanistan War against the Soviet Union; and, of course, the most recent invasion of Iraq to seize its oilfields and forward position US forces for an invasion of neighboring Saudi Arabia when it is inevitably destroyed by internal civil war. And under a Grab the Oil strategy, militarization of US society will only deepen.
The reason is that a very major portion of the world’s oil is, by accident of geology, in the hands of states hostile to the US. Fully 60% percent of the world’s proven reserves of oil are in the Persian Gulf. They lie beneath Muslim countries undergoing a religious revolution that wants to return the industrial world to a pre-modern order governed by a fundamentalist Islamic theocracy. Saudi Arabia alone controls 25% of all the world’s oil, more than that of North America, South America, Europe and Africa combined. Kuwait, Iran and Iraq, each control approximately 10% of the world’s oil.
Another 15% of the world’s oil lies in the Caspian Sea region, also a dominantly Muslim region. It includes a group of post-Soviet, satellite and buffer states that lack any semblance of legal or market systems. They are extraordinarily corrupt, really just Gangster Thugocracies masquerading as countries. Think Afghanistan. Both Russia and China consider this region part of their “sphere of strategic influence” portending significant clashes for the US over coming decades.
As long as the US chooses the Grab the Oil alternative, the implications for national policy are inescapable. The combination of all these facts—fixed supply, rapid depletion, lack of alternatives, severity of consequences, and hostility of current stockholding countries—drive the US to HAVE to adopt an aggressive (pre-emptive) military posture and to carry out a nakedly colonial expropriation of resources from weaker countries around the world.
This is why the US operates some 700 military bases around the world and spends over half a trillion dollars per year on military affairs, more than all the rest of the world—its “allies” included—combined. This is why the Defense Department’s latest Quadrennial Review stated, “The US must retain the capability to send well-armed and logistically supported forces to critical points around the globe, even in the face of enemy opposition.” This is why Pentagon brass say internally that current force levels are inadequate to the strategic challenges they face and that they will have to re-instate the draft after the 2004 elections.
But the provocation occasioned by grabbing the oil, especially from nations ideologically hostile to the US, means that military attacks on the US and the recourse to military responses will only intensify until the US is embroiled in unending global conflict. This is the perverse genius of the Grab the Oil strategy: it comes with its own built-in escalation, its own justification for ever more militarization—without limit. It will blithely consume the entire US economy, the entire society, without being sated. It is, in homage to Orwell, Perpetual War for Perpetual Grease.
In his first released tape after 9/11, Osama bin Laden stated that he carried out the attacks for three reasons: 1) to drive US military forces from Saudi Arabia, the most sacred place of Islam; 2) to avenge the deaths of over half a million Iraqi children killed, according to UNICEF, as a result of the US-sponsored embargo of the 1990s; and, 3) to punish US sponsorship of Israeli oppression against the Palestinian people. Oil and the need to control it are critically implicated in all three reasons.
But now comes the sobering part. In response to the 9/11 attacks, Secretary of Defense Donald Rumsfeld stated that the US was engaged in “…a thirty to forty year war (!) against fundamentalist Islam.” It is the fever of War, of course, that becomes the all-purpose justification for the rollback of civil liberties. Lincoln used the Civil War to justify the suspension of habeas corpus. Roosevelt used the cover of World War II to inter hundreds of thousands of Japanese Americans. And now Bush is using the self-ratcheting “War on Terror” to effect even more sweeping, perhaps permanent rescissions of civil liberties.
Under the Patriot Act, a person can be arrested without probable cause, held indefinitely without being charged, tried without a lawyer or a jury, sentenced without the opportunity to appeal, and put to death—all without notification of…anybody. This is simply a Soviet Gulag and it has been rationalized by the hysterical over-hyping of the War on Terror. The fact that it is not yet widespread does not diminish the more important fact that it has been put in place precisely in anticipation of such procedures needing to be being carried out on a mass scale in the future.
The broader implications of the Patriot Acts go far beyond the abusive treatment of criminals or terrorists. Their portent can be glimpsed in the language used to justify them. When Attorney General John Ashcroft testified on behalf of the Act, he stated, “…those who oppose us are providing aid and comfort to the enemy.” These are carefully chosen words. “Aid and comfort to the enemy” are the words used in the Constitution to define Treason, the most fateful of crimes against the state. In other words, protest against the government—the singular right without which America would not even exist—is now being defined as trying to overthrow the government.
And by the internal logic of a global Oil Empire, this is entirely reasonable. The needs of the people of any one country must be subordinated to the larger agenda of Empire itself. This is what the Romans learned in 27 B.C. when Augustus proclaimed himself Emperor. It was the end of the Roman Republic and the disappearance of representative government on earth for almost 1,700 years, until the English Civil Wars in the 1600s. That is the reality we are confronting today—offering up our democracy in propitiation to an Empire for Oil. It will be a fateful, irreversible decision.
Returning to Pirsig’s metaphor, the choice of a Grab the Oil strategy is the equivalent of the monkey holding onto the handful of food, remaining trapped by the coconut. It is an ironclad guarantee of escalating global conflict, isolation of the US in the world, unremitting attacks on the US by those whose oil is being expropriated and whose societies are being dominated, the militarization of the US economy, the irreversible rescission of civil liberties, and the eventual extinguishment of American democracy itself. It is the conscious, self-inflicted consignment to political and economic death.
But the coconut metaphor, remember, involves a choice—food or freedom. What, then, is the alternative, the letting go of the paltry handful of food in conscious preference for the life of continued freedom?
The alternative to Grab the Oil is to dispense with the hobbling dependency on oil itself and to quickly wean the country off of it. Call it the path of Energy Reconfiguration. It is to declare a modern day Manhattan Project aimed at minimizing the draw down in the world’s finite stocks of oil, extending their life, and mitigating the calamity inherent in their rapid exhaustion. It means building a physical infrastructure to the economy that is based on an alternative to oil. And it means doing this, not unilaterally or militarily as the US is doing now, but in peaceful partnership with other countries of the world, the other counties in our shared global lifeboat that are also threatened by the end of oil.
In more specific terms, energy reconfiguration means retrofitting all of the nation’s buildings, both commercial and residential, to double their energy efficiency. It means a crash program to shift the transportation system—cars, trucks—to a basis that uses perhaps half as much oil per year. This is well within reach of current technology. Energy Reconfiguration means using biotechnology to develop crops that require much less fertilizers, pesticides, herbicides and machinery to harvest. It means refitting industrial and commercial processes—lighting, heating, appliances, automation, etc.—so that they, too, consume far less energy than they do today. It means increasing efficiency, reducing consumption, and building sustainable, long-term alternatives in every arena in which the economy uses oil.
Such a program would return incalculable benefits to national security, the economy, and to the environment.
