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Shale Oil Stocks Are On The Rise – Here’s Why

Editor — Wed, 04 Jan 2012 00:00:53 +0000

World oil demand is…expected to surpass 115 million barrels per day in 2025 from only 91 million barrels per day today yet production in many countries is either waning or being consumed by the producing country. [In this article I identify those countries whose production is in decline, 2 countries who have increased production thanks to unique sources and how to invest accordingly.] Words: 595

So says Nick Hodge (www.energyandcapital.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Hodge goes on to say, in part:

Oil Demand is Increasing in Most Regions of World

Oil Supply From Many Countries is Decreasing

Nigeria

Venezuela

Libya

Iran

Angola

That’s five OPEC nations with supply heading down and it doesn’t get any better in non-OPEC countries that were once major producers…

Mexico

Norway

Oil Consumption of Oil-exporting Countries Increasing

In countries whose supply isn’t shrinking, there’s another problem: growing economies.

The New York Times reports:

The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter.

It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years.

To recap, many countries — both inside and outside OPEC — are undergoing supply contraction. Those that aren’t are exporting less because they’re using more internally.It’s the perfect recipe for higher oil prices, which, by the way, Goldman Sachs (GS), Barclays (BCS), and Deutsche Bank (DB) are all forecasting for this year.

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Countries Whose Oil Supply is Increasing

Canada (Oil Sands/Shale Oil) and the U.S. (Shale Oil)

Canadian oil production has been surging for years [while] American production is undergoing a renaissance. As prices rise due to falling production elsewhere in the world, rising demand [across the globe], and [the anticipated] consequences of the Iran situation, companies operating in the United States and Canada, especially in rich new shale finds, will be the main beneficiaries.

Shale Oil Stocks Outperforming Dow

Companies like Northern Oil and Gas (NYSE: NOG), Oasis Petroleum (NYSE: OAS), Continental Resources (NYSE: CLR), Whiting Petroleum (NYSE: WLL), Petrobakken, and more are already showing how the strength of new North American oil production is translating into financial wealth. [As the graph below shows,] even as the Dow has tacked on 2,000 points since October, it can’t keep pace with shale oil stocks.

Conclusion

Oil prices aren’t getting any lower and shale production isn’t slowing down anytime soon, so you need to be putting yourself in a position to profit now.

*http://www.energyandcapital.com/articles/north-american-oil-production-on-the-rise/2004

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1. What is Shale Oil?

People often say: “You can’t squeeze blood from a stone.” However that’s exactly what shale oil is. An alternative fuel, created by squeezing our planet’s proverbial “Life Blood” out of rock. Words: 1066

2. New Discoveries Insufficient to Avoid Peak Oil

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New Boom-bust Cycle Risks Hyperinflationary Depression and Much Higher Gold Price – Here’s Why

Editor — Sat, 26 Nov 2011 07:22:13 +0000

It is my view that the world has entered a new boom-bust cycle driven by oil prices. Oscillating oil prices – as opposed to credit cycles – will repeatedly stimulate and crash the highly levered global economy. Governments have not recognized this new cycle, and as part of a fruitless effort to retain control over deteriorating real growth and rising unemployment central banks will print more and more money, risking a hyperinflationary depression (stagflation at best). [As such,] the only respite for many investors is gold. [Let me explain.] Words: 925

So says Mark Motive (www.planbeconomics.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The report’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Motive goes on to say, in part:

The world is experiencing the worst economic recovery since the Great Depressions so why is oil hovering around $100/bbl? Some might point to developments in the Middle East as the reason for high oil prices. However, I believe the root cause of current Middle East angst is the steady depletion of easily accessible oil and, consequently, government revenues needed to quell the population. Everything that is happening across the Middle East – citizen revolts, government crack downs, production disruptions and oil price inflation – tells me the world may have crossed the point of peak oil. [That being said, while] I don’t think the world will run out of oil anytime soon I do believe, based on the advice of expert geologists, that:

the world is running out of inexpensive oil and
global demand is pressuring oil prices.

Given these pre-conditions, [as mentioned in the opening paragraph,] it is my view that the world has entered a new boom-bust cycle driven by oil prices. Oscillating oil prices – as opposed to credit cycles – will repeatedly stimulate and crash the highly levered global economy. Governments have not recognized this new cycle, and as part of a fruitless effort to retain control over deteriorating real growth and rising unemployment central banks will print more and more money, risking a hyperinflationary depression (stagflation at best). [As such,] the only respite for many investors is gold.

Boom-bust Cycle Driven By Oil Prices

During the last thirty years debt has spread like a cancer throughout the developed world. Today’s consumption was financed by tomorrow’s higher revenues, creating a vicious cycle between growth and the need for debt. This system worked as long as growth needed to repay expanding credit could be subsidized by inexpensive energy. Unfortunately, rising oil prices have stealthily and persistently chipped away at the foundation of our heavily indebted financial system.

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Many mistakenly point to sub-prime mortgages and CDS’s as the cause of the 2008 crisis but I believe they were merely the transmission mechanisms. In reality, rising oil prices eroded the weakest links in the increasingly levered global economic system [and ultimately, when] oil prices and total debt passed the threshold beyond which the economy could not operate, the financial system came crashing down. With collapsing demand, oil prices fell.

Quantitative Easing Perpetuates the Boom-bust Cycle

As we’ve witnessed repeatedly since Richard Nixon suspended dollar convertibility into gold, the Federal Reserve solves all economic problems with the monetary cure-all. Either by using the proverbial helicopter or the Treasury as an intermediary, central banks have repeatedly pumped liquidity into the economy and bought bad debts from the private sector. This effectively transfers the bad debt to the taxpayer by way of liability and currency debasement. In addition, fiscal policy (which is often the hand maiden of monetary policy) adds additional public sector debt in the name of stimulus. In whole, debt burdens and money supply rise. Of course, all this is done under the assumption that the economy will somehow be able to repay these new debts through future growth.

In the new boom-bust cycle driven by oil prices, the central banks are unknowingly impotent. As the economy crashes, they print money to stimulate economic activity, but it is short-lived and inflationary. More stimulative is the lower oil prices caused by the crash. However, any renewed growth and inflation sends oil prices back up towards another threshold, once again breaking the weakest links of the economy…and the default-bailout-growth cycle repeats.

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Right now, oil price inflation is most noticeable when we fill up our gas tanks but as high oil prices become pervasive throughout the economy the destruction of aggregate wealth will intensify. This will increase the number of weak links throughout the economy. It will also increase the sensitivity of those weak links to higher oil prices – another vicious cycle. Consequently, as the default-bailout-growth cycle repeats and rising oil prices become more omnipresent, periods of economic growth become weaker, and periods of economic bust more frequent and persistent. Eventually, as the cycle repeats, the sharp economic contrasts of boom and bust blend together becoming a permanent shade of economic grey.

