Monday, February 28, 2011


Some Democrats Shifting on Drilling?
Is Congressman Jim Himes (D-CT-4) starting to get the message on domestic energy independence? According to one recent set of comments and a strong message from some of his constituents, he just may be.

http://hotair.com/archives/2011/02/28/some-democrats-shifting-on-drilling




 

NY Times Blows Story on Drilling “Dangers” 
 
File this article under the heading of one more attempt to prevent the development of any domestic energy supplies unless they fit in with the green /renewable energy agenda. And that’s the same agenda which, while it may serve a great purpose in the future, still can’t finance itself without massive government subsidized support.

 
http://hotair.com/archives/2011/02/28/ny-times-blows-story-on-drilling-dangers/



Saudi Arabia Is Lying About Being Able To Increase Its Oil Production

"Saudi Arabia has been lying about the reserves for decades. Saudi Arabia the last two times said they are going to increase production and they couldn't increase production. Don't fall for that. The reason oil is going up is the world is running out of known reserves of oil."

http://www.zerohedge.com/article/jim-rogers-saudi-arabia-lying-about-being-able-increase-its-oil-production




US Freezes $30 Billion In Libyan Assets (The Bulk Of Which Originated In The US And Europe)

The US crackdown on its former business partner continues, with the US Treasury announcing it has "located and frozen" at least $30 billion in Libyan assets " as it seeks to deprive embattled leader Moammar Gadhafi of access to government and personal accounts, a department official said."

[It is unclear] whether the US Treasury, which has to rely on a Ponzi check kiting game with the Primary Dealers to fund itself, and, of course, on the Fed to monetize its debt issuance, would confiscate any of this amount.

Does this lower the national debt by $30B?  Or will they just spend it in QE3?

http://www.zerohedge.com/article/us-freezes-30-billion-libyan-assets-bulk-which-originates-us-and-europe



Libyan Rebels Allow Oil Out of Country

Libyan rebels pressed the regime of Col. Moammar Qaddafi Sunday, taking control of a key city near the capital of Tripoli, declaring a provisional government and allowing oil shipments to resume from territory under their control.

The turmoil across the Middle East, cradle of much of the world's oil production, has sent prices soaring. Last week, crude oil for April delivery on the New York Mercantile Exchange rose $8.17 per barrel, or 9.11%

The Arabian Gulf Oil shipment would be the first oil exported from the eastern territory in more than a week—the last left on Feb. 19, before much of eastern Libya had slipped out of government control.

http://www.foxnews.com/world/2011/02/28/libyan-rebels-allow-oil-country


No Oil Price Shock Yet?

Libya’s output is about 2% of worldwide oil production. If Libya’s oil fields get knocked offline, it would be a tiny hit, equal to only about half of the smallest of the top five oil price disruptions in the last sixty years. Here are the five oil shocks:

Suez Crisis, Nov. ‘56 - Lost 10% of output
OPEC embargo Nov. ‘73 - Lost 7.5%
Iranian Revolution Nov. ‘78 - Lost 7%
Persian Gulf War Aug. ‘80 - Lost 9%
Venezuela unrest, Gulf War II, Dec 2002 - Lost 4%
** in 2008, it was due to surging global demand for oil.

[The] rule of thumb [is] that a $10/barrel increase in the price of crude oil translates into a 25 cents per gallon increase in the price consumers will eventually pay for gasoline at the pump.

it is natural to fear that this latest oil shock may be enough to kill the global economic recovery. But oil prices would have to rise much further, and persist for much longer, for these fears to be justified.

http://www.foxbusiness.com/markets/2011/02/25/oil-price-shock


Today's Precious Metal Close

Silver pits close at 1:25 pm, just as the dump in silver peaked. Gold followed suit, with its 1:30 pm close. This blatant attempt to dump PMs into the pit close and have silver and gold end trading on the books near the lows of the day merely confirms that "someone" is truly desperate to avoid an avalanche of margin calls. Of course, this uber-cheap trick works at best for a day or two.

http://www.zerohedge.com/article/todays-precious-metal-close-banging-moment-brought-fine-people-comex




The Market Is Telling Us That The Dollar Is Finished


There is no shortage of turmoil right now… yet we are seeing the dollar get clobbered while gold, silver, and smaller currencies like the Swiss franc rise. This represents a major shift in the way that the market views risk. The market is telling us that investors are washing their hands of the dollar as a safe haven asset.