In terms of national security, Energy Reconfiguration greatly reduces the county’s susceptibility to oil blackmail. It reduces the need for provocative adventurism into foreign countries in pursuit of oil. As such, it reduces the incentive for terrorism against the US. And by reducing such threats, it reduces the need for a sprawling, expensive military abroad and a repressive police state at home. Savings in military costs—perhaps on the order of hundreds of billions of dollars a year—could well pay for such a program. The saving of democracy, of course, is priceless.
The economic benefits are at least equally impressive. By reducing energy imports, the US would reduce its hemorrhaging trade deficit and the mortgaging of the nation’s future that such borrowing implies. A national corps of workers set to retrofitting the nation’s homes and businesses for energy efficiency would address employment problems for decades in a way that could not be outsourced to Mexico or India or China. And a more efficient industrial infrastructure would make all goods made in America more competitive with those made abroad. In all of these ways, Energy Reconfiguration raises, not lowers, the average standard of living while increasing the resilience of the economy as a whole.
Energy Reconfiguration also delivers enormous—perhaps incalculable—benefits to the environment. By reducing energy intensity, it reduces the impact on the biotic carrying systems of any level of economic activity. Global warming may be the single most potent threat to global stability today. A recently leaked Pentagon report predicted that rapid climate change may well set off global competition for food and water supplies and, in the worst scenarios, spark nuclear war. If the US did no more than change from being the most energy inefficient economy in the industrial world to being of only average efficiency, it would dramatically slow the environmental destruction that hangs like a sword over the entire world.
Are there any precedents for such an ambitious vision? In the 1980s China adopted a nationwide energy efficiency program. Within a decade, overall energy intensity fell by 50% while economic growth led the developing world. Also in the 1980s, Denmark began a crash program in wind-generated electricity. Today, wind provides 10% of Denmark’s electricity while Denmark makes 60% of all the wind turbines sold in the world. India’s Renewable Energy Development Agency used a similar set of programs beginning in 1987 to reduce oil based electricity usage. Today, India is the largest user of photovoltaic systems in the world.
Even within the US there are ample precedents for optimism. The US economy was 42% more energy efficient in 2000 than it was in the 1970s when the Arab oil embargoes shocked the country into action. Corporate Average Fuel Economy (CAFÉ) standards more than doubled the average mileage of US automobiles between 1975 and 1985 before being effectively abandoned in the late 1980s. The National Research Council has reported that efficiency programs sponsored by the Department of Energy returned $20 for every $1 invested, making them arguably one of the best investments in the economy even before a change in national energy strategy.
We should harbor no illusions, however, that adopting such a strategy will be easy. The military and energy industries in which the Bush family is so heavily invested will vigorously resist such a policy. And the energy bill now making its way through Congress is nothing so much as a testament to the death grip the energy industry holds on the American people. It provides tens of billions of dollars of subsidies and giveaways to energy companies while actually encouraging more intensive energy use. As the poster boy of these leviathans, President Bush expressed their sentiments best: “We need an energy policy that encourages consumption.” What more need be said?
In the end, the choice of these two alternatives—Grab the Oil or Energy Reconfiguration—is much bigger than oil alone. It is a choice about the fundamental ethos and, in fact, the very nature of the country. Most immediately, it is about democracy versus empire. In economic terms, it is about prosperity or poverty. In engineering terms, it is a matter of efficiency over waste. In moral terms this is the choice of sufficiency or gluttony. From the standpoint of the environment, it is a preference for stewardship over continued predation. In the ways the US deals with other countries it is the choice of co-operation versus dominance. And in spiritual terms, it is the choice of hope, freedom and purpose over fear, dependency and despair. In this sense, this is truly the decision that will define the future of America and perhaps the world.
A final word on Pirsig’s monkey. The monkey is doomed but not tragic. For the monkey cannot really comprehend the fateful implications of its choice: that its greed assures its doom. In the case of people and a country, however, that is not the case. It is no accident that President Bush has not asked any sacrifices of the country for his War on Terror. That is part of the seduction, like the candy a drug pusher uses to lure an unsuspecting child.
But we cannot, like the monkey, claim to be unaware of the choice we are making. Awareness of such choices is part of the burden of mature citizenship. Nor can we feign ignorance of the consequences. Simply put, our present course will cost us our country. And our doom will be compounded by incalculable tragedy and what Lincoln once called “the last best hope for mankind” will, indeed, perish from this earth. Unless, that is, we find the vision, the wisdom and the courage to let go that handful of paltry treats and choose freedom instead.
Robert Freeman - March 2005
Rogue
International Perspective, by Marshall Auerback
The View from the Summit of Hubbert's Peak
March 14, 2005
““Understanding depletion is simple. Think of an Irish pub. The glass starts full and ends empty. There are only so many more drinks to closing time. It’s the same with oil.” – Colin J. Campbell
The Organisation of the Petroleum Exporting Countries will try to calm a nervous oil market this week by pledging that it is prepared to meet customer demand by continuing to pump oil above its official quota limits in an effort to cool oil prices, which are trading near record nominal levels of $55 a barrel. All very fine and well, but even OPEC has all but conceded that there is very little they can do to bring oil prices down substantially.
Algeria’s minister for energy and mines has conceded what many in the “Peak Oil” camp have been arguing for quite some time: OPEC has reached its production limit, and trying to stretch output by one million barrels per day isn't likely to lower oil prices. Chakib Khalil said prices were high because of world economic growth – particularly in the United States and China:
"OPEC has reached its production limits. It doesn't have much production capacity. If it came to a crunch, it has capacity for one million barrels (more per day), and I don't think a production increase would influence the barrel price." he told reporters last week. Depletion dynamics are, as the geologist M. King Hubbert predicted decades ago, alive and well.
The problem of increasing supply shortages has also been exacerbated by oil companies' failure to add new refining capacity to keep up with global demand for petroleum products. This is exacerbating already tight oil supply conditions and fuelling the rise in oil prices to nominal record highs.
With the increasing preponderance of heavy oil on the markets, the need for increased refining facilities is even more acute, but substantial barriers remain: Stricter environmental laws in the US, Europe, China and India are compounding the lack of excess refinery capacity as companies invest in new equipment to reduce sulphur content at the expense of adding new capacity. Last year's increase of 2.65m barrels a day in global oil demand overshadowed the modest rise of 700,000 b/d in global refining capacity in 2004. U.S. refineries are working close to capacity, yet no new refinery has been constructed since 1976. And oil tankers are fully booked, but outdated ships are being decommissioned faster than new ones are being built.
Current market conditions have led to the most remarkable Damascene conversion of all: The rapid rise in global oil demand should lead the industrialised world to promote energy conservation and alternatives to oil, the International Energy Agency (IEA) warned last week. The cri de Coeur from the West’s leading energy-policy advisor marks a sharp turnaround from an organization which has hitherto dismissed notions of an imminent supply shortages and consistently overstated energy supply. Indeed, as recently as last year, the IEA was openly expressing the hope that demand growth might slow in 2005, when actual figures already proved this wish utterly fanciful. China's oil demand alone is expected to grow by 33% this year. Industrialized and developing nations are expanding their economies as fast as possible to generate cash and liquidity as a means of securing more oil.
