[CAMWEST-discuss] Fw: Why Energy Is the Only Real Currency

Danny Hannan danny_hannan at yahoo.com
Fri Mar 5 23:28:03 UTC 2010


G'day all,
From my research I have come to exactly the same conclusions as Chris Nelder has reached here.  This is not at all surprising to me.  What is surprising to me is that so few analysts including our government analysts have NOT come to the same conclusions.  We are all working from the same sets of data, the conclusions should be at least similar.

The explanations for the discrepancies of conclusions are not flattering:
1.    Scientific Ignorance 
2.    Deliberate Denial
3    Deliberate deception or mendacity

Please send this on to politicians who may be receptive to the conclusions and have the honour and courage to speak out about it.

Dan
 danny_hannan at yahoo.com 



----- Forwarded Message ----
From: Energy and Capital <eac-eletter at angelnexus.com>
To: danny_hannan at yahoo.com
Sent: Sat, 6 March, 2010 6:55:32 AM
Subject: Why Energy Is the Only Real Currency


Having trouble viewing this issue? Click here.  
   Follow Energy and Capital on Twitter  
Home Editors Archives Whitelist Contact Site Map  
Why Energy Is the Only Real Currency
By Chris Nelder | Friday, March 5th, 2010
When oil crossed $120 a barrel for the first time in May 2008, oil cornucopians knew they were in trouble... 
Prices had quadrupled in just five years, yet had failed to bring new production online. Regular crude had flatlined around 74 million barrels per day (mbpd). The case for peak oil was looking stronger with every new uptick in crude futures. 
The following month, prominent peak oil critic and cornucopian Daniel Yergin of IHS-CERA changed his stance: The peak oil threat would be neutralized by peak demand. Gasoline consumption had peaked in the U.S. and Europe, he argued, due to the combined effects of increasing efficiency, biofuels, and the recession. 
In 2009 the peak demand story seemed confirmed, as prices stabilized around $70 in June, and U.S. consumption remained well off its previous high. Most people thought the nearly 2 mbpd decline in U.S. petroleum demand from 2007 through 2009 owed to efficiency and people driving less. 
In reality, only about 15% owed to reduced gasoline demand. The other 85% was lost in the commercial and industrial sector: jet fuel, distillates (including diesel), kerosene, petrochemical feedstocks, lubricants, waxes, petroleum coke, asphalt and road oil, and other miscellaneous products. 
Very simply, when oil got to $120 a barrel it cut into real productivity, and forced the world's most developed economies to shrink. At $147, it wreaked serious damage. 
Advertisement

An Investment... Better Than Gold?
Our international gold guru, Greg McCoach, recently uncovered a powerful, moneymaking glitch in the gold market.
... One that makes buying physical gold virtually obsolete.
You see, right now, there's a unique way for you to collect double the gains gold makes... 5% gain pays you 10%... 20% gain pays you 40%... etc! With gold prices primed for another surge, you can't afford to pass this one up.
Click Here For Your Free Report.
________________________________

