Saturday, May 24, 2008

Oil Prices

I'm a regular reader of John Mauldin and his investing insights. Today's newsletter was on oil prices, asking if we are in a bubble or if supply is being outstripped by demand. Go read the whole thing for some really good insights on the subject.

The short version of his article is that oil is in a speculative bubble right now. He makes a good case for a significant drop in oil prices over the next six months. He also makes the case (and has in the past) that the longer term trend in oil prices will remain up.

I happen to totally agree with Mauldin. While I'm perfectly happy to see oil prices rise (it seems to be the only way to get folks to wake up!), I think the recent parabolic rises are unsustainable and not supported by the fundamentals. Some pundits are suggesting oil will go to $150 or $200 per barrel this year. And maybe it will. But at some point the speculation portion of the recent runup in prices will pop and oil will fall precipitously. However, when it does fall like a rock, I feel it will "hit bottom" at around $100 per barrel, still significantly higher than the previous bottom. But as usual, when gasoline falls to around $3.00 to $3.50 per gallon, consumers will breathe a sigh of relief at the "lower prices" and the adaptation process will continue.

The fact remains that oil prices are on a long term trend line up, and will continue so until alternative energy sources are more widely utilized.


Friday, May 23, 2008

Moving Beyond Toast

Hillary is now past being toast and is quickly approaching pure carbon:

I guess there's been a lot of buzz that Hillary would want the second slot betting that Obama would get knocked off during his run/Presidency. While I think I understand what she was trying to say, it could be interpreted as in really bad taste. Such is the life of a politician. It's the reason I work for politicians rather than being one.


Getting Through

Is it possible, maybe just a little itsy bitsy possible that folks are finally getting the picture?

WASHINGTON -- Americans drove less in March 2008, continuing a trend that began last November, according to estimates released today from the Federal Highway Administration.

“That Americans are driving less underscores the challenges facing the Highway Trust Fund and its reliance on the federal gasoline excise tax,” said Acting Federal Highway Administrator Jim Ray.

The FHWA’s “Traffic Volume Trends” report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.

Though February 2008 showed a modest 1 billion mile increase over February 2007, cumulative VMT has fallen by 17.3 billion miles since November 2006. Total VMT in the United States for 2006, the most recent year for which such data are available, topped 3 trillion miles.

Additionally, the U.S. Department of Transportation estimated that greenhouse gas emissions fell by an estimated 9 million metric tons for the first quarter of 2008.
This proves that a gasoline tax would have worked. Had the U.S. government instituted an progressively painful gas tax back in 1975, we could have accomplished the needed result much sooner and with far less pain to working people.


A Billion Here, A Billion There ....

More proof that U.S. taxpayer dollars were pocketed by Iraqi's. They're probably padding their Swiss accounts against a rainy day.


A Chip Off The Ol' Block

Kathy Hilton on her daughter Paris:

Kathy Hilton doesn't care if you think she's a bad mother. In an interview promoting her latest venture, a beauty line, Paris' mommy dearest spoke about the dark days of her daughter's jail sentence. Mrs. Hilton was horrified by her daughter's jail term, she said, and felt that the punishment was excessive.

During Paris' time in the slammer, Mrs. Hilton added, "People were even throwing excrement at the window of her cell." Paris was also subjected to wearing a scratchy, unflattering jumpsuit, which Mrs. Hilton found upon her release. "When I felt how rough it was—that thing was like sandpaper—I threw it away," she said tearfully. But Hilton says her kid's incarceration did have an upside: "I lost so much weight."

Damned those unfashionable scratchy prison uniforms! Perhaps they could have called in Yves St. Laurent to design something more appropriate?


Fatwa Explained

The prominent cleric al-Sistani in Iraq is reappearing in the news. Yesterday word leaked that he is privately issuing fatwa's against the U.S. occupation.

Juan Cole provides possible explanations for why this is happening, and why it's happening now. The short version is that the longer the U.S. stays and the more successful the anti-insurgency, the more likely Sunni's will regain power (that's what happen when the British were in Iraq in the 1920's). Al-Sistani does is also Iranian born and fears increased U.S. sabre rattling against Iran. If al-Sistani decides to actively and openly oppose the occupation, things could heat up considerably.