The US is typical in this regard. Although Americans make up just five per cent of the world’s population, they consume a quarter of the world’s oil supply. In 2004 alone, US petroleum demand grew at its strongest rate in five years. Last December alone the daily consumption of refined oil was 21 million barrels in the U.S, a quarter of world use. For much of the twentieth century, the United States was the world’s largest oil producer, and its profligacy wasn’t a pressing problem. Today, however, the US is only the third-largest producer, behind Saudi Arabia and Russia. In terms of proven reserves (in themselves based on questionable statistical data), America has slipped to tenth place in the international rankings, as reservoirs in Texas, Louisiana, and Oklahoma have started to dry up.
In response to the most recent surge in oil prices, President Bush has called for increased energy conservation (interestingly enough, a stance that was disparaged by his Vice President just 2 years earlier when he was eagerly pressing the case for war in Iraq), as well as using America’s increasing reliance on imported oil (from increasingly unstable regimes) as justification for increased drilling in the Arctic National Wildlife Refuge, on Alaska’s North Slope. The Prudhoe Bay oil field, one of the world’s biggest reservoirs, is just sixty miles west of the refuge. Surveys carried out by the U.S. Geological Survey suggest that anwr may contain about ten billion barrels of recoverable oil.
Even if this estimate turns out to be reliable, and if exploration starts next year (highly questionable given ongoing Congressional opposition), in 2025 anwr could be generating about a million barrels of oil a day. This is a lot of fuel, but it dwindles next to domestic American energy requirements. By 2025, according to the Department of Energy, Americans will be consuming almost thirty million barrels a day. With luck, an anwr oil field operating at full capacity could satisfy perhaps three or four per cent of that total, meaning that the country would still remain heavily reliant on oil imports at a time of rapidly growing depletion abroad, melding with rapidly increasing demand. Consider the following: The average American consumes 25 barrels of oil a year. In China, the average is about 1.3 barrels per year; in India, less than one. So as some 2.5 billion Chinese and Indians move to improve their living standards, their demand for energy is likely to become similarly insatiable with all that this implies for prices in the energy complex.
UK and Norway North Sea production peaked in 1999/2000. China and Mexico (5th and 6th largest) are both expected to peak soon, if they have not already. Although Russia is now emerging as a swing producer of comparable importance to Saudi Arabia, this is a temporary phenomenon: the government announced recently that it expects production to peak around 2007, which probably explains President Putin’s increasing reluctance to see this strategically vital industry fall under the control of Western interests.
In April, 2003, just weeks after the invasion of Iraq, Vice-President Cheney echoed many Wall Street predictions that by the end of the year Iraq would be able to raise its oil output as much as fifty per cent over prewar levels. Before the war, the Iraqi National Oil Company was pumping about two and a half million barrels a day. Now, with the help of money, personnel, and equipment provided by the American government, it is pumping about 1.8 million barrels a day—at least, on those days when insurgent attacks on pipelines and storage facilities don’t force a cut in production.
The perception long fostered by the IEA has been that supply has continually exceeded demand. It has made the behaviour of prices since March, 1999 hard to understand. By contrast, the work of oil consultants Groppe, Long, & Littell, Matt Simmons and Colin Campbell have consistently constructed their supply/demand data by tracking the physical flow of oil, rather than relying on the politically doctored numbers furnished by the members of OPEC. Using this method has made today’s high oil prices far easier to understand, particularly in light of the persistent evidence suggesting widespread overproduction of OPEC members in regard to their respective quotas.
The evidence, however, is becoming irrefutable and the IEA is finally sounding the alarm: “The reality is that oil consumption has caught up with installed crude and refining capacity," the Paris-based agency said. "If supply continues to struggle to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives”. It states in its World Energy Outlook 2004 that $3 trillion will need to be invested in new oil production capacity to offset future production declines and meet demand growth to 2030.
One can, therefore, fully understand the beginnings of what appears a full-blown panic on the part of the IEA. The nightmare scenario that their analysis only hints at has been sketched out vividly by oil analyst Jan Lundberg, who recently laid out the following scenario in (appropriately enough), Electric Vehicle (EV) Magazine:
“The end of abundant, affordable oil is in sight, and the implications are colossal. About now in our hydrocarbon phase of human history, we have pulled out of the Earth approximately half of the available petroleum (crude oil and natural gas). The other half still in the ground is harder to extract and may not - as assumed - fuel the global economy or even provide a transition to another phase…
This means that the next tough oil shortage, even if it is not acknowledged as a post-peak oil extraction phenomenon of diminishing supply, will cripple the globalized economy. Understanding of both the economics and social dynamics of collapse is rare, and even when it is present there is an absence of taking into account the "market factor" in ushering in collapse…
Despite the need to be prepared for imminent, final energy shortage - which could happen now or in several years at the latest - people persist in focusing too much on the likely date of the passing of the peak. It is already clear that the oil industry and OPEC numbers on oil reserves are suspect.
The scenario I foresee is that market-based panic will, within a few days, drive prices up skyward. And as supplies can no longer slake daily world demand of over 80 million barrels a day, the market will become paralyzed at prices too high for the wheels of commerce and even daily living in "advanced" societies. There may be an event that appears to trigger this final energy crash, but the overall cause will be the huge consumption on a finite planet…
The Earth cannot, as of the world oil peak in extraction, give up ever greater quantities of black gold. Most of the world exporting companies are now reducing extraction rates due to fewer discoveries and depleted fields. Oil production in 18 producer countries has passed its peak and is declining faster than previously thought: at about 1.14 million barrels a day.
International Energy Agency figures put the total spare capacity of all 11 countries in OPEC at just 330,000 bpd (down from 6 million bpd in 2002). Conventional Saudi spare capacity is zero... An IEA report from August 2004 indicates Saudi Arabia needs up to 800,000 bpd of newly discovered oil each year just to offset declining fields and maintain its current production level." [Al-jazeera] - This can't happen, so watch for the ensuing energy crisis.
The world needs to produce another 2,723,530.2 barrels per day by the end of 2005 just in order to stand still…” (The Global Nutcracker Called Peak Oil; EV World, Feb. 20 2005, as sourced from: http://www.fromthewilderness.com/free/ww3/031005_globalcorp.shtml#0)
Even Wall Street, long in the camp projecting a return to $25 per barrel oil (on the back of what now appear to be absurdly optimistic predictions regarding Iraq’s future potential production of crude), is reflecting the new analytical paradigm. Thus, Deutsche Bank warned in a recent piece that the hydrocarbon era was “increasingly likely to be coming to an end", and “politicians, company chiefs and economists should prepare for this in good time, to effect the necessary transitions as smoothly as possible.” Citing evidence of an approaching peak in world oil production within just a few years, the paper (“Energy prospects after the petroleum age”, - December 2, 2004) suggested that "strong reactions in prices and economic upheaval are possible" when output starts to decline. "The possibility of realigning the energy mix without radical economic disturbance would be all the more likely," the paper concludes, "the sooner politicians, industry and private consumers respond to the signs of the times on the markets for hydrocarbons."