Boom-bust Cycles Initially Cause Gold Price to Decline – and Eventually Soar

As they did in 2008, central banks will print money to bail out collapsing financial infrastructure and support a growing mass of unemployed. While each cycle may begin as a deflationary shock, causing gold prices to decline, the eventual monetary response will destroy currencies and send gold prices soaring. This has already started to happen.

Conclusion

Unless high ROI replacement energy sources are found then, over the long-run, this [boom-bust] cycle could turn into a hyperinflationary depression, as central banks naïvely fight a losing battle. Savings could be wiped out as the value of paper currency plummets…with gold being one of the few ways to protect one’s wealth over the long run.

* http://www.planbeconomics.com/2011/12/03/peak-oil-the-new-boom-bust-cycle-and-gold/

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Hubbert: Peak Oil and the Coming Cultural Crisis

Editor — Mon, 14 Nov 2011 07:52:52 +0000

In 1956 Hubbert predicted that US oil peak [production] would be sometime between 1969 and 1971 for [which] he was ridiculed…[but it did precisely that - ] in 1970… Then, in 1974, he predicted [that] the world ] production of crude] oil [would] peak [around] 1998 [qualifying that projection by saying] that if OPEC were to restrict the supply, then the peak would be delayed by 10-15 years which would put it at 2008-2013, or exactly right. OK, now is anyone willing to make a bet that Hubbert’s THIRD prophecy about the cultural crisis he expected is wrong? Didn’t think so. Here it is [- and I include in the article several suggestions on how Hubbert's 3rd forecast might actually be averted were the powers to be agree to take drastic action, which is unlikely]. Words: 1369

So says Gary Flomenhoft (http://cluborlov.blogspot.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Flomenhoft goes on to say, in part:

In case you are not familiar with Hubbert’s first two prophecies, [below are charts outlining what he expected to unfold].

Prediction #1: Hubbert’s U.S. Oil Production Profile

Prediction #2: Hubbert’s Global Oil Production Profile

Here is what Hubbert’s prediction (to scale by MBPD) looks like overlayed onto a reasonably close estimate of the actual global oil peak which started in 2005 and has continued as a plateau up to now.

Prediction #3: Hubbert’s Projection of Cultural Crisis

[In an article** entitled Exponential Growth as a Transient Phenomenon in Human History Hubbert put forth the following, as presented in chart form:]

Hubbert said,

The third curve (on the left) is simply the mathematical curve for exponential growth. No physical quantity can follow this curve for more than a brief period of time. However, a sum of money, being of a nonphysical nature and growing according to the rules of compound interest at a fixed interest rate, can follow that curve indefinitely…Our principle constraints are cultural…we have evolved a culture so heavily dependent upon the continuance of exponential growth for its stability that it is incapable of reckoning with problems of non-growth…it behooves us…to begin a serious examination of the…cultural adjustments necessary…before unmanageable crises arise…

[Or, to state it differently,] since debt represents ultimately a claim on real assets, debt cannot continue forever if growth of the real resource based economy has stopped. This is Hubbert’s Third Prophecy: when economic growth cannot continue due to the lack of affordable oil, then we will have a cultural crisis.

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Ok, anyone see any cultural crisis happening? Yeah, what about a worldwide uprising of the 99% against the 1%? What does this have to do with Hubbert’s Third Prophecy? EVERYTHING!

Here is a graph of total US debt in all sectors up to end of 2009:

Here is [the] same curve overlayed with [the] same time scale on global oil peak:

Looks like Hubbert’s graph above doesn’t it? That’s because it is. Debt can continue to increase indefinitely, while oil can not and, since our entire money system is based on debt with interest attached, there is no way to escape it. All money is debt because we have allowed banks and the Fed to create all our money through interest-bearing loans by using the fractional reserve system. The details are unimportant, the main point is that our money supply is created by interest-bearing loans of banks and the Fed. Therefore, the economy must always grow in order to pay back the interest. When the economy can’t grow anymore…collapse.

Here is what has happened to US debt over the last several years:

2008 US Debt:GDP ratio = 350%

2009 4Q US Debt:GDP ratio = 425%

2011: US Debt:GDP ratio = 475%?

Debt has continued to grow because we don’t have a real economy anymore, we have a fictitious funny-money phantom economy of mostly financial speculation. Here is what happened in 2008:

As we all know, we had a stock market crash, a housing crash, an oil price spike and crash, and an employment crash. Because we don’t have a real economy any more we have papered over these problems by creating more debt. The taxpayers bailed out the criminal fraudsters on Wall St., taking on more government debt, and the Fed bailed out many bankrupt banks internationally ($12 Trillion), indenturing the taxpayers for future debt.

Since debt represents ultimately a claim on real assets, debt cannot continue forever if growth of the real resource based economy has stopped. This is Hubbert’s Third Prophecy: When economic growth cannot continue due to the lack of affordable oil, then we will have a cultural crisis.

Well here we are folks. The solution of the powers that be? Create more funny money through the fed’s “quantitative easing program”. The solution of the Keynesian economists? Take on more government debt through interest bearing loans by selling Treasury bonds to the Fed, China, and other parties (stimulus). The solution of the right-wing “deficit hawks”? Cut government (social) spending to the bone to “cut the deficit” which they created through monstrous military spending, and tax cuts to themselves. Guess what. None of these are going to work. The solution is structural in the monetary system itself. When all money is debt, there is always interest to pay and growth is required.

Hubbert didn’t mention one other notable feature of a debt-money system. It systematically pumps wealth from the bottom 80% of the population in wealth to the top 20%. The bottom 80% pay interest while the top 20% collects it, and of course most of the interest is collected by the top 10%. When all money is debt, that’s a lot of money going to the top. The Occupy Wall Street people aren’t stupid. They know the game is rigged.

A SOLUTION

A solution is some form of Public Credit Money. That means that money is issued without interest:

100% reserve requirements (abolish bank money)
Abolish Federal Reserve notes (end private central banking)
Issue Treasury Notes INTEREST-FREE (Greenbacks)
Issue state or local currency (warrants, bills of credit, zero interest bonds)
Social Credit (CH Douglas)
Kucinich NEED Act

Each of these topics could have a separate article, but I have summarized each, briefly, below:

1. The small reserve requirement of ~5% means that the banking system can create 1/.05 = 20X the money from deposits on hand. Most people think banks loan out money that people save and deposit, but that isn’t how it works. With 100% reserve banks can only loan out money on time that you deposit, and you cannot withdraw it during that period of time, so it is like a CD (certificate of deposit).

2. Abolish the fed or put it under the Treasury Department.

3. The Treasury Department could then issue Treasury notes, not Treasury bonds. Treasury notes are credit money that is spent on public goods, or loaned for projects creating public goods. It is returned to the government through taxes or repayment of low-interest loans. The colonists used colonial scrip, Lincoln issued GREENBACKS, and Kennedy issued Treasury notes. These were all credit money, not debt money.

