Sunday, August 19, 2007


Still More on Scapegoating China

Now here is an opinion that is inflaming people. The commenter says:
I think people should be careful what they wish for on China. Ya know, if China were to revalue its currency or China is to start making say, toys that don’t have lead in them or food that isn’t poisonous, their costs of production are going to go up and that means prices at Wal-Mart here in the United States are going to go up too. So, I would say China is our greatest friend right now, they’re keeping prices low and they’re keeping the prices for mortgages low, too.
This is exactly what I have been saying. Rich countries are offshoring their production to China precisely because they want China to make lots of cheap stuff. Indeed, this is propping up the US economy because so many Americans now depend on cheap Chinese goods. It’s exactly as I said before: if you want quality, you have to pay for it. But Americans don’t (and many can’t) pay for quality. Unfortunately, Erin Burnett is absolutely correct. By making poisonous food and toxic toys, China is helping the US economy stay afloat. That is the reality. Burnett is being attacked for merely pointing out the ugly truth.


More on Scapegoating China

In a previous post I observed that rich-country consumers (specifically those in the US and Japan) are wrong to blame China for consumer goods that are shoddy or dangerous. In this post, the author makes some other excellent points showing why it’s wrong to blame China for America’s ballooning trade deficit and American unemployment. Scapegoating China for such problems is nothing more than blaming China for giving us what we want, and on our own terms.

Friday, August 17, 2007


Biofuel Bust, Redux

You just can’t keep a good scam down. Show over and over again that large-scale biofuels are wasting energy and mining farmland, but subsidy-seekers and others who stand to gain from giant money-grubbing schemes like this will hang on tightly. I feel as though I'm beating a horse which should have been dead long ago, but which just keeps getting up because it’s well-fed on fat subsidies.

So, even though I present this new proof that the biofuel industry is nothing but a grand scam, I know that the ethanol and biodiesel people will just keep lining up at the public trough.

Friday, August 10, 2007


Will Oil Go to $100?

There’s a lot of speculation about whether oil will sell for $100/bbl, and if so, how soon. Some say it will be only a matter of months, and certainly they offer plenty of factors which could be the cause. On the other hand, some say that oil will never hit $100 because of new production, biofuels, and conservation.

There are plenty of good oil price analyses out there, so I won’t waste time and space by repeating them here. But I would like to briefly discuss these three factors of new production, biofuels, and conservation, and assess whether they might hold down the price of oil.

First, new production isn’t nearly as promising as one would hope. Simply put, oil in the ground does not equal gas at the pump. There is a development process — after you have discovered oil — that is getting increasingly long and expensive because the easy oil has already been found. So new production simply cannot bring us the gushers of cheap energy that built the petroleum civilization, and unless demand falters considerably, the price of oil will keep rising.

Second, I've provided plenty of discussion and links on this blog showing that biofuels are more bust than savior. A link I’ll add here is for a discussion showing that using ethanol does not displace oil imports. Biofuels are a disaster on a large scale and can never replace oil. But their production does use plenty of oil, deplete lots of farmland, and raise food prices.

Third is the idea that conservation will save the day. Make no mistake about it: conservation is good. But people don’t like to conserve, and especially in the US, the world’s biggest oil consumer, skimping on energy is viewed by most of the population as un-American. Indeed, Americans have a sense of entitlement which convinces them that they have a right to consume lots of resources and energy, the rest of the world be damned. Another factor is that the Pentagon is the world’s single biggest oil consumer, and how much energy conservation do you think the Pentagon will be doing, especially as the neocons strive mightily to extend America’s rule over the world with more wars and military bases? Precious little, my friend. Still another factor is the American car culture and the auto industry that underpins it. Americans clearly like big cars because they keep driving them even while grumbling about the price of gas. US automakers don’t like fuel efficiency standards, or making small cars, for that matter. Indicative of this is a statement by the president of Ford saying that fuel efficiency regulations “distort” the market because they force automakers to make more fuel-efficient cars than the market demands. I shall leave the reader to see the obvious problem with this line of thinking.