The problem, as energy investment banker Matthew Simmons - long a smoke alarm for Peak Oil - has said repeatedly, "is that the world has no Plan B." Simmons is absolutely correct. He further notes, “The world's network of crude oil pipelines also is now operating at virtually 100% capacity. For almost all of 2004, the world's tanker system operated at full capacity too. This sparked an unprecedented rise in taker rates, which added up to $5 to $6 per barrel to the wellhead price of oil in some key long-haul export routes.” Why are no more tankers being built? Because, as Simmons, Campbell, Groppe, Michael Ruppert and others in the “Peak Oil” camp have argued, soon there won't be enough oil to ship to cover what it would cost to build them.
What about alternative energy sources? America possesses just three per cent of the world’s known natural gas reserves; Iran, Russia, and Qatar together possess more than fifty per cent. Given rising levels of American antipathy in that part of the world, one can envisage future government in Tehran, Moscow, or Doha ultimately adopting energy policies inimical to American interests (if that isn’t already occurring). With continued talk of a pre-emptive strike on Iranian nuclear facilities, history might repeat itself with Iran seeking to exercise its market power in the natural gas market in much the same way that opec (ironically, led by the Shah of Iran) did for crude in the late 1970s.
Coal represents a politically safer alternative, but burning coal inevitably generates carbon dioxide, the gas primarily responsible for global warming, which even the Bush Administration has now conceded to be a genuine phenomenon. The world is also well familiar with the attendant problems of “clean energies” such as nuclear power, but even certain leading members of Greenpeace are conceding that increased resort to nuclear power will be part of the West’s response to decreasing reserves of oil and natural gas, as necessity overrides any political opposition. Moreover, the gestation period to deciding to embrace nuclear energy and the commissioning of new plants is still considerable and therefore unlikely to bridge the gap from future oil price shocks.
By the same token, however much higher oil prices might act as a spur to further development of alternative energy technologies, that solution is unlikely to be cheap. Power generated from waves, windmills, and solar panels, for example, is weak, intermittent, and expensive—at least twice the cost of electricity produced from coal or gas. When it is cold or dark, solar panels don’t produce energy; when it is calm, wind turbines don’t turn. To insure continuity of supply, renewable power plants have to budget for large amounts of overcapacity, a problem that isn’t going to disappear.
Clearly, it is not an overstatement to say humanity’s way of life is on a collision course with the basic facts of oil geology. The descent from the peak of Hubbert’s summit is likely to be far more painful than the ascent, yet few have offered anything in the way of serious contingency planning to deal with this oncoming problem. Of course, it is likely that over the longer term, the global economies might find the necessary resolve and unity of purpose to develop a new non-fossil fuel economy. But this is unlikely to occur in the absence of crisis first: More industries will likely be forced to the wall as a consequence of rising energy costs. Further environmental degradation is likely, as is mass starvation in some countries, since (as professor emeritus of geosciences at Princeton University, Kenneth Deffeyes notes) the 6.4 billion people living on the earth today are fed thanks largely to the successes of the 20th century’s green revolution, which, among other innovations, brought petrochemical-based fertilizers into wide use. The competition for energy security will, as we noted last week, almost invariably lead to further global conflict. This is nothing new. After all, it was the saintly Jimmy Carter, not George W. Bush, who first warned that “an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” The subsequent crash in oil prices made such threats seem superfluous, but the prospects for a cheaper, peaceful alternative, short of a renewed embrace of an economic stone age, look decidedly threadbare in the early stages of the 21st century. Abundant energy from fossil fuels was a one-time gift, as even the IEA is implicitly conceding today. No one has yet suggested a realistic and pain-free alternative.
Rogue
Krygyzstan/Oil....and I posted this article that would change their countries status as an oil importer to "self sufficiancy". Wonder what happened to this deal?.......
"Canadian company Cadima Petroleum???"........
Wednesday, 23 May, 2001, 08:45 GMT 09:45 UK
Kyrgyzstan finds oil
The Kyrgyz prime minister, Kurmanbek Bakiyev, has said that a Canadian oil exploration company has found oil in Kyrgyzstan which may be sufficient to meet the country's domestic needs for 20 years.
Mr Bakiyev said that deposits found in southern Kyrgyzstan were estimated at 70 million barrels.
He said the Canadian company Cadima Petroleum planned to start production this year.
A spokesman for the Prime Minister told the BBC that the government was trying to attract foreign investment in the project.
He emphasised that results so far were only preliminary.
Kyrgyzstan, one of the poorest Central Asian states, currently imports most of its oil and gas from Uzbekistan.
Rogue
Kyrgyzstan government overthrow and Oil???....
from pravda.ru...
On the whole, Cadima Petroleum plans to invest about 1 million dollars in drilling oil wells. After finishing all the investigations, an investment agreement about oil-fields and conditions of their exploitation will be signed between Kirghizia and Canada.
Optimists from Kirghizian government announce it is a chance for Kirghizia to get absolute energy independence. According to Kurmanbek Bakiev, the prime-minister of the country, first oil-gusher on the eve of 10th anniversary of Kirghizian sovereignty could be regarded not only as an economical, but also as a political event.
Hmmmm....
Rogue
"Canadian company Cadima Petroleum???"........
Wednesday, 23 May, 2001, 08:45 GMT 09:45 UK
Kyrgyzstan finds oil
The Kyrgyz prime minister, Kurmanbek Bakiyev, has said that a Canadian oil exploration company has found oil in Kyrgyzstan which may be sufficient to meet the country's domestic needs for 20 years.
Mr Bakiyev said that deposits found in southern Kyrgyzstan were estimated at 70 million barrels.
He said the Canadian company Cadima Petroleum planned to start production this year.
A spokesman for the Prime Minister told the BBC that the government was trying to attract foreign investment in the project.
He emphasised that results so far were only preliminary.
Kyrgyzstan, one of the poorest Central Asian states, currently imports most of its oil and gas from Uzbekistan.
From the newsroom of the BBC World Service
just "fooling around" on a slow day.....
Rogue
Wouldn't surprise me in the least if this has "something" to do with Oil/natural resources.....
Top Stories - AP
Police Fight to Impose Order in Kyrgyzstan
1 hour, 33 minutes ago Top Stories - AP
By BAGILA BUKHARBAYEVA, Associated Press Writer
BISHKEK, Kyrgyzstan - Gunfire, wailing sirens, dark deserted streets and groups of young men with armbands helping police confront looters: so began the Kyrgyz capital's second night after the country's sudden shift of power.