4. States or local governments could issue warrants, bills of credit, or zero interest bonds. Some people feel the national government is too unaccountable to be trusted with money creation and it should be devolved to lower levels of government.

5. Social Credit (CH Douglas): Part of public credit money could be to resurrect the idea of social credit. Government issues credit directly to the public as a guaranteed minimum income and they spend it on things they need. The fed gave money free to banks. Why not give money free to us? This is similar to the scene in the recent movie “In Time”, when they rob the bank and announce to the crowd that the bank is giving zero interest loans, and you don’t have to pay it back.

6. Dennis Kucinich has introduced the NEED act which incorporates many of these ideas from the American Monetary Institute.

Conclusion

Debt-based money is incompatible with the post oil-peak world. It’s only a matter of time before it collapses in default.

*http://cluborlov.blogspot.com/2011/11/hubberts-third-prophecy.html (**PDF of the Hubbert article)

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1. Peak Oil: What a Farce!

It wasn’t supposed to be this way. By now, Peak Oil was supposed to be a fact of daily life. People were supposed to be lined up at gas stations, struggling to buy US$10-a-gallon gas. Solar and wind companies were supposed to occupy prominent places on the Big Board instead of going out of business right and left. People were supposed to have diminished expectations – resigned to shivering in the dark. Free markets, a flawed system of commerce, were to be exposed as a misleading theoretical construct, incapable of providing for people’s needs…The world was running out of resources…Now, suddenly, there is a different tale to tell and the New York Times is up to the task. Up and down the Americas, we learn, there is an Oil Boom. Suddenly, we have gone from enforced austerity to an unheralded plenty. Middle East, watch out! [But all is not as it seems. Let me explain.] Words: 1440

2. Peak Oil Is Still With Us – Here’s Why

In a recent article called There Will Be Oil in the WSJ, Daniel Yergin once again attempts to debunk the concept of peak oil and sees global production capacity growing to 110 mmbpd by 2030, followed by slow decline. In this short report I take a quick look at his key arguments in an effort to bring further convergence between the peak oil and business-as-usual camps. [Unfortunately, I failed to do so concluding that Peak Oil is still very much with us. Let me explain.] Words: 2032

3. New Report Confirms that “Occupy Wall Street” Has a Point Regarding Income Inequality in America

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4. America: The 42nd Most Unequal Country in the World!

Richest 1% of Americans Own 33.8% of Country’s Private Wealth and 23.5% of Its Income!

[Remember the song by The Barenaked Ladies called "If I Had a Million Dollars"? Well, if you were one of the many ultra-wealthy around the world who were worth billions (see list) and earns billions of dollars each year, year after year, where could you possibly spend such riches? Well, frankly, even being very extravagant, it actually is surprisingly difficult to spend that much money - and there's the rub. While this article, on one hand, outlines where and how a billionaire could make a small dent in his fortune (the uplifting part) it outlines, on the other hand, just how concentrated wealth is in the U.S. these days and the adverse effect such a concentration is having on our society.] Words: 2156

5. Are America’s Wealthy Unpatriotic?

The Rich are NOT Paying Their Fair Share of Income Tax

Over the last half century, the richest Americans have shifted the burden of the federal individual income tax off themselves and onto everybody else – dramatically! At a time of national economic crisis, especially, they can and should contribute far more in taxes. [Let me show you the extent of this massive redistribution of wealth so you decide for yourself if this is, indeed, the case.] Words: 1140

6. Never Have SO Few Owned SO Much – Where Do You Place in the Wealth Hierarchy?

[The fact that] the top 1% has prospered incredibly while the bottom 99% have been screwed royally is supported by countless data. New data show this is a global phenomenon and that even in the worst of economic times the wealthiest make out like the bandits they are, and there are a lot more of them than 1%. [Let's take a look at what the data actually says.] Words: 781

The Implications of Coming “Peak Copper” for America – and the World!

Editor — Wed, 09 Nov 2011 07:28:30 +0000

About two years ago, I looked through a BHP Billiton presentation which listed the number of years remaining for particular commodities. It was not an analysis of “peak” commodities as such, just a report on when various commodities would be completely, 100% depleted based on current usage rates and reserve assumptions. Copper in that report was determined to be scarcer than oil! [What does that mean for the future well-being of the U.S. - and the world?] Words: 1380

So says Dr. Stephen Leeb (www.leeb.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted (sub-titles and bold emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Leeb goes on to say, in part:

Our Premise

You can never really talk about peak oil, peak zinc or peak anything as a separate, unitary factor; you’re really talking about peak resources. When one critical resource, [be it]… food, energy, base metals, even labor – and each of those resources is used in some way to obtain, refine or simply process all other resources - becomes increasingly scarce, that resource, by virtue of its relationship to all other resources, will, in turn, make all those other resources scarce as well. (A primary thesis of the past two books I’ve written, “Game Over” and the recently released “Red Alert,” is that you cannot analyze commodities apart from their relationship to other commodities.)

Copper Prices May Be “Unimaginably’ High in 3 Years

We make the [above] points in light of a recent report issued by Goldman Sachs, with which we agree, on October 28th as follows:

Copper prices may be ‘unimaginably’ high in 3 years with China growth spurring consumption.

This is a truly frightening statement…Indeed, in terms of probable or potential scarcity, I think copper may even surpass rare earth elements, oil and many other commodities. Copper grades, i.e., the amount of copper you get from every ton of ore mined, as well as grades for almost every other base metal and precious metals such as gold and silver, look like a scary playground slide. They continue to fall, and fall dramatically quickly.

Implications of “Unimaginably’ High Copper Prices

A so-called “unimaginably high” price for copper would imply unimaginably high prices for our electric grid, building homes, and perhaps for drilling oil. Clearly other commodities would become ever scarcer, in a vicious circle to end all vicious circles.

Our government seems wholly oblivious to this. Somehow they must be praying to, or simply have an abiding faith in a technology god somewhere out there – one who will come down and rescue us from the threat of resource depletion. Yes, there could possibly be technologies in development now or in the future that will come on stream and provide such a rescue - but to be sure of such a possibility? That can hardly be the basis of sound policy. To have no credible alternative solutions or coping strategies in place is irresponsible – or sheer madness…

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We know that China doesn’t believe in such a solution…because, while we’re fighting a shooting war in Afghanistan, China is spending comparable amounts of money in the same place – mining copper. Indeed, China seems desperate to get all the copper it possibly can…to ensure their standard of living into the next decade and beyond.

America Doesn’t Realize It is In An Economic “Commodities” War

The real war here is an economic war. It’s the war China is fighting to assure that its civilization continues, and it should be the one we’re fighting to save our own civilization.

I use the word ‘war’ because I think it transcends political distinctions. Once it is recognized as a war, presumably liberals, conservatives, and even most libertarians (i.e., those who allow for at least some legitimate role for government) can come together. We are being attacked – at least implicitly – as our standard of living is under attack. Fighting this war should be the biggest and most important priority we have.