As I explained in "Investment Themes for the Next Decade," the new normal will be  cycles of bumping our heads against the supply ceiling, falling dazed to the floor, rising back to our knees, then finally standing... only to bump our heads against the ceiling once more. 
Scooters Will Kill SUVs
Two interesting news stories crossed the wire this week, which portend badly for the world's #1 net importer, the U.S.
The first was a Reuters report that the last quarter of 2009 had "wiped out" the equity of Mexican state oil monopoly Pemex, leaving it $1.4 billion in the negative. Falling crude output, falling refining margins and a burgeoning dependency of the state on its revenues had squeezed it to death. 
Not only did the report offer further confirmation that the oil export crisis has arrived, but it also confirmed my growing suspicion that the oil production everyone has assumed will come online in five to ten years might, in fact, fail to materialize. Negative equity companies have a hard time raising capital for new exploration.
The second was a Bloomberg report that Saudi Arabia had agreed to double its oil exports to India, to some 866,000 barrels per day. India indicated separately that its onshore production of oil may peak this year. 
This adds to the pressure on Saudi Arabia's exports, whose oil shipments to China have been growing at a rate of 11%-12% per year and now stand at roughly 1 million barrels per day (mbpd). China has eclipsed the U.S. as the primary bidder for Saudi oil, while U.S. imports from the Persian nation have fallen to a 22-year low. 
The last two years have seen the marginal buyers of oil shift decisively to the non-OECD countries. A gallon of fuel delivers so much value in China and India (think peasants on scooters), that even at $120 a barrel, remarkable economic growth rates are possible. 
In major oil exporting countries like Saudi Arabia and Venezuela — where subsidized gasoline still sells for under 25 cents a gallon — the appetite for fuel grows steadily every year with little thought given to efficiency. 
It's a different story in the U.S. For debt-laden consumers, an extra $50 or $75 to fill up the tank on an SUV every week sharply reduced discretionary income and starved the economy of its most fundamental driver: consumer demand.
The Real Meaning of Peak Demand
The most promising effort I've seen to quantify the role of efficiency in peak demand was a report in October of last year by Paul Sankey of Deutsche Bank entitled, "The Peak Oil Market." My initial excitement quickly gave way to disappointment as dug into it, however, as I realized that its confident assertions were unsupported by the data. 
I applauded the effort enthusiastically — and I hope to see more serious work along the same lines — but it fell far short of proving that energy transition can be accomplished under the status quo of economic growth, let alone its optimistic twist on "The end is nigh for the age of oil." 
The fact is that peak demand in the OECD is not merely a function of efficiency gains and biofuels substitution, aided by a temporary recession... 
Instead, peak demand will be the result of a permanent state of increasing depression in which non-OECD countries not only more than make up for the loss of OECD demand, but outbid them for the marginal barrel. 
Advertisement

This FREE "Starter Play" Could be Worth 50% Over the Next 8 Weeks...
Even if you've never bought an option in your life, renowned guru Ian Cooper can have you trading like a seasoned veteran in just weeks. 
And to prove it, he's giving you your very first play at no cost, right here today. After that he'll guide you every step of the way in learning how to use these "everything-proof" investments to pad your portfolio fast and easy. 
And on top of it all - you have 6 months RISK-FREE to learn from him. 
Take your first step and grab this potential 50% winner right here.
________________________________

As we enter the post-peak phase of global oil supply sometime around 2012-2014, the price that heavily import-dependent countries like the U.S. would have to pay for that marginal barrel will become increasingly intolerable. In a weakened economy, $100 a barrel (or less) could be the new $120.
The true import of peak oil, therefore, may not be sustained high prices, but economic shrinkage. Demand will be destroyed long before oil gets to $200 a barrel, but it will not be destroyed by improved efficiency.
From where we stand today, it's hard to make an argument for economic recovery. Persistently high unemployment rates, broken state and federal balance sheets, and an inflationary depression will continue to cut into petroleum demand. 
We spent the last several decades offshoring the fundamental value-adding sectors like energy production and manufacturing, and now our FIRE economy — finance, insurance, and real estate — rests entirely on real value created elsewhere.
The reason is simple: Energy is the only real currency. 
Every dollar of fiat currency or GDP was ultimately derived from cheap energy. Trying to print your way out of energy decline is like prescribing ever-higher doses of aspirin for a headache caused by a brain tumor. Yet those at the levers of monetary policy are, by all appearances, completely ignorant (or in willful denial) of this fundamental fact.
The vogue prescription for the sovereign debtors at greatest risk of default (see a Top 10 list) is "austerity measures." The theory is that a period of belt-tightening will stanch the fiscal bleeding until economic recovery puts everyone into the black again. 
Yet, if primary energy supply is declining, and the rising star of developing economies is inexorably cutting into the supply available to developed and indebted economies, then there can be no recovery.
I have joked on Twitter that I'm expecting an "M-shaped recovery," where we're now on the second hump. A more accurate image is slow strangulation.
Two Questions for Recoveryistas
Those who would argue for economic recovery must answer two intractable questions. 
The first is: Where will the energy come from, as more of the world's net exporters become net importers? 
Britain, Argentina, Indonesia, and others have become net importers in recent years. Mexico and Columbia are expected to follow suit within a decade. Clearly, we can't all be net energy importers. 
There is also the obstinate fact that aggregate net energy — the energy you get in return for investing energy in its production — has been dropping steadily. Oil net energy dropped from 100 in the early 1930s to 11 or less today. Net energy for natural gas is now in decline. We don't have adequate data to know yet, but coal's net energy is probably in decline too. Meanwhile, the net energy of all substitutes is low: wind, 18; solar, 6.8; nuclear, 5-15; all biofuels, under 2. 
It is not surprising that a study of the Herold database (Gagnon, Hall, and Brinker, 2009) showed the amount of oil and gas produced per dollar spent declined between 1999 and 2006.
The second question is: If the creeping infection of sovereign default continues to spread to more countries, where will the money come from to bail them out? 
The answer has been, and continues to be, more aspirin. Without more cheap energy, monetary tactics to play the game into overtime will not only be futile, they will only draw us closer to the edge of the net energy cliff.
All of which begs a final question: If the answers are transition to renewables, and rebuilding our infrastructure for high efficiency, then where will the money and energy to do it all come from? And lastly, how long will it hold out?
Without cheap energy to fuel the growth that is hoped to pay off the accumulated debt, austerity will become an everyday reality — not a short-term fix. A reality that slowly sinks in for the rest of our lives, as net importers become progressively poorer. 
The peak demand argument is a good one... but not for the nice reasons. 
Until next time, 
Chris
Investor's Note: Transitioning to renewables is much more difficult than you might think. The sad truth is that bridging the energy gap between oil and renewables is going to take decades to accomplish and cost trillions of dollars. However, we do have one option: natural gas... And unconventional gas fields are one of the few gems left in our domestic energy picture. 
I know some of my readers have made a small fortune trading these up-and-coming companies operating in these burgeoning shale companies. If you're interested in learning more about these profitable natural gas plays, simply click here. 
Comment on / Rate this Article