Added: Here's another great analysis of the situation. It's not good for the U.S.



Did you know that the U.S. military consumes 1.5% of all oil used by the U.S.?


Thursday, May 22, 2008

Fed Up?

Has al Sistani lost his patience?

Iraq's most influential Shiite cleric has been quietly issuing religious edicts declaring that armed resistance against U.S.-led foreign troops is permissible — a potentially significant shift by a key supporter of the Washington-backed government in Baghdad.

....So far, al-Sistani's fatwas have been limited to a handful of people. They also were issued verbally and in private — rather than a blanket proclamation to the general Shiite population — according to three prominent Shiite officials in regular contact with al-Sistani....Between 10 and 15 people are believed to have received the new fatwas in recent months, the Shiite officials told the AP.

....It is impossible to determine whether those who received the edicts acted on them. Most attacks — except some by al-Qaida in Iraq — are carried out without claims of responsibility.






Yeah right.

The McCain campaign has announced that they will release grandpa's medical records tomorrow. That's on a Friday of a holiday weekend. They're claiming that he's fit as a fiddle. My question is that if he's so fit, why the games with the timing of the release? They are also limiting the actually viewing of records to a few news organizations. Why?


Think Again

Think the situation in Iraq is calming down? If you listen to the American media that parrots the Preznit, you might.

But think again.


No Wonder Congress Gets Low Marks

After years of kissing Bush's butt, Congress finally gets up the stones to override a veto. Yep. They overrode the veto of the farm bill.

But guess what. Due to a "glitch", the bill sent to Bush for veto was improperly drafted. Thus, the bill and the entire process must be redone.

My sausage making processes are cleaner than this.

Added: Looks like they've also passed the GI Bill with a veto proof vote. Many intrepid Senators changed their votes from no to yes once they saw that there were 60 votes to pass. Do you think that Senate Republicans that are up for election are nervous?


A Picture Tells The Story

It's a simple picture that really answers the question of why oil prices are skyrocketing (click to enlarge):

Gee, who could've predicted it?

Added: OPEC is coming out today and saying there's nothing they can do about supply. Translated: We're topped out in production. OPEC claims Saudi Arabia has some more capacity but is enjoying the cash flow too much. As I've said before, I don't think Saudi Arabia can do any more either but they don't want the world to know it.

The American public has been trained to simply weather these price storms, enjoy a pullback, then adjust to the new level of gasoline prices. What happens if prices don't level and just continually rise? If what OPEC and peak oilers are saying is true, it's not until demand falls substantially that prices will stabilize. And with a couple billion Indians and Chinese now demanding petroleum, American consumption may not be able to affect prices the way it once did. Maybe Americans will finally have to think about alternative energy and alternative transportation? But hey. What's the hurry?


Wednesday, May 21, 2008

So It's War For NBC?

This crap is incredible:

There is more to the White House's unprecedented attack on NBC News yesterday than meets the eye.

The blistering letter to NBC from White House Counselor Ed Gillespie ostensibly focuses on the way President Bush's interview with NBC chief foreign correspondent Richard Engel was edited for presentation on Sunday's Nightly News.

But NBC's handling of the interview was not atypical for a tightly-edited broadcast and did not violate any journalistic norms. The White House may believe that news outlets are obliged to reproduce all of Bush's non-answers in their rambling entirety, but that's not the way the news business works.

Here's a link to the interview in question.

As Froomkin later points out in the above article, the Preznit seemed to be getting more and more pissed as the interview went on. It wasn't the editing that was a problem, it was the fact that he was confronted with pointed and challenging questions. The village idiot is so used to wet kiss questions that he usually gets he got miffed when facing a, you know, real journalist.

It looks to me like the White House is joining in on the Faux war against NBC. These are classic Republican pushback tactics to try and put the media back in the box anytime they do their jobs. Let's hope NBC/MSNBC keeps their balls and do the job they are charged with doing.