To say more, China is not only spending tons of money in Afghanistan, but whatever they’re spending there is merely a drop in the proverbial bucket, as they will be spending 2 ½ trillion dollars between now and 2015 to find, acquire and process commodities. That’s a comparable amount to what the U.S. spent during the Second World War.

We could go on with example after example, but the bottom line is that for our civilization to have any chance of survival we’re also going to have to spend massive amounts of money. How can we, given our debt crisis and associated problems right now? Then again, how can we not do so, given what’s at stake?…

I recall giving a keynote address at a J.P. Morgan energy conference earlier this year. The audience consisted of extremely knowledgeable utility executives, presidents, financial officers, etc. I asked them “How many of you consider copper to be a potentially scarce metal?” Not one of them answered affirmatively.

You can be sure that at the moment I was posing this question China was busily mining copper in the midst of that war-torn country where our own troops go on fighting and dying for what appear to be the most nebulous political and strategic objectives…[I]f we can wake up to the fact that the current situation in terms of risks to this country easily rises to the level of a
full-scale war, then we’ll have a chance – but as the situation with copper shows (and don’t just take it from me, listen to what Goldman Sachs is saying), time is running out very, very quickly…

How to Capitalize on Coming “Peak” Copper

As someone who advises people about investments [here is my advice on how to capitalize on the future "unimagineable" price of copper]:

copper stocks stand out. The best of the major copper companies is clearly Freeport-McMoRan (FCX) and for those of you who want to swing for a home run, we continue to like NovaGold (NG). Neither of these stocks, despite the longer term prospects for profound copper scarcity, is going to be for the faint of heart. Freeport, I think, could trade as low as $10 and as high as $150 and over; NovaGold, perhaps could move between $4 to $50 or more.
As far as gold and silver stocks go, my recommendations remain the same: Goldcorp (GG), SPDR Gold Shares (GLD), iShares Silver Trust (SLV) and Barrick Gold (ABX), which incidentally bought a huge copper mine recently, and by virtue of infrastructure built by China it will almost certainly ship its entire product to that country. And again, NovaGold (NG), which in addition to a massive copper deposit also has a massive gold deposit.
Gold [bullion is highly recommended.] Obviously in the context of severe resource scarcity, paper currency makes no sense for anyone. Pricing resources cannot be a battle of printing presses; that just won’t do it as a rationing device. Rather, we are going to need something for this purpose that is constant or close to it [such as] gold [bullion] - the clear first choice – and silver… because of its history as a monetary metal. [Furthermore], from what I know now, [silver] could become nearly as scarce as copper in the years ahead, which would likewise pose a major threat to everything else…

*http://www.leeb.com/long-term-growth/%E2%80%9Cunimaginable%E2%80%9D-prospects-copper-10-31-11

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Peak Oil: What a Farce!

Editor — Sun, 18 Sep 2011 07:47:54 +0000

It wasn’t supposed to be this way. By now, Peak Oil was supposed to be a fact of daily life. People were supposed to be lined up at gas stations, struggling to buy US$10-a-gallon gas. Solar and wind companies were supposed to occupy prominent places on the Big Board instead of going out of business right and left. People were supposed to have diminished expectations – resigned to shivering in the dark. Free markets, a flawed system of commerce, were to be exposed as a misleading theoretical construct, incapable of providing for people’s needs…The world was running out of resources…Now, suddenly, there is a different tale to tell and the New York Times is up to the task. Up and down the Americas, we learn, there is an Oil Boom. Suddenly, we have gone from enforced austerity to an unheralded plenty. Middle East, watch out! [But all is not as it seems. Let me explain.] Words: 1440

So say the Staff of The Daily Bell (www.thedailybell.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

The article goes on to say that, according to the article in the New York Times,

“Recent Discoveries Put Americas Back in Oil Companies’ Sights … New Fields May Propel Americas to Top of Oil Companies’ Lists … Brazil has begun building its first nuclear submarine to protect its vast, new offshore oil discoveries. Colombia’s oil production is climbing so fast that it is closing in on Algeria’s and could hit Libya’s prewar levels in a few years. ExxonMobil is striking new deals in Argentina, which recently heralded its biggest oil discovery since the 1980s

A Chinese-built rig is preparing to drill in Cuban waters; a Canadian official has suggested that unemployed Americans could move north to help fill tens of thousands of new jobs in Canada’s expanding oil sands; and one of the hemisphere’s hottest new oil pursuits is actually in the United States, at a shale formation in North Dakota’s prairie that is producing 400,000 barrels of oil a day and is part of a broader shift that could ease American dependence on Middle Eastern oil.

Petrobras is investing more than $200 billion to help make Brazil a major oil player. Technology has made Canada’s oil sands easier to tap in recent years, creating foreign interest as well as a demand for workers. For the first time in decades, the emerging prize of global energy may be the Americas, where Western oil companies are refocusing their gaze in a rush to explore clusters of coveted oil fields.

“This is an historic shift that’s occurring, recalling the time before World War II when the U.S. and its neighbors in the hemisphere were the world’s main source of oil,” said Daniel Yergin, an American oil historian. “To some degree, we’re going to see a new rebalancing, with the Western Hemisphere moving back to self-sufficiency.”

The facts revealed in this article are startling. Venezuela and Mexico, despite their reserves, are relegated to the back of the pack because of government inefficiencies. Nonetheless, the New York Times makes the following startling statement: “Venezuela is now considered to have bigger oil reserves than Saudi Arabia, putting it at the top of OPEC’s rankings.”

There is some hedging, of course. The Middle East can still influence oil prices greatly, the Times reports, and its oil fields are generally cheaper to develop but advancements in technology have suddenly made the Americas – from Argentina to Brazil to the US and Canada – an energy powerhouse. Imagine that!

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Shale oil and fracking may soon help the US produce two million barrels of oil a day. While discoveries of Brazil’s new offshore fields could yield even more. “Brazil will become an oil power by the end of the decade, with production in line with that of Iran,” the Times quotes Pedro Cordeiro as saying. He is an energy consultant for Bain & Company, who sees the country’s oil production climbing to 5.5 million barrels a day by 2020.

Is this idle chatter, or is OPEC really being challenged? Canada, we learn, is already the top gas exporter to the United States, ahead of Mexico. Canada’s oil sands may produce 3 million barrels a day by 2020. Such production increases have already helped the U.S. cut OPEC imports by more than a million barrels a day. Brazil and Colombia now surpass Kuwait as oil exporters to the U.S.

We have been writing about the economic illiteracy that supports Peak Oil for nearly a decade now. We have always believed it to be a kind of propaganda – a dominant social theme advanced by the Anglosphere power elite for purposes of control and further exploitation.

