Tuesday, May 31, 2005

shipping security

It has often been noted that internatioanal trade will become more costly as the price of shipping fuel increases. I believe another factor will also increase shipping costs: security. A loaded oil tanker is worth a huge amount of money these days. The largest tankers hold around 2 million barrels of oil, with an ultimate worth of a hundred million dollars. No doubt a supertanker full of oil is very closely watched by satellite based security systems. Exxon is not going to let a few thugs in speedboats steal their tankers. But terrorists might well hope to blow one up. And security does not come cheap.

And what about bulk carriers? A loaded bulk carrier with a cargo of 20,000 tons of soybeans is worth 5 million dollars for the cargo alone, with far lower security than a huge tanker. Bulk carriers are often registered under a flag of convenience, like Liberia, to a small company based in the Virgin Islands, with a crew from a different country, say Korea, and leased to an international shipping company, and insured somewhere else. Cargo manifests and ships registration papers can be forged. We might see another resurgence in high seas piracy, like we did around 2000-2001.

Sunday, May 29, 2005

US dollars are melting away

In this Financial Sense audio file Credit Collapse and Will The Dollar Hold? Douglas C. Noland makes a very interesting point. The US economy, after transitioning from a manufacturing economy, and then to a service economy, has now become a financial products economy. Most of our GDP, he says, is from profits from real estate loans, and from 'hybrid financial instraments' such as derivitives and structured trades.

The derivatives thing reminds me of Enron, but on a vastly larger scale. Enron was a well run, if aggressive, oil and gas company. Then they sold off all their oil and gas properties to raise the capital to create a Virtual Energy Marketplace. and they set up their business to be so complex that no one could figure out what they were really doing. And of course the executives turned out to be crooks. Well this sounds similare to 'hybrid financial instraments' to me. If it is so complicated that no one really knows where the money is coming from or going to, and all you can see is that there sure is a lot of it sloshing around, then beware.

BTW, I own shares in one of Enron's old discarded oil and gas businesses: EOG resources. It is the only US stock I own at this point. I think it is still a well run energy company. They have significant oil reserves, and, even better, significant gas reserves.

unregulated capitalism

I believe that American style anything-goes capitalism is a disaster, every bit as damaging to society as centrally controlled communist economies. The best economic system is a well-regulated capitalism. I know this is hard to achieve and hard to even contemplate for those who think that goverment regulation is a road to tyranny. I remember reading in the Old Testament somewhere that one of the ancient nations, possibly Sumer, prospered with the benefit of an efficient bureaucracy. Those who believe that private industry is inherently more efficient that bureaucracy need only to look at the USA health care system: a self-perpetuating gordian knot of insurance firms, HMOs, and drug companies. Very little of the money we spend on health care seems to go to health care.

Government regulations are especially important regarding production and use of scarce resouces. Ancient Japan saved itself from economic collapse from deforestation, by strict regulation concerning logging, according to Jared Diamond, in his book Collapse. A Norwegian friend informed me that centuries ago the Norwegian king imposed strict fishing controls, and preserved Norway's fisheries for centuries. No doubt these regulations were extremely unpopular. They are the sort of painful choices America must make soon to stave off economic collapse.

amusingly hypocritical

I find American laisez faire capitalism to be amusingly hypocritical. Enterpreneurial enthusiasts love 'disruptive innovation', at least as long as they are not the ones whose business is disrupted, they think predatory mergers and acquisitions are just part of the game. The think 'crony capitalism' is something found in other countries. But then when energy or other commodity prices go up they start complaining about obscene profits. But the simple fact is that every commodity producer, of any commodity anywhere, dreams of controlling the market, high prices and pricing power for that commodity. Fisherman dream of high prices for fish, oil producers dream of high prices for oil.