On the whole, energy conservation just isn’t a significant part of American culture, and can’t be counted on to help hold the price of oil down. Biofuels are a bust. And new production can’t replace what is being lost (about 1 million b/d).

Conclusion: Look for oil to hit $100.

Tuesday, August 07, 2007


Mexico’s Oil and the Reliability of Media

There’s a comment here by a Daily Reckoning writer on the Presna Latina story that PEMEX will run out of oil in seven years. Yea, I have to agree that “run out” is probably over the top. It’s probably a safe bet that Mexico will no longer be an oil exporter seven years from now, but PEMEX will probably still be pumping oil.

On the other hand, the writer casts aspersions on the reliability of Presna Latina. While it is likely not the most reliable news purveyor in the world, one might try comparing it with the reliability of the mainstream US media. Does that put things in a different light?

Thursday, August 02, 2007


The Great Fall-Apart Has Begun

Call it what you like — for lack of a more elegant term, I’ll call it the Great Fall-Apart. Of course I’m not the first to observe the problems with America’s creaking infrastructure, but almost no one is making the obvious connection. Modern economies built their infrastructures with oil that was cheap and plentiful, and powered their motor vehicle and aircraft fleets with that same energy bonanza. But now we’re at the tipping point. Energy is no longer cheap, and nations are beginning to fight over it.

While our leaders speak to us reassuringly that the infrastructure will be maintained, they know that it’s all downhill from here. Roads, bridges, the electrical grid, pipelines, and what have you will increasingly fall into disrepair because it is too costly to maintain them. It won’t be long until we begin to see weeds growing out of the cracks.

The obvious thing to do is scale down and localize, but the “bigger is better” mindset has a stranglehold on modern man’s thinking, and that is going to make the Great Fall-Apart that much worse.

Happy landing!

Wednesday, August 01, 2007


Israel, Iraq, and Oil

We keep hearing from certain quarters that the US invaded Iraq — and is rattling its saber at Iran — purely because Israel is putting the US up to it, and that the invasion had nothing to do with oil. Anyone who knows anything about energy and oil knows that to hold such a belief one has to ignore reality. And that reality is that modern economies (even developing economies) and military forces are nothing without oil, whose production has to all indications peaked. The US neocons and their Democratic brethren see this; the Chinese see it; the Russians see it — all the big players and then some see it. That is why everyone is jockeying for position to secure energy resources and keep them from other players. So it’s even more amazing that the “nothing-to-do-with-oil” school doesn’t see it. Geopolitics has always to an extent been defined by energy, but now energy has become absolute. Anyone with half a brain — although they might not admit it publicly — knows that there is no replacement for oil, the deceptive propaganda about biofuels and hydrogen notwithstanding.

So, what’s Israel after? Let’s look at some numbers. According to the CIA Factbook, in 2006 Israel’s oil production was a measly 100 b/d, while its consumption was a whopping 249,500 b/d. How’s that for starters? It imports 214,000 b/d, and has proven oil reserves of only 4 million barrels, which in today’s world is not even a drop in the bucket. Obviously, without copious oil imports, Israel would be toast — nothing but a patch of land, half desert, with people living in destitution. In particular, its military would be set back 100 years. With virtually no oil of its own, Israel’s situation is as precarious as that of Japan, and it’s in even worse circumstances than the US, which still has some domestic production.

As such, it is not at all surprising that to find that oil might be piped from Iraq to Haifa. Indeed, it is my belief — based on the above-described circumstances and the safe assumption that Israeli leaders know how desperate their situation is — that Israel has had Iraqi oil in its sights from the very beginning, especially considering that this plentiful source is practically next door to Israel. The Israeli leadership would have to be geopolitically illiterate and stupid to overlook this.

So, do you still think that attacking Iraq had nothing to do with oil? As the reader can see, this alone is powerful circumstantial evidence suggesting that Israel goaded the US to attack because of its own desire to slake its desperate energy thirst with conveniently close Iraqi oil. It’s either get the oil, or wither and die.

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