The great Western banking families always float scarcity memes as a way to consolidate control and further expand global governance. In fact, if the Peak Oil meme is now going out of fashion, this may only mean that some other kind of propagandistic measures is about to be initiated. We don’t know what it is but we can guess, as it seems obvious and evident that the powers-that-be are trying to form pan-national building blocks for world government. The EU is supposed to be one and the North American Union – a merger of Mexico, Canada and the U.S. – is supposed to be another.

This sudden “discovery” of the Americas’ potential for energy sufficiency may be a way of tying together North and South American economies. By making energy available within the Americas, a certain degree of continental solidarity may be fostered, along with a number of binding political and economic ties. Of course, from our point of view, the great banking families that want to run the world have been retarding North and South American oil exploration and production for at least 50 years.

What is perplexing and condescending about the New York Times article is that the “newspaper of record” has been a willing tool of this promotion for at least that long. Now all of a sudden, the New York Times is reversing its editorial policy – but without a single apology or mea culpa. That’s how it works, of course. The Times is not a reportorial device; it is a propaganda outlet for power elite memes. When the time comes for a meme to be discarded it will be. The Times will reverse decade’s worth of reporting in a single day and never even bother to acknowledge the editorial shift.

One of the Forbes brothers (of magazine fame) was quoted some months ago as saying the U.S. itself, even in the lower 48, might contain enough oil (not to mention coal and natural gas) to provide for its needs for the next 1,000 years – and that’s with the current technology.

Conclusion

We happen to believe oil may be abiotic – that it occurs naturally over time but whether or not this is so, it is increasingly indisputable that oil and other energy resources are NOT in short supply. The scarcities are managed ones, intended to ensure that people must turn to national and global solutions for what should be local and entrepreneurial solutions. The New York Times is getting around to admitting this is so. Perhaps the Peak Oilers shall not be far behind.

Staff Note: This meme seems to be gaining momentum! The Wall Street Journal recently published an article by Daniel Yergin taking on Peak Oil and its Oilers. In the article, “There Will Be Oil,” Yergin writes that, “For decades, advocates of ‘peak oil’ have been predicting a crisis in energy supplies. They’ve been wrong at every turn.” Yergin even blasts the ludicrous M. King Hubbert and his Peak Oil theory often referred to as “Hubbert’s Peak.” Even more astonishingly, Yergin mentions Hubbert’s nutty theory of “Technocracy” in which scientists and engineers should rule the world using mathematical analysis. Of course, what Yergin doesn’t mention is that Smart Meters are now being installed around the world to monitor every aspect of people’s energy consumption, on the theory that the world is running out of oil and corporate and government monitoring is necessary to survival…

*http://www.thedailybell.com/2973/Americas-New-Production-and-the-Farce-of-Peak-Oil

Peak Oil Is Still With Us – Here’s Why

Editor — Sat, 17 Sep 2011 07:04:59 +0000

So says Euan Mearns (www.theoildrum.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Mearns goes on to say, in part:

Oil production

Global oil production (crude + condensate + natural gas liquids: C+C+NGL) has been on an 82 million barrel per day plateau for 7 years despite record high oil price, deployment of technology such as horizontal wells and 3D seismic, the development of new oil provinces such as offshore Angola and unconventional play concepts such as the Bakken shale in North Dakota. Oil production rose during the great oil bear market from 1980 to 1998 but has largely stagnated during the great bull run ever since. Many things are upside down on the back side of Hubbert’s peak.

Decline rates

Any discussion about peak oil should begin with decline rates…Decline is the natural process whereby production rates fall as a result of depressurisation of the reservoir combined with water ingress into the oil-bearing strata. Oil production companies go to great lengths to mitigate for decline by injecting water or gas to maintain pressure, well maintenance programs (work overs) and by drilling new wells. Observed declines are therefore much less than natural declines but nevertheless run at a globalised average of around 5% per annum.

With global C+C+NGL production running at 82 mmbpd, 5% observed net declines will wipe out 4.1 mmbpd capacity every year. What this means is that the oil industry must add 4.1 mmbpd new capacity every year from new field developments just to stand still. This new capacity has to be derived from a stock of second-tier assets such as deep water Gulf of Mexico, heavy sour oil in Saudi Arabia, Arctic oil or the Bakken Shale since most of the favoured tier-one assets have already been produced.

In order for production to grow beyond the 82 mmbpd plateau the oil industry must add more than 4.1 mmbpd new capacity every year from an ever degrading pool of resources. To reach 110 mmbpd in 2030 would mean adding more than 4.1 mmbpd each year to 2030 reaching an additional 5.5 mmbpd new capacity in that year. Where is this new capacity going to come from? [While] Yergin cites a list of new discoveries and new play concepts…[the] new discoveries and plays [that] have been developed and put into production over the past 7 years have been inadequate to provide new production in excess of declines.

New plays and play concepts

The oil industry continues to make new discoveries and to deploy new technology that has made it possible to develop low-quality reservoirs that would have been un-commercial a decade ago were it not for new technology and the high price of oil. The giant Claire Field off the west coast of Scotland, and the Haradh segment of S Ghawar and the Khurais field, both in Saudi Arabia, are examples of low quality reservoirs, discovered decades ago, whose commercial development has been made possible by extended reach horizontal wells. Developing these giant fields in this way has enabled the global industry to maintain the 82 mmbpd plateau but not to exceed it.

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Yergin cites new discoveries off shore in Ghana, Brazil and French Guiana as examples of new plays that may boost future production together with unconventional oil from Canadian tar/oil sands and oil produced from shales like the Bakken. New production in Angola, Rajasthan in India, Congo Brazaville, and deep water GOM may be added to the list of recent new provinces that have been brought on stream. The fact is that without this steady stream of new developments, the oil industry will fail to maintain production at current levels and production will enter the decline phase.

UK independent explorer Cairn Energy has just drilled 6 dry wells in the Arctic waters off the West coast of Greenland, reminding all that despite the best seismic technology and basin models, exploration remains a high risk business. The Bakken Shale in North Dakota does represent an interesting [and more encouraging] case study.

In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such “tight” oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago.

In email correspondence, Oil Drum editor Arthur Berman pointed out that Bakken production comes from around 6000 wells, giving an average rate of about 67 bpd per well whilst Oil Drum editor Tad Patzec pointed out that in the GOM total, Bakken production may come from a handful of Macondo-type wells. Thus, while there is an interesting lesson for all to learn from the Bakken, the scale of effort required to win this production is immense and despite this effort, global oil production remains glued to its 82 mmbpd plateau.

Similarly, the immense effort to develop the Canadian tar sands has not managed to boost global production for the last 7 years. If this scale of effort made in the tar [oil] sands and the Bakken are not maintained then global oil production will fall.