Foreigners will swoop in and mop up US inventory long before [the dollar becomes too cheap].  Foreign governments will manipulate their own currencies in order to avoid missing out on a 300 million-strong consumer market.

http://www.zerohedge.com/article/simon-black-market-telling-us-dollar-finished

Thursday, February 24, 2011

Consider this: Gold is Fiat too...

I want to present a point of view that will most likely be unpopular with DP gold bugs, but that should be important to everyone concerned with their financial future. Gold and its intrinsic value is a perceived value. You can not eat gold, run your car on it or power your house with it. Those of you that are banking on the value of gold being higher in the future are playing the greater fool. While gold may have more value than a declining dollar, it is not the most scarce commodity on the planet. Logic would dictate, if Gold Prices stay high, new exploration will eventually lead to greater supplies, and perhaps lower prices.

Before you give me history lessons on the historical value of gold, remember this; the Romans did not run their chariots on gold and the world population was not pushing 10 billion people when they used gold as the standard to trade goods and services. Energy is the new gold and clean water will eventually become the new oil as it relates to the value of scarce commodities.



http://www.dailypaul.com/55303/gold-is-fiat-money-too

So the ability to produce your own electricity and pump up you own well water will be of paramount financial value? Is this where the finance & survivalist sectors meet?
US Dollar valuation and the price of Gold

In the news from Egypt, an American-originated declaration of Mubarek's impending resignation and departure is resoundingly refuted by that embattled leader. The United States Federal Reserve announces it will buy "back" $97 billion in debt, according to MarketWatch, which goes on to state the Fed has bought "$397 billion in U.S. debt since August." The world's most powerful nation in the 20th century has in the 21st passed its prime and is suffering horribly from dementia. It's like watching a faded starlet in Hollywood try to strut down Rodeo Drive, a laughingstock to passersby, but she convinces herself that she's still 'got it,'

How does the central bank of a nation $14 trillion in debt keep coming up with money to buy its own money? Is it not supremely revealing of the extreme depths of delusion to which this so-called bank and its governors have now descended? The fraud inherent in this perpetual shell game is obvious to all except the hucksters moving the shells around and the dupes naively trying to follow the pea shell in the hopes of winning a prize. The audience knows there is nothing under any of the shells.

Gold

The fact that gold's price performance in the last 40 days or so digresses thoroughly from its normal course during times of Mideast instability amid severe monetary and price inflation is evidence that either the price of gold is directly manipulated by banks, or that the coordinated campaign of disinformation by the Big 6 media division of the U.S. Treasury has finally become so fine tuned as to hypnotize recipients of its message. In either case, $2 billion in redemption of Gold ETF GLD makes one wonder what has changed fundamentally to justify such a sell off in a month where global instability and inflation are robust?

Or have those with a vested interest in the appearance of a stable dollar realized that they could use the billions of dollars in quantitative easing to directly influence demand for and thereby price of gold by incrementally building large holdings in gold ETFs, and then dumping them in compressed time lines to help generate severe price swings?

How very ingenuous to use the strength of gold's demand and price metrics to undermine those very same dynamics! Buy up ETF shares with dollars fabricated out of thin air, and then dump the built-up position in a single month to drive superficial dollar demand and coincident gold aversion. Whoever dreamed that up should get the Congressional Medal of Honor and go straight to jail.

These short-term machinations aren't relevant in the long run, however, and only provide buying opportunities for those building a store of value in precious metals. Pundits speculate on an impending day of default for the U.S. dollar, when to sovereign bondholders, that day has come and gone, and the big players are tiptoeing to the exits accumulating gold as they go. When we finally shine the light on them and acknowledge the default has already occurred, the gold and silver price explosion to the upside beyond $2,000 will begin in earnest.

http://www.theaureport.com/pub/na/8609

Wednesday, February 23, 2011

Congradulations! Your Dollar is now worth less

With global unrest spreading like Molotov cocktail fire, and implied US GDP plunging by 5% in the past week on the hike in oil prices, it is becoming very evident that the recovery myth is now over, despite claims by the NAR charlatans, and another round of quantitative easing is almost inevitable.

http://www.zerohedge.com/article/dollar-plummets-expectations-qe3-spread


The Revolution Will Come To Saudi Arabia Next

With the facebook revolutions having claimed virtually every other country in the region, the time may be coming for that most important one of all. And if Facebook is to be relied on for its revolutionary calendar, a job it has so far done without reproach, the revolutionary wave will come to Saudi Arabia on March 20.That will also be the day that crude passes $200.


http://www.zerohedge.com/article/if-mountain-will-not-come-muhammad-revolution-will-come-saudi-arabia-march-20

For those of you who are wondering, $200 crude means roughly $6.70 gasoline.  Kiss that family entertainment budget goodbye.  Hello second job.
 