Hundreds of pillagers wandered the rain-slick streets in mobs Friday, throwing stones at cars and seemingly seeking a repeat of the previous night, when the city was theirs and the unpopular President Askar Akayev had fled after 15 years in charge of this former Soviet republic in Central Asia.
But this night, police were back on duty — cruising the streets in marked cars and shouting over megaphones for order. Groups of stick-wielding young men hovered outside shops and offices — this time to guard them.
One of the front lines in the battle against looters was TsUM, the city's most important department store and the only one that survived Thursday night's plundering.
A dozen officers — ambivalent about working for a new leadership whose legitimacy they questioned — joined about 100 volunteers in guarding the store Friday.
Standing in the rain, the volunteers said they would defend TsUM — a fixture throughout the former Soviet bloc — all night long.
One of the volunteers tore a piece of yellow cloth in two, using one strip as an armband and another to wrap it around an iron bar gripped in his hand. I asked him if he would really hit anyone with it. He smiled broadly and said: "Yes."
TsUM was not attacked Friday night. Marauders drew close but were deterred by police who fired into the air to warn them off, witnesses said
How the police fare will likely be a key test of the quickly appointed interim government's ability to restore order and establish credibility at home and abroad.
Kurmanbek Bakiyev, a former opposition leader who was named acting prime minister and president, speedily appointed a Cabinet. Among the new government officials is Felix Kulov, who was released from prison during Thursday's turmoil and appointed coordinator of the country's law-enforcement agencies.
"The city looks as if it has gone mad," Kulov said.
The looting so far appeared limited to Bishkek, and officials in other cities tried to prevent it spreading.
A statement purportedly from Akayev, the ousted president who was in an undisclosed location, warned that Kyrgyzstan was plunging into a dark time. The Red Cross reported dozens injured in the turmoil Thursday, while lawmaker Temir Sariyev said three people had been killed and about 100 injured overnight.
Throughout the capital, police appeared to be trying to determine the location of groups of looters, then rushing to the area and going after them in vehicles and on foot, firing into the air. One such operation played out for some 10 minutes, shouts piercing the previously quiet street as shots filled the air with the smell of gunpowder.
Earlier in the day, hundreds of poor treasure-hunters wandered up and down the five floors of a shopping mall that stood bare, its windows smashed and their frames charred.
All the goods in this Turkish-owned Beta Stores mall were swept away in a rampage the previous night, but people sifting through the remaining trash still found things to take: metal scrap, empty boxes, broken mannequins.
Almazbek Abdykadyrov was mounting several wooden boards on his bicycle.
"I want to build a house; I don't have any material myself. Others are taking, so I'm taking, too," he said.
Two teenagers carried a sink, saying it was "a present from Beta Stores."
The area was littered with pieces of cardboard boxes and cloth and empty bottles.
Shops that escaped damage Thursday night were closed, or their owners hung signs reading "we are with the people" in hopes of warding off attacks.
Bishkek residents were frightened and shocked.
An elderly woman told me she was shaking as she watched the looting overnight and cars passing by her windows until 3 a.m. stuffed with carpets and other goods, some even hauling refrigerators and other large appliances or pieces of furniture on the roof.
"I've never seen anything as horrible as this in my entire life. Nobody was stopping them," she said, overwhelmed.
Trying to restore order, Kulov held meetings with police and security officials and tried to persuade them to return to work. He pledged to "give a big battle to the pillagers."
Some police were back on the streets Friday — but without their uniforms. They still appeared shocked by the storming of the government building the previous day.
One of the officers guarding TsUM, a senior police lieutenant who would not give his name, said police were ready to resume service.
But when asked if they would work under Kulov, he said: "We could, but how legitimate is he at the moment?"
He was one of the police officers who tried to defend the government building on Thursday, and his memories of the seizure were still fresh.
"It was slaughter," he said. "We were counting our missing like in war." He said dozens of police officers were injured, many seriously.
But stopping the looters appeared to be the main task for now, and it reconciled the police with the opposition.
"It was all started by provocateurs and then other people joined thinking that it's property belonging to the president's family and they have the right to part of it," Kulov said.
One of the chains badly pillaged was Narodny shops, which belong to Akayev's son Aidar.
Opposition supporters camping outside the government headquarters in Bishkek in three army tents denied their involvement in the night rampage.
"It's those government-hired provocateurs who were trying to spoil our rally yesterday," said Kadyrbai Sodirov, referring to hundreds of men in plainclothes who clashed with the anti-Akayev rally before the seizure of the government building known as the White House. "Now they are trying to tarnish our image another way."
But Saniya Sagnayeva, an analyst from the International Crisis Group, said she believed most looters had been on the opposition side Thursday.
"It's a war of the poor against the rich," she said. "It is understandable: These young men are mostly from remote villages. They have no fridges, no radio at home. After their triumph at the White House, they think the city is theirs. It's winners' fever."
Among the daylight pillagers at the Beta Store was one man who came for an unusual purpose. Vladimir Ivanenko had two small plastic bags full of what looked like rubbish.
He said his bags contained shattered pieces of red and yellow glass, broken cups, torn photographs of Bishkek, the mountains and Lake Issyk-Kul — a popular regional holiday destination in this country of 5 million people.
Ivanenko said he was going to use the pieces to create a picture that will embody "an epoch and a time."
"The picture will be about shattered illusions. The red glass will symbolize blood and the yellow will symbolize lost illusions, and the torn pictures of Bishkek — our disappointment."
Rogue
Showdown: Battle groups head for Mideast
WorldNetDaily ^ / 3/23/2005 / Jerome Corsi
Posted on 03/23/2005 7:31:54 AM PST by cncrnd
Three carrier battle groups are converging on the Persian Gulf. The aircraft carrier USS Carl Vinson has departed Singapore and is currently crossing the Indian Ocean, en route to the Middle East. The aircraft carrier USS Theodore Roosevelt is also on the move, crossing the Atlantic Ocean, reportedly headed toward the Mediterranean.
Reports are also circulating that the U.S. Navy has dispatched ships containing nuclear armaments to reinforce the battle groups. This will be the first time since February 2004 that the U.S. has had three major carrier groups stationed on or around the Middle East.
Each of the carrier groups are armed with 85 aircraft capable of delivering precision-guided munitions. The air refueling capabilities of the aircraft allow them to operate from long distances. Each carrier battle group will include nuclear submarine protective cover. The battle groups can act independently and can stay on station indefinitely.
The U.S. military air bases in Turkey, Qatar, the United Arab Emirates, the Indian Ocean island of Diego Garcia, not to mention those recently established in Iraq and Afganistan, give the U.S. formidable muscle in the area. In addition, we have more than 150,000 battle-hardened Army and Marine forces on the ground in the region, capable of responding to any threat we face.