Wednesday, May 04, 2005

US fuel efficiency

Improving the fuel efficiency of american vehicles is the single most important first step the US could take to turn away from the ruinous dual path of peak oil and global warming. When I heard that President Bush advocated improving CAFE standards, in his April address to the nation, I thought this was a change, possibly a piece of sanity from a government that seems to live on another planet. Unfortunately, this was, as usual, pure and dangerously misleading bullshit from the Bush administration.
Bush proposed increasing fuel efficiency to save 340,000 barrels of oil a day. This would be a modest improvement. But what the policy really proposes is to increase CAFE standards for SUVs from 20.7 mpg to 21 mpg. That doesn't sound so impressive. And, according to the National Highway Traffic Safety Administration, this change would save at most 9,400 barrels per day. Reporters asked people at the NHTSA about the white house's 340,000 barrel figure and they had no explanation.
the story, on MSNBC, is here: White House policy does little to save fuel
It seems that there is no lie, no matter how large or small, petty or how audatious, that Bush and company are not willing to use if it furthers their narrow minded, pro-business agenda.

Sunday, May 01, 2005

F. William Engdahl and other reading

Last year, I started on the train of thought that led me to publish this blog. I stumbled on some articles by F. William Engdahl. Reading these three essays stunned me into an eventual realization that the human society is at a crucial turning point and it looks very much like a drastic, and probably irreversable turn for the worse.

About how soon we are approaching a world energy crisis

Abut the US real estate bubble and US debt, and how that will cause the collapse of the dollar

A long article about how maintaining America's dominant position requires ever more imperialist force. Interesting points about the IMF, and the occupation of Iraq.

Seeking more information, I have also read two books on peak oil:
  • The Party's Over, by Richard Heinberg
  • The End of Oil, by Paul Roberts.
    Heinberg is by far the most pessimistic author I've read, he is a Cassandra bearing dreadful prophesy. He sees the energy crisis that will come with the end of plentiful oil as inevitable, and the consequenses devastaing. In several decades time, most nations will not be able to maintain universal public electricty grids. What electric resources will be available, will only be for military and government elites. Over the next hundred years or so, the population of the earth will fall drastically, to the level it was at before industrial, petrochemical-based, fertilizer became available: it will fall to 1/4 of what it is now. And it will fall by the means that population usually falls, by disease, famine, and warfare.

    Roberts sees a glimmer of hope for the energy supply of the globe. by smart government management of resources, nations may be able to transition to natural gas as a bridge fuel, and finally to renewables. Coal will probably always be available for some uses.

    The way I see it, per capita available energy will have to fall drastically, no matter what sort of society we have in the future. (Per capita available energy seems to be the crucial metric that charts the rise and fall of civilization. for a numerical explanation of this, called the Olduvai Gorge theory, see this page: The Peak of World Oil Production.) We may devolve to a coal burning, early industrial society, or a "green" society with wind, biomass, and solar energy to supplementing our remaining fossil fuel. But these systems will not be able to support anywhere near the current earth population. No alternative energy source (with the possible exception of nuclear fusion) has the energy concentration, portability, and huge volumes that oil has givien us. We may also devolve to a feudal, pre-industrial society. It is not out of the question that the human race might be extinct in 100 years.

    I don't believe that there will be a single computer functioning on Earth in 100 years time. Even in the most optimistic senario, this level of technology will be unsupportable. The problem that makes me most pessimistic, is that all the economic analysis doesn't take into account the many disruptive effects of global warming, which now looks every bit as inevitable as a peak oil energy crisis.

    (A strange footnote: assuming human society survives, future historians will look back on history, and they will have a pretty good record of what happened until about the mid 1990s, when most information becomes electronic. All computer data will be lost when the electical grids go dark, and the factories no longer manufacture hi tech parts to keep old computers running. Historians of the 22nd Century may well wonder "What The Fuck Happened"?)

    I have also read a fascinating book on how societies disintergrate, or, alternately, how they survive societal crisis and prosper anew. If societies made intelligent choices that enabled them to survive, the choices were always about careful conservation and government management of resources, and population controls. The book is Collapse, by Jared Diamond