The Long Crisis

Archive for December, 2009

Humans are a peculiar breed. Ignoring all of the copious evidence of the worldwide demand for crude oil being closely balanced or in excess of supply, even in a period of recession, the denial of peak oil abounds. The entire theory of peak oil remains viewed by many otherwise intelligent people as some sort of hoax. Events in the oil market are about to prove them incorrect.

Perhaps part of the matter with the state of denial is that the peak oil explanation is not well understood or not understood the least bit by the masses. There are those who accept as true that peak oil means that oil will soon not be available at any price. And since crude oil is still available and oil fields are still being developed worldwide there is no danger of running out of oil so peak oil is only a theory that can be disregarded for the following 50 to 100 years.

Those individuals fail to understand that peak oil means the all of the low hanging fruit of new oil fields has already been discovered. In the future oil will be much more challenging and costly to produce from deep water fields and oil fields located in remote regions around the globe with no or inadequate infrastructure in place.

Future oil fields will need another shrinking resource, large amounts of funds, to develop the fields and to bring the oil to market. They are going to also require extensive use of high tech extraction and complicated transport systems to bring the oil out of the earth and to transport it to refineries. Despite the fact that oil will likely be available fo quite a long time to come it is going to be very costly to create new sources and the oil is going to be enormously high priced.

It’s difficult personally to comprehend why people can’t or refuse to recognize the fact that in a finite world resources, even crude oil resources, will eventually be exhausted. The same people have no difficulty comprehending that with a sugar bowl if you continue to take scoops out without replacing the contents from time to time eventually the bowl becomes empty. Yet, the same people are in denial about the finite aspect of oil. They seem to think that a resource that took millions of years to form in infinite amounts will always be in abundant supply despite the fact that we are drawing down at a high rate an impossible to replace resource.

One time bomb that is speedily ticking away that will forcefully get the peak oil idea across is the sharp decline in the rate of production of Mexico’s Cantarell oil field. Mexico is the third largest supplier of oil to the United States. Within two years it is highly likely that Mexico will not be able to export ANY oil to the US market. Whatever oil they produce will be needed for the Mexican domestic market. That event may well be the trigger for a panic in the oil market.

Even those who deny peak oil will have to change their position as the price skyrockets to $200 a barrel and beyond. That day is probably not so far away.

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Are you about to graduate from college and haven’t a clue as to how to find a job? I don’t mean a decent job. I mean any old rotten job at all. Are you a recent college graduate and getting tired of sending out resumes which seem to end up in a black hole? Are you worried about telling someone you hope to have a special relationship with that you are unemployed and living in the basement of your parents home?

Well, stop worrying. There is a way to look respectable even when you are really unemployed. Since everyone knows that the American and world economy is not in great shape just now and that for college graduates of the class of 2010 the job market will probably be pretty bleak it’s a great time to remain a student. Who can tell you that’s a bad decision?

Here are three good reasons why you might want to remain in or return to college, stay respectable, and earn that master’s degree.

1.) With only your undergraduate degree you can not get a job. Not even a lousy job. Attending college was much more fun than hanging around your parents house all day and all night. Especially when all they say to you these days is “get a job you lazy freeloader. What a waste it was to pay for your college education. And now all you do is eat, eat, eat, and sleep,sleep,sleep, and play stupid video games on your computer. Can’t you at least join the military?”

2.) In the long run having a master’s degree will likely help you to earn a lot more money. That is if you can get a job in this lousy economy. But buck up. Going for a master’s degree will buy you time. And it’s cool to tell everyone you are in a master’s degree program. Much better than saying that you are unemployed.

3.) You can improve your mind and better prepare yourself to work for a big dumb corporation. Besides, you have nothing better to do. You don’t have a job and no job means no money and no respect.

If the economy is still rotten after you earn your masters degree than why bang your head up against a wall? Just stay in school and go for that PhD. Maybe you should consider becoming a student in Sweden where you can attend college for as long as you like and the government will pay for most of it.

“The Swedish Institute grants hundreds of scholarships every year to help foreign students make their stay in Sweden more affordable. Currently, tuition fees for everyone are fully subsidized by the state.” Hey! Check it out. Study in Sweden

Masters degree anyone? It’s a great step out of the unemployment line and towards respectibility. For more information visit Master’s Degree Education

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Those never say die Black Swans are on the move again. The Dow lost about 104 points yesterday as a series of downgrades by the ratings services downgraded Greece and a number of Dubui firms with close government ties. Today Spain was added to the negative watch list.

Yesterday stocks, gold and oil all fell while the dollar rallied after Dubai World’s Nakheel PJSC reported losses of $3.65 billion on writedowns, Fitch Ratings downgraded Greece’s credit, and German industrial production unexpectedly dropped. About noon today the Dow is up about 10 points but looking heavy. Over the next few days look for some serious downside action as the Sovereign debt crisis spreads its wings and takes on the look of a Black Swan.

While the recent last Dubai fly by of the Black Swans only caused turmoil in the US stock market for a day or so the news over the past 48 hours was more unsettling.

“Greece is a whole lot more important than Dubai,” said Uri Landesman, New York-based fund manager at ING Investment Management. “There are a lot of banks, in Europe especially, that have exposure to Greece, so if there’s a major problem in Greece, that would be more important than a problem in Dubai.”

Yes, I know that I am using the term “Black Swan” loosely. A true Black Swan event by its very definition is an unexpected disastrous event and debt problems with Dubai, Greece, and Spain are by now widely anticipated. However, the fallout from the Dubai, Greece, and Spain sovereign debt troubles have the potential to trigger true Black Swan events in parts of this interconnected world that are far removed from Dubai, Greek, and Spanish financial centers.

Fitch Ratings also mentioned the the UK and US were on a path that is headed straight for financial trouble, and that unless the present course is somehow corrected it is no longer unthinkable these two spend, spend, spend, nations could lose their Aaa debt ranking.

Now that would lead to a feast of the Black Swans. With Dubai, Greece, and Spain troubles with excessive debt in the spotlight, it looks like many US stock market traders are beginning to question the lofty level of the market after the rally from last March’s lows. After all the US government is creating more debt than any entity in the world. Is the eventual day of reckoning near?

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