What's going on? Looks like it's showdown time with both Iran and Syria. President Bush has said in words of one syllable that Iran will not be allowed to develop nuclear weapons. He has also demanded that Syria completely withdraw its military and intelligence forces from Lebanon. Nor will George W. Bush rest quietly until the mullahs quit funding Hezbollah.
(Excerpt) Read more at wnd.com ...
Rogue
Russia Plans War To
Defend Syria And Iran?
Posted By Il_Bagattel
3-17-5
This excerpt appeared in last night's (3-14) Le Metropole Cafe daily report:
(snip)
The Cafe and GATA (Gold Anti-Trust Action Committee) have developed quite the information network around the world. On that note I am passing on what I am hearing from a solid source. None of this can go in the verified camp, so it all must be treated as RUMOR until we receive proper verification:
* Russia is preparing for possible war and its actions on the dollar indicate just that; they are going to back Syria, Iran. China will back Iran.
* Russia has made deals on oil and gas projects and opened its minerals to trading. This should show soon in response to Chinese raw materials buying.
* Russia has also abandoned efforts to tie the ruble's movement closely to the dollar and switched to shadowing both the euro and the US currency. This is the first step to war. Other countries operating de facto dollar pegs will follow suit. With 81 per cent of Russia's oil exports currently sold to Europe, the move means that Russia will eventually denominate its oil in euros.
* Remember Russia is the world's second-largest oil exporter, behind Saudi Arabia.
* Asia is following Russia, or should I say leading, and is about to dump dollars in sizeable chunks; they believe that the U.S. dollar is no longer seen as a stable currency and it appears that Malaysia will be the first major Asian economy to dump the dollar. China has already calculated when they will optimize the dumping of the dollar to provide the greatest strength to a newly un-pegged Yuan. Both events will occur very close together and it will be planned to do the most damage to the US.
As you know Bush had a record budget deficit forecast of $427 billion for this fiscal year. All this has other investors turning to the euro and when Asian central banks turn; the dollar's problem will worsen. Dumping dollars will result in stronger Asian currencies and by un-pegging the Chinese currency from the dollar will most certainly trigger the wholesale dismemberment of America's middle class. These developments, when they happen, will be the financial equivalent of a nuclear first strike. When Asians pull the plug, U.S. rates will skyrocket this will be followed by Russia, Germany and maybe France. The Mexican Peso will have more value than the US dollar."
* Halliburton is all over Alaska and probing mining companies there.
* There will be an eventual cutoff of oil to the U.S once an attack on Bushehr occurs. The situation in the US will be worse than 1973.
* The US is going to war and Syria and Iran will be hit. Field commanders have the authority and a green light to go any time.
* Iran has had nuclear weapons since 1991.
* "I'm told in a specific time frame, 36 months or less, the central banks will be completely diversified in currencies and out of the U.S dollar. Be advised they are buyers of gold. When I learned this I was astounded by it."
* "I believe our troops to north of Iraq are all in danger. They will have to have a draft. There is no question about it as they are short people despite U.S officials/congress comments. I have the stats and I know this for a fact that they can not go longer with out doing a draft. They are well over 100,000 short of personnel which was said directly to me; massive preparation like that of WW2 would have to take effect immediately."
(End)
Just food for thought for you. Take it or leave it. Time will tell on all counts.
https://www.lemetropolecafe.com
Rogue
Jtomm/GFCI.......very nicely thought out "conspiracy theory". LOL!
Seriously, you are probably very "right on" with your very well laid out post.
Big thumbs up!
Rogue
Bob Chapman/The International Forecaster.......I wasn't aware of any of the skeleton's in his personal closet. "Pumping and Dumping" is as old as the markets.....and so is "character assassination".
I do disagree with you in that Chapman reports some very interesting facts concerning the world economic scene that should be known by anyone "battling" in the markets. Some very interesting information that doesn't get widely reported that may help investors to "nail the Big Picture". The "Kudlow Crew",the major media and their ilk may not like to deal with certain economic facts.
Instead of railing against Bob Chapman's character.....It would have been much more interesting to refute or debate some of his economic views that I posted that must have touched a raw nerve.
Anyway....the markets are a "voting" machine. You can listen to the economic B.S. from some major media propagandist like Kudlow(a "former" $500 per day cocaine user!), or peruse the things that Chapman reports on , and "cast your Vote".
Rogue
EGSR.....sounds like it could be a winner long-term. I guess it's just a matter of timing your stock purchase correctly. I'll be looking at the technicals closely and try to "load the boat" and turn the "token" position into a meaningful position when the stock looks ripe for purchase. Looks like it could see a bit more downside near-term.
Rogue
EGSR...Len/RRainman?.........what is your position on the company? Do you own it? I have just a "token" long position.
Rogue
BSIC.....I picked up some down here too.
Rogue
EGSR.....It somehow has always bothered me that RRainman called EGSR a "scam" company at one time. Considering his bullishness on oil/gas.......Does he know something we don't? Or is it just "lackluster" management for the stock underperformance?
Rogue
Major oils......many of the major oil companies are getting quite near 1st objective Fibonacci "ABC" corrective wave price levels. I'm keeping an eye on them and I'll let the board know when I think they have bottomed for this(what I believe to be) corrective move.
They seem to have been "projecting" or "telegraphing" the price of oil nicely.I believe the next "upleg" may be quite explosive........although I can always be wrong.
Rogue
Lentinman....I agree that some of the author's "opinions"(Bob Chapman) should be cut out to aleviate any incendiary Left/Right politcal garbage. Point taken!
I do think there is some real "food for thought" in his essays that all investor's should be aware of though.
By the way...... Isn't Chapman the "anti-Kudlow"?? LOL!!
Rogue
Lentinman......I fail to see how reporting the facts is political. I make no political statements....but,
I guess the old market pro Bob Chapman does take some pokes at those in power. I believe his statistics and insight on the international finacial scene is imperative to understanding the "world investment" scene.
I will try to cut out his political stance next time.I don't think he is too concerned with the everyday phony Left/Right "Hegelian" garbage out there anyway in politics.
I think he is just truly concerned that we Americans are "sheep being led to a slaughter".
No politics....just "God Bless America" from me.
Rogue
the latest from The International Forecaster's Bob Chapman....
March 20 2005
"A nation can survive its fools, and even the ambitious, but it cannot survive treason from within. An enemy at the gates is less formable, for he is known and carries his banner openly, but the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not as a traitor, he speaks in accents familiar to his victims, and he wears their face and garments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to be feared."
Marcus Tullius Cicero, 42BC
Our intelligence sources say that European Union countries have been buying oil from OPEC producers in euros for some time now. As the dollar has sunk, some 35%, oil producers that have been selling in dollars have taken some horrendous losses. We believe that once the dollar breaks down at $1.40 to the euro there will be a natural shift out of dollars into euros for payment for oil and perhaps other things such as commodities.