"Zombie" money.

There are a number of fallacies - or delusions, if you will- concerning our economies that are set to inflict enormous damage.  There is no economic recovery, there hasn't been one in the past five years, and there won't be one for a very long time to come.

The media has force-fed the incorrect definition of inflation to the masses.  Inflation is not the same as rising prices.  Why is the distinction between the definitions important? Because today in the US both the money/credit supply and the velocity of money are falling (deflation), while some prices are rising, in particular those of food and energy. It is Speculation that is causing the rise in prices, not inflation.  But not of the ordinary kind of inflation - zombie money speculation.  The same unrecognized losses in the financial system that our governments cover up with criminally negligent accounting non-standards cause prices of oil and food to rise, since that's where the zombie money -inevitably- ends up.

http://theautomaticearth.blogspot.com/2011/01/january-14-2011-zombie-money-kills-real.html

Tuesday, February 22, 2011

Arab Protests Affect World Food Prices

Commentators are drawing a link between protests in the Middle East and further rising global food prices.

You probably won’t be surprise to learn that rising oil prices is at the heart of the reason why the protest are driving up food prices.  As Tafline Laylin wrote earlier today, the price of oil has risen 6% to $95.39 per barrel following the turbulence in the MENA region.  This is apparently a six-year high.

As the agricultural industry is heavily reliant on fossil fuels (through machines, transportation and fertilizer production), this means that the rising prices of oil has led to the rising price of food.

With the recent revolt in Libya- a country which happens to be the world’s 12th biggest oil exporter- some commentators states that an impact on oil and consequently food prices is inevitable.

Egypt nudged prices upwards and so further protests will no doubt continue to push up the price of oil and food as they are so inextricably connected.

With the recent wikileak revelation that Saudi exaggerated its oil production by up to 40% this trend is set to continue in the future. It also reinforces the need to diversify our energy mix and seek more sustainable energy that is not so susceptible to market shocks and political turmoil.

http://www.greenprophet.com/2011/02/arab-protests-food-prices/
If this is an economic blog, then why am I posting articles about mid-east turmoil?

If you've been around the block once or twice, you probably realize by now that the short story is:  Oil -> Gas -> Production equipment -> Goods & services -> You

Turmoil in the mid-east can dramatically affect the price of oil.  Oil prices directly affect the price of gasoline.  And while gas prices alone have a dramatic affect on our wallets and relative income, they also have a dramatic affect on the cost of other goods and services.
Crude oil accounts for 55% of the price of gasoline, while distribution and taxes influence the remaining 45%. Usually, distribution and taxes are stable, so that the daily change in the price of gasoline accurately reflects oil price fluctuations. Occasionally, however, distribution lines are disrupted or are down for maintenance, which can increase the price of gasoline even when oil prices are down.

http://useconomy.about.com/od/supply/p/oil_gas_prices.htm

The cost of gas/oil/natural gas has a dramatic affect on the costs of food because (1) The mechanized agriculture systems in use today (ie: tractors, plows, combines) consume a considerable amount of gasoline in order to harvest and otherwise produce the food that must then be (2) delivered to the stores via transportation that also uses petroleum based fuel (ie: Trains, trucks, etc).  (3) The fertilizer and other products used to grow crops require fuels as well.  ALl these costs must be passed on to the consumer, or the retail establishment, shipping companies, farmers, etc will not make a profit.  Without profit, there is no commerce, and no economy.  They have mouths to feed to 'eh?


Gasoline prices are likely to have a large impact on consumer spending but a much smaller impact on the amount of gasoline purchased. Instead, the effect is likely to be felt in other areas of spending (e.g., vacations, entertainment, electronics, or eating out). - Lars Perner, Ph.D.

http://www.consumerpsychologist.com/gasoline_prices.htm

So I submit to you that when the price of Gas goes up, it isn't your car's MPG that you should be worrying about (well, not that alone anyway).  Americans tend to live in homes that are fairly distant from their jobs (ie: cant walk, and public transportation doesn't always get you there), and geographically diverse enough that 90% of us can't carpool to the same destinations.  So our gas usage isn't really going to change much.  Buying and hoarding gas wont help you.  A typical family of 4 can use 200 gallons per month.  Do you have a place to store 200 gallons of gas?  And that will only get you by for a month.