Oil price and technology

Hubbert insisted that price didn’t matter. Economics—the forces of supply and demand—were, he maintained, irrelevant to the finite physical cache of oil in the earth. Why would price—with all the messages that it sends to people about allocating resources and developing new technologies—apply in so many other realms but not in oil and gas production? Activity goes up when prices go up; activity goes down when prices go down. Higher prices stimulate innovation and encourage people to figure out ingenious new ways to increase supply.

I certainly agree with Yergin that the simplistic geological maximum flow rate model advocated by early workers such as Hubbert needs to be refined to incorporate a systems approach based on economics, society, politics and technology. It is of course the case that high price will stimulate oil industry activity whilst at the same time reducing demand. The key question here is where does the price balance lie between stimulating production and killing demand?

Yergin fails to mention that we have experienced a high price environment for several years now and this has failed to boost production beyond the 82 mmbpd plateau (see chart up top), in part because high price has at the same time tempered demand for oil, especially in the OECD. High price does not seem to have impacted the decline of the North Sea at all, although it seems likely that without high price that decline would have been even more rapid. Ingenious technologies have helped maintain this plateau but it is far from clear that they will in future move oil production substantially above it.

5 trillion barrels more

Currently, it is thought that there are at least five trillion barrels of petroleum resources in the ground, of which 1.4 trillion are deemed technically and economically accessible enough to count as reserves (proved and probable).

There is simply no point speculating about vast unconventional oil resources replacing the easy flows of light sweet crude upon which our current society and economy is based. The cost of recovery, in economic, energy and environmental terms is quite simply too high. And as already noted for unconventional oil sources like the Bakken and Canadian [oil] sands the scale of endeavour required is immense compared with traditional oil that flows out of the ground at rates of tens of thousands of barrels per day. The type of society that may be founded on unconventional sources such as these will look very different to today’s society that is founded on easy flows of cheap oil.

A parable on Scottish unconventional diamond resources may help illustrate this point. Diamonds occur in Earth’s upper mantle, at depths greater than 100 kms, below crust of Archaean age (older than 2.5 billion years old). Scotland is blessed to have rocks of this age in the northwest highlands of our small country providing us with potentially millions of tonnes of diamond resources. All we need to do is to wait for prices to rise and the right technology to come along that will enable us to mine at such great depths and we will single handedly flood the market (dumping prices – oops) ending diamond scarcity once and for all.

Peak demand

In this view, the world has decades of further growth in production before flattening out into a plateau—perhaps sometime around midcentury—at which time a more gradual decline will begin. And that decline may well come not from a scarcity of resources but from greater efficiency, which will slacken global demand.

The concept of peak demand is actually one that I subscribe to but certainly not in the way articulated here by Yergin, who seems to believe that improved energy efficiency will lead to a reduction in demand for oil. In fact, the exact opposite of this is more likely to be true where improved energy efficiency enables society to afford a higher price that will lead directly to more, not less oil being produced.

The notion of peak demand that I subscribe to is one where there is a maximum price for oil that the global economy/society can bear. That price will fix the amount of poor quality resources that can be converted to reserves since every time the price ceiling is hit the World gets cast into recession reducing demand for oil in a way just experienced during the 2008/09 peak oil crash.

Summary and conclusions…

Over the years there has been significant convergence between the peak oil and business-as-usual camps, each hopefully learning from the other. Yergin, whilst attempting to debunk peak oil, appears to have been converted to a late peakist. I can certainly relate to many of the concepts described by Yergin – price influencing supply and demand, technology, innovation and new plays etc. – but wonder when these are going to result in new production capacity (supply) that exceeds annual declines?

The stakes are high. Should policy makers listen to Pulitzer Prize winning historians or should they listen to geologists and a growing band of economists who can see the dependency of economic growth upon increasing supplies of cheap energy that quite simply do not appear to exist? Most important of all, will the WSJ publish a modified view of the oil world than that presented by Daniel Yergin?

*http://www.theoildrum.com/node/8391?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+theoildrum+%28The+Oil+Drum%29

Related Article:

1. Peak Oil: What a Farce!

Get Positioned: Oil & Uranium Going to Record Highs! Here’s Why

Editor — Thu, 10 Feb 2011 07:11:32 +0000

‘Peak Oil’ To Soon Push Oil & Uranium Prices Beyond Previous Record Highs!

As the world approaches ‘Peak Oil’ crude oil usage will begin to be rationed more and more and the world will turn to nuclear energy to meets its energy needs. As such, expect both oil and uranium to surpass their previous record levels of US$147 per barrel and US$140 per pound, respectively, within the next 2-3 years. Let me explain why. Words: 1446

So concluded Puru Saxena (www.purusaxena.com/) in the above paraphrased comments from an article* reformatted and edited [...] below by Lorimer Wilson, editor of www.munKNEE.com, for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Saxena goes on to say:

The day of reckoning is approaching and the world does not have a contingency plan… The world’s output of conventional crude oil peaked in 2005 and global oil exports are also past their prime. Furthermore, the unconventional sources (oil sands, heavy sour crude, ethanol, natural gas liquids, bio-fuels and shale) are struggling to keep up with the ongoing depletion in the world’s largest oil fields. As such, it is probable that the world’s current production of total liquids is at or near maximum capacity. [That suggests that Peak Oil is fast approaching.]

Up until 2007 various government sponsored energy agencies were extremely optimistic about their oil production forecasts. In fact, before it commissioned its first field-by-field analysis in 2008, the IEA used to claim that the world could easily produce over 110 million barrels of total liquids per day! Ironically, other agencies such as CERA and the EIA were even more liberal with their oil production projections and ‘Peak Oil’ was dismissed as a lunacy.

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In November 2008, [however,] the IEA released its World Energy Outlook 2010 report, which was a thorough analysis of the world’s 800 largest oil fields [and] in that study, the IEA admitted (for the first time) that most of the world’s largest oil fields were depleting at a rapid clip and serious capital spending was essential to avoid an energy crunch in 2020. Although this report was a step in the right direction, in our view, the IEA was still painting an unrealistic picture. Fortunately, it has taken the IEA only two years to realise its mistake and its latest World Energy Outlook 2010 report presents a far more realistic scenario.

Oil Output Forecast To Increase By Only 9% Over Next 25 years!

According to its latest study, the IEA now expects global total liquids production to increase to just 96 million barrels per day by 2035! Bearing in mind the fact that the world currently produces 88 million barrels of total liquids per day, the IEA is now essentially implying that output will only increase by 9% over the next 25 years!

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It is notable that in 2009 the IEA stressed the importance of oil for economic growth and concluded that 106 million barrels per day would be required by 2030 ( representing an increase of approximately 18 million barrels per day above current output) [but,] interestingly, in last year’s report, the IEA predicted that global production will peak at only 96 million barrels per day in 2035! So, within the course of a single year, the energy watchdog for the developed world lowered its production estimate by 10 million barrels per day!

New Oil Discoveries Are Very Optimistic Projections!