 
Categories 
	* Fossil Fuels
	* Renewables & Alternative Energy
	* Global Energy
	* Energy Stocks
	* Solar Energy Investing
	* Peak Oil

 Subscribe to
our RSS Feed 
What is an RSS Feed? 
________________________________

9.5 Times Better than Gold
Learn the secret to a $32 million company with a $727 million gold strike...
This small 45-cent gold stock is now positioned to make its first move to $4.59 - a 920% gain!
Get all the details on this incredible opportunity in my latest research report here.
________________________________


Related Articles"Indeflation" and "Compartflation"

Energy Sector Outlook

Investment Themes for the Next Decade

Our First Peak Oil Recession



Economic Releases for the week of Monday, March 8th, 2010:

Mar 10 - Wholesale Inventories
Mar 10 - Treasury Budget
Mar 11 - Initial Claims
Mar 11 - Trade Balance
Mar 12 - Retail Sales
Mar 12 - Michigan Sentiment
Mar 12 - Business Inventories

Brought to you by Wealth Daily

________________________________


From the Archives...The Commodity All Energy Technologies Need
2010-03-03 - Nick Hodge

Stay Away from this Oil Stock at All Costs
2010-03-01 - Keith Kohl

Energy and Capital's Weekend Edition
2010-02-28 - Keith Kohl

Who Will Find Oil in the Jungle?
2010-02-26 - Christian A. DeHaemer

The SEC's Energy Game-Changer
2010-02-24 - Nick Hodge

________________________________

24 Straight Energy Winners
We just closed #24 with a 114% gain...

... And we've just released #25.

Our new report details the entire situation... and how this new play could be the next triple bagger our readers are getting accustomed to.

Just follow this link.
________________________________

 

________________________________

You can manage your subscription and get our privacy policy here.
Energy and Capital, Copyright © 2010, Angel Publishing LLC, P.O. Box 84905, Phoenix, AZ 85071. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Energy and Capital does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. The publisher, editors and consultants of Angel Publishing may actively trade in the investments discussed in this newsletter. They may have substantial positions in the securities recommended and may increase or decrease such positions without notice. Neither the publisher nor the editors are registered investment advisors.
 Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law. 
Please note: It is not our intention to send email to anyone who doesn't want it. If you're not sure why you're getting this e-letter, or no longer wish to receive it, get more info here, including our privacy policy and information on how to manage your subscription.   


      
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://nicku.org/pipermail/camwest-discuss/attachments/20100305/89223812/attachment-0001.html>


More information about the CAMWEST-discuss mailing list