Instead, consider where else you can improve you bottom line.  Because those goods & services that we use on a daily basis are gonna be the real killer.
Protesters hit with air strikes in Tripoli?

http://www.juancole.com/2011/02/the-gates-of-hell-have-opened-in-tripoli.html

Libyan turmoil hits stocks as oil surges

Mounting concerns over Libya's violent crisis weighed on stocks Tuesday and sent oil prices surging.

http://finance.yahoo.com/news/Libyan-turmoil-hits-stocks-as-apf-1471605558.html

Monday, February 21, 2011

It's not about running out of oil so much as it is about running out of cheap oil.

Well the "Peak Oil" folks were right about ONE thing..
It's not about running out of oil so much as it is about running out of cheap oil.

          My father rode a camel. I drive a car. My son flies
                    a jet-plane. His son will ride a camel.
                        
The above quote is a popular saying used by Saudi Arabs to remind themselves that the boom brought about by the switch to oil as the energy source of first choice will be short lived-- spanning only a few brief generations.

What most Westerners fail to grasp--or refuse to grasp--is that the insight contained in this quote applies not only to the citizens of petroleum rich nations in the Middle East, but to everyone else-- including ourselves.
 This exerpt, taken from karavans.com, is indicative of the Peal Oil issue.  And while we may not be there yet, the rising price of gas is starting make riding a camel look more enticing.  ;)
Oil Goes Berserk In Electronic Trading

Today alone, WTI (April) has surged from $90 yesterday to over $98 in electronic trading (see below). Either this is some computer gone haywire in the closed session, or when America wakes up tomorrow we may be on the verge of another flash crash. As for Brent, it passed $108.50. As a reminder, and people forget this all too readily, each dollar jump in crude wipes out $100 billion in US GDP. That means that at face value, today's move in the commodity complex, may have taken out as much as 5% of annualized GDP when fully processed through the economy!

http://www.zerohedge.com/article/oil-goes-berserk-electronic-trading-wti-passes-98

Crude oil jumps 6% as Libya protests spread

Crude oil prices jumped 6% Monday as violent protests spread in Libya, raising the possibility that oil supplies from that OPEC nation could be disrupted.

 http://www.usatoday.com/money/industries/energy/2011-02-21-oil-prices_N.htm

 more:

http://www.11alive.com/news/local/story.aspx?storyid=178787&catid=3

 

As BP Prepares To Evacuate Staff From A Burning Libya, Commodities Are Exploding

As events in Libya overnight spiraled out of control, with dozens if not hundreds killed, the parliament building in Tripoli on fire, and output at one of the country's oil fields reported to have been stopped by a workers' strike, BP has said it will soon begin evacuating  some of its personnel from the 9th largest producer of oil. And just to complete the total chaos, Iran warships are now going to pass the Suez on Tuesday instead of today, to the full glory of a fully open US stock market. The result: gold over $1,400; silver over $33.50; Crude front month over $93; Brent over $105; etc. Luckily, the US stock market is closed, meaning all this will be "priced in" by tomorrow, and the HFT levitation can resume tomorrow as if today never happened...

http://www.zerohedge.com/article/bp-prepares-evacuate-staff-burning-libya-commodities-are-exploding

 

Friday, February 18, 2011

The price of gasoline

With all the protests and political upheaval in the mid-east now, the latest news is that Bahrain is in turmoil.  Saudi Arabia is expected to be next.  The price of gasoline has already risen to $3 in the DFW area, and $3.50 national average.  The price is expected to surge even higher by end month.  Plus the additional 5-10 cent cost of the petrol companies switching over to the "summer blend".  I would not be surprised to see regular unleaded at $3.75 here in DFW by end of March.  (They are saying more like $4 nationally)   I dont know if it will be as bad as summer of 2008, but we'll see.
 
 
 
 
 
 
_

Tuesday, February 15, 2011

First!

Ok, I guess I cant really call "First" since just setting up my blog;  So how about this:

Welcome to "Life As We Know It Or Something Similar"