To complicate matters further, the IEA’s latest forecast of 96 million barrels per day of peak production depends on the assumption of finding an extra 900 billion barrels of oil over the next 25 years! However, given the fact that over the recent past, we have managed to discover only 10 billion barrels of oil each year, we cannot help but take the IEA’s rosy forecast with a pinch of salt… At the current rate of discovery, it will take us 90 years to discover 900 billion barrels of oil yet the IEA somehow believes that this task can be accomplished by 2035!

Projections of Future Oil Developments Just Wishful Thinking!

The chart below is taken from the IEA’s World Energy Outlook 2010 report and it does a good job of capturing the sorry state of affairs. As you can see, the IEA now expects the output from the currently producing fields (dark blue area on the chart) to drop from approximately 70 million barrels per day to only 16 million barrels per day by 2035. Furthermore, the IEA also believes that 60% of oil production in 2035 will come from oil fields not yet found (light blue area on the chart) or developed (grey area on the chart)! Call us skeptics but we do not believe that oil fields yet to be found or developed will somehow succeed in offsetting the ongoing depletion.

Peak Oil Could Arrive Within the Next 2-3 Years!

It is our contention that the world will struggle to produce more than 91-92 million barrels of total liquids per day and global demand will collide with available supply. Of course, we do not know the exact timing of this event but if global consumption continues to grow by 1.5% per annum, we will get there within the next 2-3 years.

Needless to say, when aggregate demand hits available supply, the price of oil will rise sharply. More importantly, if demand continues to increase in the developed world, there will be a permanent shortage of crude and governments will probably end up rationing petroleum. Furthermore, it is our firm belief that, ultimately, oil will only be used for its highest uses (agriculture and aviation).

Oil Prices Expected to Surpass Previous Record of $147 Short-term Then Tumble Again!

If history is any guide, the price of oil will not rise in a straight line and the secular uptrend will be punctuated by severe economic recessions. After all, the cure for a high oil price is a high oil price! At some point during the course of this business cycle, as the price of oil continues to rise, it will (once again) cause economic pain for the overstretched citizens of the developed world. When that happens, consumption will slow down and we will experience demand destruction in some parts of the world.

In our view, the next economic recession will be caused by yet another spike in the price of oil and during the next business slowdown, crude will get whacked again. This is the reason why we will liquidate all our energy related investments prior to the onset of the next economic recession.

Turning to the current situation, the price of oil is trading around US$90 per barrel and during the course of this business cycle, we expect it to surpass its previous record of US$147 per barrel.

Peak Oil Will Increase Demand for – and Price of – Uranium

As the world approaches ‘Peak Oil’ and crude is conserved, demand for electricity will surge. Either that or the world will go back to horse drawn carriages, which we seriously doubt! Furthermore, given the environmental damage associated with burning poor quality coal, the world will turn to nuclear energy to meets its energy needs. Therefore, worldwide consumption of uranium will appreciate over the following years and this will exert enormous pressure on mined supply.

At the time of writing, the price of uranium has climbed to US$61.5 per pound and it is probable that it will at least double from this level. In the previous cycle, the price of uranium peaked around US$140 per pound and we will not be surprised to see that level exceeded within the next 2-3 years. Such a bullish scenario for uranium is great news for the unhedged uranium mining companies and a modest exposure to these stocks seems like a reasonable bet.

How to Benefit From the Looming Energy Crunch

In summary, given the reality of ‘Peak Oil’ and our bullish bias, we have allocated approximately 30% of our clients’ capital to those assets which will benefit from the looming energy crunch. At present, we have exposure to upstream oil companies, integrated energy giants, oil services firms, renewable energy stocks, uranium and electric car/rechargeable battery manufacturers. It is our contention that these businesses will prosper over the following years, thereby rewarding our investors.

* http://dailyreckoning.com/welcome-peak-oil/

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

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Oil

Nick Barisheff: These 6 Trends Will Drive The Price of Gold For Decades

Editor — Mon, 07 Feb 2011 07:57:28 +0000

This new video by www.bmgbullion.com and www.FutureMoneyTrends.com is brought to you by www.munKNEE.com. The 6 minute and 49 second video identifies and discusses:

3 mid-term trends that will drive the fiat price of gold to heights western economists can not even imagine and
3 irreversible trends that will affect the price of gold and currencies for decades

To read Nick Barisheff’s (www.bmgbullion.com) speech, complete with graphs, that was the genesis of the video go here.

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Oil Prices Are Going Higher! Here’s Why

Editor — Wed, 20 Oct 2010 07:54:41 +0000

Increased Oil Consumption Means Higher Oil Prices

Global crude oil production has plateaued at 74 million barrels per day. However, now that economies are recovering, consumption levels are back on the rise [and] the result will be an inevitable rise in oil prices. Words: 717

So says Chris Mack (www.TradePlacer.com) in an article* which Lorimer Wilson, editor of munKNEE.com , has reformatted into further edited [...] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Mack goes on to say:

Oil Consumption is Crucial for Economic Growth

Ignoring the rest of the world, the U.S., China and India are expected to increase their daily consumption of oil by almost 10 million barrels per day by 2025. Economic advancement over the last 150 years has been highly correlated with the consumption of oil and other fossil fuels [and] without this increase in consumption of oil at low prices, the world will experience no growth. With such large populations and leverage to energy consumption, [however,] it is unclear if China and India can live up to their high hopes of leading the world out of the current global economic slump.

What An Increase in Oil Price Means For Global GDP

A $100 increase in the price of oil would cost an additional $3 trillion in direct consumption expenses globally – effectively reducing global GDP by 5.1 percent. While some of this wealth might be transferred to oil exporting nations, this is not a zero sum game. If oil shale or deep water drilling were used to replace current low cost supplies than oil producers would be spending nearly $100 in additional productions costs and realizing none of the financial gains to offset the losses from consuming nations.

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Most developing nations that are driving global economic growth are highly dependent on energy consumption. Although the U.S., EU, and Japan consume large amounts of energy, these nations have less leverage to the price of oil in relation to their GDP. If the price of oil were to rise by $100, China would suffer from a direct 6 percent hit to their economy, India would suffer from an 8 percent hit to their economy [and] Japan, as probably the most economically vulnerable nation in the world, [would be even more adversely affected].

What Oil Dependency Means

Another important consideration for countries is their foreign dependency on oil. While Russia has a high level of leverage in oil consumption, it is also a net exporter. As a result, Russian oil supplies are relatively secure. The two most vulnerable nations in the world to an oil shock are Japan and South Korea as they import more than 97 and 98 percent of their oil respectively. Both nations are also highly urbanized with very little arable land. These nations would not survive a halt in global oil trade. The EU, China and India are also highly dependent on oil imports.

Why Extent of Unused Arable Land is Important

South and Central American nations including Brazil and Argentina may have the best chances of coming out ahead as they are energy independent, have lower populations than Asia, and the most unused arable land.