The effect on the US economy of course will be devastating, as we have predicted previously. All those dollars out there are going to be looking for a home and that home will be back in the US.
High-level Lebanese intelligence sources say former PM Rafik Hariri was assassinated by orders from the Bush neocons and Ariel Sharon’s government in Israel. Hariri was opposed to the construction of a major US airbase in the north of Lebanon. The US wanted the Syrians out of Lebanon before construction of the base was initiated. The base is to be built by Jacobs Engineering in Pasadena, CA and Bechtel Corp of San Francisco. The two neocons responsible for the orders to assassinate Hariri came from Carl Rove and Elliot Abrams.
At a town hall meeting in Vermont a resolution calling for bringing the troops home now passed with 65.2% of the rate.
Word reaches us from the Middle East that Israel has drummed up secret plans for a combined air and ground attack on targets in Iran if diplomacy fails to halt the Iranian nuclear program. Iran says their development is peaceful. Israel and the Bushites say otherwise. We know for sure Bush and Israel do not tell the truth, so what is one to believe.
Long-term unemployment, defined as joblessness for six-months or more, is at record rates. That is why unemployment is 13-1/2%, not 5.3%. We are now outsourcing some of our best jobs out of the country, and those thrown out of work that are 40 or older cannot get jobs. They go into consulting and eke out living in the black economy. Outsourcing is the most destabilizing thing that has ever hit the American economy. Educated, experienced workers and professionals cannot get jobs. The American worker is becoming obsolete and soon our economy will suffer the indignity of being a second-class country, and nobody wants to listen. Your degree does not matter any more. There is someone in the third world that has the same degree and experience that will work for 20% of what you will work for. Soon you will lose your house and later you will go bankrupt. This is the elitist legacy of America. Just last month 373,000 people with college degrees quit job hunting and dropped out of the labor force. The number has tripled since 2000. Twenty percent of long-term jobless are college graduates. Now the song is, the more you make the more liable you are to be laid off. Many are living off home equity. Older workers are really screwed. They do not stand a chance of getting back a similar job. Most are working into their 70’s in order to survive at a low paying service job. Our situation as a nation is deplorable and it is getting worse by the minute. Our leaders in Congress and the White House could care less. We hope you let them know what you think.
As we ship out our means of production and now outsource our best jobs, we are told by the technology industry that our country risks losing its competitive edge without significant new investments in education, research and development and the spread of broadband technology. Funds for education are being cut to fund foreign wars, and industry is piling up cash cutting back and laying off because they see trouble ahead just as they did in the late 1920s and early 1930s. Seven percent of US households have the fastest kind of broadband access, compared with 30% in Korea, 20% in Japan and 10% in France. US investment in research and development stayed flat for the past three decades, while growing dramatically among competitors such as Brazil, India, China and Israel. US students are behind counterparts in other countries in math and science. Some Asian countries are graduating five times as many engineers. Industry is flush with cash but they want Congress to give them a development tax credit. They, of course, as elitists want CAFTA passed, which has nothing to do with US investment. In fact, it is the antithesis of improving our competitive position. These are the lies and subterfuge we encounter everyday from industry and government.
Identity thieves have penetrated several companies that collect data and sell it to businesses, industry and government. Essentially, we have no protection. Breaches are becoming an epidemic and we have no privacy left.
Our military is already talking in terms of domestic occupation and warrantless searches. Some in the military are already talking about major alterations in US laws. They call for the military to have the legal right to detain vehicles, suspects, conduct arrests and searches and seizures in order to keep the peace. That would end Posse Comitatus. This frame of mind and reference was set by the military doing urban training throughout the US. Few paid attention or cared what they were doing. That was the beginning, the foot in the door. Then there was Waco and the slaughter that ensued. Get set for occupation and martial law in the future. Boobus Americanus will not get wise until he hears the goose steps. Fifty percent of our population is out to lunch. They cannot get it through their heads that they are supporting the world. Global upheaval is on the way and our military will be happy to play their part subjecting and suppressing you.
Microsoft has designed a Teddy Bear containing microphones, a camera and technology that will allow it to watch a child’s every move.
As you know from our previous issue, M3 rose $59.2 billion in the past two weeks. Annualized that is 16.3%. As we explained, the Fed is raising interest rates and at the same time increasing monetary aggregates. This is what they have done repeatedly over the years. The difference this time is that we have an enormous debt overhang. This is bad for the dollar and every other asset-class except gold and silver.
Last week what looked to be uncoordinated was a coordinated effort by South Korea, China and Japan to publicly warn the US to fix the dollar inflation problem. That had to have come after extensive behind-the-scenes wrangling. There are three ways to fix the dollar, cut the budget deficit, raise interest rates or implement protective tariffs. We believe interest rates will be used and there is a 50-50 chance of a 1/2 point increase in rates next week to show the world Sir Alan is serious. Thus far, the increases in Fed rates have been totally ineffective and a 1/2% rise will only be the beginning until real rates rise. The ten-year Treasury has to be 6%; it is 4.54% presently, for it to even begin to bite into the economy. The longer the Fed takes to raise rates the more damaging it will be on the US and world economy. He is biding time to hold back the economic and financial correction until he leaves his office in January.
The Cambridge Consumer Credit Index March survey shows 45% of consumers are making minimum monthly payments or not making payments at all on their credit cards. That is up 3% y-o-y.
Mortgage growth has heightened bond market volatility; because ever-lower rates have induced early payoffs via refinancing and portfolios with mortgages end up with short duration when rates fall. When rates rise, the mortgages make portfolios long duration. In order to stay in balance, portfolio managers must sell bonds when bond prices fall and buy bonds when bond prices rise. This is the same kind of portfolio insurance that brought on the collapse of October 1987. Those versed in derivatives understand that it is similar to dynamic hedging. Presently the values of mortgages greatly exceed the value of US Treasuries and have since the stock market bubble got underway in 1997. Fannie Mae and Freddie Mac facilitated this eventual problem. Both could be or may eventually go bankrupt.
Eventually the Fed has to accelerate the climb in interest rates. The recent Treasury auction, where only 11% of the bond-rate offering was taken by foreign central banks, is a signal from those banks that they want a higher yield to offset the growing risk. It is all there for anyone to see, rates have to climb 1% to 3% over the next 1-1/2 years and as that unfolds, bond, stock and real estate values will decline.
Maurice R. “Hank” Greenberg, formerly OSS-CIA and a Council on Foreign Relations guiding light, has resigned as CEO of AIG, American International Group, ending the reign of the Greenberg crime family. Mr. Greenberg and his two sons’ are crooks. Hank dines with Henry Kissinger, David Rockefeller and Alan Greenspan to name a few CFR buddies. On AIG’s corporate Board of Directors, we have the following CFR members, Martin Feldstein, Ellen Fulter, Carla Hills, Richard Halbrooke, Donald Kanak, Bernard Aidenoff, William Cohen and Frank Zarb. You can rest assured that Hank and his two sons will never do jail time for their crimes. Elliot Spitzer would not dare go that far. He knows he would end up dead and at the least, an outcast in the tight depraved community of NYC. As you will see again, we have two sets of laws in America, one for the rich connected elitists and one for the rest of us.