Good Idea

I think this is a great idea:

In the WP's op-ed page, James Andrew Miller writes that a good way to "foster party unity" among the Democrats after a bitterly long nomination fight could be for Obama to promise Clinton that he will appoint her to the Supreme Court if a justice decides to retire during his presidency. The contenders pretty much agree on every major issue, so it's likely that Obama would be pleased with Clinton's votes in the court. The move would also motivate her supporters to back Obama since she could play a much more consequential role in the country's future than if she were to be his vice president. "Clinton's gumption and determination might make her one of the most powerful forces ever on the court, particularly when it comes to swaying other justices when the court is closely divided."
Except I wouldn't make it public.

I'm of the opinion that when push comes to shove, Clinton supporters will not vote for McCain. In fact, without an October surprise, I'm not sure anyone will vote for McBush other than that core 30% of nutbars that would vote for my schnauzer if he was a Republican. But promising Hillary a SCOTUS position would be a very dignified way to getting her out of the race, get her full support for the campaign and put her in a governmental role in which she could really shine.


Tuesday, May 20, 2008

So Sorry

Poor old Ted. A liberal icon on the ropes.


Iran Surprise

Some of you may know that I have a permanent tinfoil hat when it comes to Bush attacking Iran. But then stuff like this keeps bubbling up:

The official claimed that a senior member of the president's entourage, which concluded a trip to Israel last week, said during a closed meeting that Bush and Vice President Dick Cheney were of the opinion that military action [against Iran] was called for.

However, the official continued, "the hesitancy of Defense Secretary Robert Gates and Secretary of State Condoleezza Rice" was preventing the administration from deciding to launch such an attack on the Islamic Republic, for the time being.

The report stated that according to assessments in Israel, recent turmoil in Lebanon, where Hizbullah de facto established control of the country, was advancing an American attack.
Of course the White House adamantly denies that attacks are "imminent". Of course you and I know they could launch attacks next week or around oh, say, October and still be truthful in the "imminent" proclamation.

At a minimum the White House wants to keep the saber rattling by leaking such stories. At worst, someone inside the administration leaked to try and prevent these idiots from bombing Iran.


Shape Up

Want your 6 year old daughter to grow up to be the modern woman? Buy her a pole dancing kit! And when she gets the hang of it, makes sure she dresses appropriately and looks just right!


Oil Is Cheap

You think oil is expensive now, just wait:

Mexico provides about 14% of the oil the US imports. On any given day that makes it either the #2 or #3 leading source for US oil imports after Canada and Saudi Arabia. Given that the US currently imports close to 70% of its oil needs, the Mexican oil is critical.

But here's the thing. Using straightforward ELM calculations, Jeffrey Brown is confident that Mexico will ship its last barrel of oil to the United States -- or anywhere else, for that matter -- about 6 years from now, in 2014. In a recent interview with Brown, I asked about this forecast.
And this there this evaluation of the global supply:
"Global production peaked in 2005, and we're now into the third year of decline. And the critical point to keep in mind is, our model and case histories show that the decline rate accelerates, year by year. Using the Lower 48 in the United States as an example, you can see the annual declines going 2%, 3%, 5%, 7%, 10%, 15%, 20, on and on. So it's an accelerating decline rate."

Underscoring Brown's concerns:

On April 15, 2008 the Russians, the world's second largest oil exporter, announced that their oil production appeared to have peaked, with production in the first quarter of this year declining for the first time in a decade. If they have indeed peaked then, based on the ELM, the world could lose Russia's current ~7 million barrels a day in exports within 6 to 9 years.

Echoing the baseline premise of the ELM, Herman Franssen, president of International Energy Associates, projects that Iran, the world's fifth largest exporter, may consume an amount equal to their exports by 2015. A prominent oil analyst, the late Dr. Ali Samsam Bakhtiari, estimated that Iran is either at or near peak.