Capacity of arable land is a strong indicator of potential for economic prosperity if energy prices spike because the arable land supports farming and food production.

Conclusion:

Now that the U.S., and Europe are also financially insolvent energy consumers the world is turning to nations such as India and China to drive global growth [but] their large population and leverage to the price of energy create a situation of great risk.

If peak oil is realized within the next five years then growth prospects in India and China will be reduced drastically [and] the result will be negative global GDP growth and a reduced standard of living for virtually all nations.

*http://tradeplacer.com/blog/2010/10/21/1287691140000.html

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

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Crude oil

4 Tips to Survive the Coming Economic Crises

Editor — Sun, 12 Sep 2010 07:02:50 +0000

The politicians in Washington tell us the economy is recovering. Well, maybe so … as long as you don’t need a job. The problems facing this country — in debt, energy, lost jobs, unbalanced budgets and more — continue to mount. In short, I think we’re headed for a head-on collision with hard times. Are you going to be ready? Words: 1386

So says Sean Brodrick (www.uncommonwisdom.com) in his original article.* Lorimer Wilson, editor of www.munKNEE.com, presents below further edited [..] excerpts from the article for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Brodrick goes on to say:

4 Economic Dark Clouds Are Gathering Over the Country:

1. Jobs Depression
Sure, sure, GDP is rising … on a tide of government spending. U.S. manufacturing is growing too, as long as you don’t mind that a growing slice of the parts used in “U.S.” manufacturing are made in China. Meanwhile, jobs are vanishing. Twenty-nine million Americans either can’t find jobs or can’t find full-time work. Do you think that’s going to improve as long as companies can ship American jobs overseas where someone will work for $3 a day? Heck, no. It’s going to get worse!

2. Budget Implosion
Yes, the national debt of the U.S. has doubled in less than eight years, but I’m sick of talking about the ballooning U.S. budget gap. For a different dose of awful, let’s talk about the states. Across America, states are running deep in the red, and together, face a shortfall of $156 billion in fiscal 2010, according to The Economic Policy Institute.

Florida, Arizona, Michigan, New Jersey, Pennsylvania and New York are all facing severe funding crises, and they’re just the tip of the iceberg. The head of JPMorgan Chase, Jamie Diamond, says California’s $20 billion budget deficit is worse than anything facing Greece or other financially troubled countries in Europe. Since California is the world’s eighth-largest economy, that should set off alarm bells!

State budget deficits will likely be resolved with layoffs and budget cuts, which will hammer local economies and worsen the downward spiral.

3. Energy Crisis
After over 18 months of recession, world oil consumption is roaring back to its pre-crash peak. The International Energy Agency says oil demand will probably hit 86.5 million barrels a day this year. That is equal to a thousand barrels a second. The growth in demand isn’t in the U.S. — we’re using oil at 2005 levels. Instead, it’s the growth in China, India and other emerging markets that is driving global demand now.

Meanwhile, on the supply side, new oil discoveries peaked decades ago. Starting in 2011, we’ll see a drop of just over 4 million barrels per day from the fields that are currently producing about 85 million barrels a day. After 2014, world production will go into steeper and steeper decline.

4. The Road to Famine
World food demand is projected to increase 100% by 2050 due to a rapidly expanding population in countries such as China and India and yet, 963 million people, 14% of the world’s population, are already chronically hungry. Do you think you’re immune? The food on your dinner table travels an average 1,500 miles to get to your plate. Think again!

Stand Up and Fight Back
I could go on, but a whole list of all the problems facing us can seem overwhelming, and it’s probably too early for you to start drinking. I don’t think these problems will hit next week, but they are growing, and time is a luxury we cannot afford to waste. Here’s the good news: you don’t have to sit there like a lump and wait for bad news to smack you in the face. You can stand up and fight back! When it comes to finances you should be using these good times to get ready – and if you don’t think these are the good times, brother, you don’t want to know about the potential bad times!

4 Ideas to Beat The Crises and Protect Your Portfolio:

1. Move Your Money
Do you trust the big banks? I sure don’t… Their bad behavior was never punished, which increases the odds that the big banks are going to mess up big-time again. Do you think that Wall Street banks will get another bailout? I think that’s unlikely — the American people are downright furious! [As such] I don’t want my money in their banks when the manure hits the fan AGAIN… [and have] moved [my] money from a large, global bank to a couple of smaller, local credit unions and community banks. Community banks are typically more conservative about how they manage their money. I certainly don’t have to worry about them using my taxpayer dollars to hand out billion-dollar bonuses.

Bankrate.com [will tell] which banks in [your] area are the most financially secure… and you can google “Move Your Money” for more information on this movement. It’s not just individuals who are doing this. Cities as big as New York and Los Angeles are fed up and considering moving their money to local community banks as well.

2. Buy Gold While It’s Still Cheap
…if you think gold is pricey now … just you wait! I prefer to own physical gold for the long term, but you can always buy the SPDR Gold Trust (GLD) or ETFS Gold Trust (SGOL) if you’re just doing it for a trade.

3. Buy Gold Miners While They’re Still Cheap
You can play the coming rally with any gold ETF, but I think gold miners look cheaper right now. If you don’t like buying individual miners, consider the Market Vectors Gold Miners ETF (GDX) or one of the other funds or ETFs that holds a basket of miners.

Now, why buy gold miners if I think hard times are coming?
a) If the U.S. dollar slumps the way I think it will, stocks will probably head higher. That’s because they’re priced in dollars, so it takes more dollars to buy them.
b) In the Great Depression, when many stocks weren’t worth toilet paper, select gold miners did well. That’s because the price of gold did well, and they were real companies producing a real asset.

4. Ride The Market Megatrends
Not all things financial are headed down the tubes. The commodity supercycle is real and we’re seeing it play out as China, India and other emerging markets buy more and more metals, energy, and other commodities to feed their economic expansions. Commodities should continue to outperform going forward. While other sectors are headed down the tubes, commodities should continue to outperform going forward.

Meanwhile, America’s baby boomers are aging. They’re going to be looking for income, and with bonds paying piddly yields, they’ll probably load up on dividend-paying stocks and what are some stocks that pay some of the best dividends? Commodity stocks! Put those two trends together and you should have some stocks that will outperform the market, pay you nice dividends and potentially rack up solid price appreciation, too. You can find these stocks on your own. If you’re looking for dividends, as a rule of thumb, you want stocks that pay at least a 3% dividend. Just be careful, and be aware that when it comes to stocks that pay dividends, it can be hard to tell the turkeys from the eagles.

What am I doing? It all boils down to the Three P’s — Plan, Prepare and be Proactive. In other words, I’m trying to take an honest assessment of the problems facing the country and me personally. I’m preparing both physically and financially. (Are you?]

*http://www.uncommonwisdomdaily.com/4-tips-to-beat-the-next-crisis-8846 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. To view archives or subscribe, visit our site.)

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