The New Hampshire state legislature will begin holding hearings on HB520, an act to reject the USA Patriot Act.
One of my intelligence contacts in NYC has contacted me and he was furious. It seems the Greenberg crime family is going to get a slap on the wrist for criminal activity by Elliot Spitzer without any prosecution or admission of wrongdoing. Their collusion with 8 other insurance companies, criminal enterprises, which defrauded investors of billions of dollars, will go virtually unpunished. Spitzer is essentially covering up crimes that are bigger than Enron and WorldCom. That makes Spitzer an accessory and culpable.
Hollinger International can proceed with a fraud lawsuit against former CEO Lord Conrad Black over allegations that he and other defendants looted the company. $425 million in damages is sought.
International investors bought US assets in January at the fastest pace in almost two years. They bought a new $91.5 billion in US Treasury notes, corporate bonds, stocks and other financial assets, up from $60.7 billion in December. This is the second highest purchase since $103.9 billion in May 2003. The dollar share of the world’s foreign-exchange reserves was 63.8% at the end of 2003; down from 66.9% two year’s earlier.
A recent government directed decision by a federal judge, Jack Weinstein, decided that the use of Agent Orange in Vietnam, that caused birth defects, cancer and other health problems, was not a war crime. That decision now allows the US to freely use depleted uranium artillery shells in Iraq, even though they are banned by international covenants. This is the kind of justice we have come to expect from our judicial system. That is political justice controlled by the whims of the elitists. This certainly is not Democracy. This is what George Bush calls democracy.
The new bankruptcy bill analysis of contributions shows that senators who voted to pass the bill raised an average of nearly twice as much between 1999 and 2004 from the finance and credit industry as those who voted against the bill. This is called the purchase of legislation. The bill’s supporters received an average of $36,600 from the industry, while the opponents received $20,221. The 18 Democrats who voted to pass the bill raised an average of $51,200 versus $20,200 than the 25 Democrats who voted to reject it. The story on the Republican side is worse; some 71% of payoff funds went to Republicans. As you can see, legislation is for sale and you pay for it. If your representatives or senators voted for this bill reward them by kicking them out of office.
The SEC has filed a suit against Qwest officials for orchestrating a sweeping $3 billion accounting fraud. It just never ends. One thing you can count on from George and the neocons is that they consistently reward failure. Everything concerning his stay in office has been a failure and wait until he and his gang leaves, then you will really realize how badly he injured our nation. His latest piece of stupidity is the appointment of Defense Deputy Paul Wolfowitz to head the World Bank. Wolfowitz was among the most forceful of those in the administration on the issue of WMD and he was the genius who predicted that Americans would be welcomed as liberators rather than occupiers once they toppled Saddam’s government. He was not just wrong – he lied about everything. He was probably the biggest liar among the neocons. He is depicted as a conservative. If he is a conservative, then we are members of Attila the Hun’s cabinet. The neocons want to end the World Bank’s function of lending money and just give your tax dollars away. What else would you expect from international fascists?
Pentagon auditors said Halliburton might have overcharged the government by more than $100 million on a contract to deliver oil to Iraq. They charged $27.5 million to deliver $82,100 worth of liquefied petroleum gas.
What is the difference between a loan shark and a banker? Not much. The former uses hired thugs to enforce repayment from debtors; the latter employs our President and Congress.
We have never written about class warfare, but then again we have never had a fascist government run our country. Class warfare was always used by the left to characterize right of center governments. Unfortunately, these characters have put most everyone to their left.
The bankruptcy bill is truly a lesson in greed. Corporate America has bought our Congress and our President. These banks have seduced Americans with credit cards; giving cards to millions who do not have the ability to repay their debts. These poor souls face no cap interest rates, outrageous fees and rates that will keep borrowers in indentured servitude for decades. In fact, most will never reduce principal. They will just pay interest and fees until they are dead. The gutting of the bankruptcy law is an act of greed but just as important, it is in preparation for the coming depression. If you cannot pay your debts the banks take all your assets for $.05 on the dollar and what you still owe them can be worked off as indentured labor. We will have a truly Dickensian society. Our government has become the guardian angel of corporatist America. This legislation is one of a long-line of criminal acts by our government and corporate America. These elitists and repurchased politicals are backing Americans into a corner. You know what happens when people have no hope. There is revolution.
The President’s New Freedom Commission on mental health will soon be launched, that includes screening all students from K-1 to the 12th grade. The NFC recommendations are already being promoted in Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, South Caroline, Tennessee, Texas, Utah, Virginia, Washington, W. Virginia, Wisconsin and Wyoming.
The program is a scheme to enrich drug companies who manufacture high-priced psychiatric drugs. In addition, medical leaders who control the medication plan, get kickbacks from the drug companies. These are drugs such as Paxil, Zyprexia, Adderall, Zoloft, Risperdal, Seroqual, Depokote, Prozac, Wellbutron, Zyban, Remeron, Serzone and Effexar. Part of the plan is to extend Medicaid to those who do not quality, to supply tax dollars to pay for the plan. Without this, NFC in 2002 had national sales of anti-psychotics of $6.2 billion. From 1999-2003 the number of children on this medication grew over 500%. Needless to say the drug manufacturers poured hundreds of millions of dollars into political campaigns. This is what the Bush crime family has planned for your children and grandchildren. If you do not allow the children to be drugged, they will be taken away from you. This is life in a modern fascist police state.
The Pentagon has been hiding a damaging report from its own auditors that Halliburton overcharged the government by $108.4 million in oil transactions in Iraq. Halliburton charged the Pentagon $27.5 million to ship $82,100 worth of cooking oil from Kuwait to Iraq. That is 335 times the actual cost. It just goes on and on and Congress does nothing about it. They are either paid off or compromised by their homosexual and pedophile activities.
We are no longer a government of laws. A good example is that of former Iraqi dictator Saddam Hussein. He has been in military detention for a year without any charges being filed and without access to legal council. All of Saddam’s rights under the Geneva Convention have been trampled and that is because he is not recognized as a prisoner of war. In order to avoid shooting him or giving him prisoner of war status, the neocon government has skirted the laws and holds him incommunicado indefinitely. The case of Saddam is one of the most serious violations of human rights to take place in recent times. His lawyers have not been allowed to visit him in an appropriate manner, which allows the facilitation of his defense. War is War. If you take prisoners you abide by the rules. Can you imagine what is going to happen in the future when our boys and girls are taken prisoner?
Porter Goss, Director of the CIA, said his agency was not torturing people. If you believe that, we have a bridge for sale.
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