Most concerning, this April Saudi Arabia's King Abdullah announced they were not going to raise oil production above 12.5 million barrels a day. Commenting on the news, Tom Petrie, vice president of Merrill Lynch, said

"King Abdullah's quote speaks to the fast-emerging reality of what I call 'practical peak oil.' The Saudis and other exporters are placing a new emphasis on elongating the petroleum exploitation and depletion cycle. This stems from a growing awareness of the challenges of conventional resource maturity, as well as rising resource nationalism. This is likely to result in an earlier occurrence of global peak oil output than many consumers yet recognize."
Summing it up, Brown told me that "The reality is that this thing is coming so much faster and so much harder than even most pessimists were expecting."
These are from John Mauldin's newsletter in a piece written by the oil analyst David Galland. Galland's take on Saudi Arabia is the most optimistic. I personally think that the Saudi's are hiding the fact that they are at, or very near, peak oil themselves. Then, add this to the equation:

"If you look at the situation in US presidential terms, looking at fossil fuels plus nuclear, the world burned through the equivalent of 10% of all oil ever consumed in Bush's first 4-year term. And, in our model, we're going to burn 10% of all remaining conventional crude in the second 4 years of Bush's term.

Whoa! That's some incredible increase in consumption!

You may have read such analysis before. But you will not often read it coming from a highly mainstream, very conservative market analysts.

If you like $4.00/gal oil, you're going to absolutely love $10/gal oil.


Monday, May 19, 2008

Peel, Stick, Click

.... and walk away ... energy independent:


I'm Back

Well it's been a helluva couple of weeks. I was diagnosed with a bunch of allergies a few months ago. As a result I've had to change several medications, all of which contained an allergen for me: corn. I made the change and then began to develop hives .... all over the place. I've been a mess every since (going on about 3 weeks now) and am going through a process to find the culprit/s. Needless to say that when you exist in a chronic, moderate stage of anapylaxis , the energy level to blog falls.

In the news, things have been kinda of quiet. Seems as if we're preparing for summer which can be much more quiet. Bush is dead meat for all intents and purposes, the Dem primary is de facto over still, the war is status quo. However, two things did stand out this morning:

First this:

USA Today leads with an analysis that says the federal government's "long-term financial obligations" increased by $2.5 trillion last year. In order to cover the benefits of everyone who is eligible for government programs, including Medicare and Social Security, "taxpayers are on the hook for a record $57.3 trillion," a figure that translates into almost $500,000 per household. The number is much higher than the $162 billion the government reported as last year's deficit because it doesn't follow accounting standards that are the norm in the corporate world and fails to count future financial obligations.
Do you notice a little problem in this reporting? That humongeous number of $57 trillion is over what period of time? And how much tax revenue will come in over an equivalent time? This is a common scare tactic .... you look at the obligation for the next 50 years, add up the amount and then scare the beejesus out of everyone. It's like deciding to have a child after looking at a lifelong cost of several million bucks. As has been said many many times before, Social Security income vs. expenses is not a big problem. Medicare is much more of a problem but can be resolved.

The other story that caught my attention was this:
The WP's Howard Kurtz fronts a look at Fox News personality Bill O'Reilly's "extraordinary televised assault on the chief executive of General Electric," and says it has escalated after high-level executives from Fox failed to persuade the heads of NBC, a GE subsidiary, to tone down the attacks of MSNBC host Keith Olbermann. Apparently the chairman of Fox News, Roger Ailes, warned the heads of NBC and General Electric that if Olbermann continued to attack Fox, O'Reilly, combined with the New York Post, would proceed to launch a campaign against NBC. In recent weeks, O'Reilly has stepped up his attacks against the head of GE and criticized the company for its presence in Iran. ("If my child were killed in Iraq, I would blame the likes of Jeffrey Immelt," the head of GE, O'Reilly recently said.) Fox vehemently denies there ever was talk about a "quid pro quo" deal, but it seems clear that what started out as an entertaining feud between two cable news hosts has hurt the sensibilities of some of the media world's most powerful people.
What corporate media indeed.

Good for NBC to stay away from the low-life Faux's business-as-usual mettling.