Monday, March 28, 2011

U.S. Has Earth’s Largest Energy Resources

U.S. Has Earth’s Largest Energy Resources
By Peter C Glover
Posted on Mar. 24, 2011

When I read this it made me ask the question why do we have gas at 4 dollars a gallon? Thanks Rob for the article Aivars Lode.

U.S. Has Earth’s Largest Energy Resources

In case anyone missed it, let me repeat something that is of a magnitude of 10 on the scale of news-quakes for Joe Public USA: America’s combined energy resources are, according to a new report from the Congressional Research Service (CSR), the largest on earth. They eclipse Saudi Arabia (3rd), China (4th) and Canada (6th) combined – and that’s without including America’s shale oil deposits and, in the future, the potentially astronomic impact of methane hydrates.

The energy facts in the CRS report should be making front page news all over America. Mostly it isn’t. Given the devastating news from Japan and New Zealand, it may be right to postpone dancing in the streets. But something else is going on. Even though they are going to dominate global energy supply for decades to come the insidious war on vital fossil fuels continues apace.

U.S. Has Earth’s Largest Energy Resources

Thus it perhaps falls to a friend of the US (i.e. me) to state that if the White House is in any way serious about impacting the economic Black Hole that is the burgeoning national debt, reinvigorating business big-time, creating real jobs and restoring ebbing national wealth, the best shot by a distance if you’re American ... well, you’re standing on it, or rather above it.

While love, spiritually speaking and in fiction, may make the world go around, it is energy – and mostly hydrocarbon energy – that actually drives it. As blockbuster thrillers sometimes put it, “Who will tell the President?”

Political pantomime

From over here, the lack of a comprehensive US energy policy and the incoherence of President Obama’s political take on energy, reminds me of a pantomime I saw last Christmas, Aladdin. The cave is full of energy riches, but ‘Emperor’ Obama – or is it Wishy-Washy? –refuses to allow the words “open sesame” to be spoken.

Senator Lisa Murkowski, Ranking Member of the Senate Energy and National Resources Committee, takes up the theme: “As we debate ways to reduce gas prices and provide relief to American families and businesses, this report should be required reading for every member of Congress.” How about for every American citizen too, Senator? Murkowski adds, “For the sake of our national security, our economy, and the world’s environment, we need to explore and develop more of our own resources.”

“The Obama administration has made a conscious policy choice to raise energy prices, accomplished in good measure by restricting access to domestic energy supplies.” So says Senator James Inhofe, a Ranking Member of the Senate Environment and Public Works Committee. He adds forthrightly, “We could help bring affordable energy to consumers, create new jobs, and grow the economy if the Obama administration would simply get out of the way so America can realize its true energy potential.”

Wow, heavy stuff. But then there’s much to be ‘heavy’ about.

While the US is often depicted as having only a tiny minority of the world’s oil reserves at around 28 billion barrels (based on the somewhat misleading figure of ‘proven reserves’) according to the CRS in reality it has around 163 billion barrels. As Inhofe’s EPW press release comments, “That’s enough oil to maintain America’s current rates of production and replace imports from the Persian Gulf for more than 50 years”. Next up, there’s coal. The CRS report reveals America’s reserves of coal are unsurpassed, accounting for over 28 percent of the world’s coal. Much of it is high quality too. The CRS estimates US recoverable coal reserves at around 262 billion tons (not including further massive, difficult to access, Alaskan reserves). Given the US consumes around 1.2 billion tons a year, that’s a couple of centuries of coal use, at least.

In 2009 the CRS upped its 2006 estimate of America’s enormous natural gas deposits by 25 percent to around 2,047 trillion cubic feet, a conservative figure given the expanding shale gas revolution. At current rates of use that’s enough for around 100 years. Then there is still the, as yet largely publicly untold, story of methane hydrates to consider, a resource which the CRS reports alludes to as “immense...possibly exceeding the combined energy content of all other known fossil fuels.” According to the Inhofe’s EPW, “For perspective, if just 3 percent of this resource can be commercialized ... at current rates of consumption, that level of supply would be enough to provide America’s natural gas for more than 400 years.”

See what I mean about an Aladdin’s Cave of untapped energy? Could America wish for more, not least to help make serious inroads into its runaway debt?

Obama’s State of the Union address made it perfectly clear that his energy paradigm remains wedded to a non-fossil-fuelled notion of a carbon Neverland that insists that erratic, under-performing windmills can do the job equally well. Meanwhile a myriad cast of characters are lining up to tell the Emperor that he and his energy policies have no clothes – and not just the usual suspects either.

“Ridiculous delays”

Speaking on March 11th at the IHS CERA Week conference, Politico reported former president George W. Bush as criticizing the Obama administration for delaying offshore drilling in the wake of the Gulf of Mexico spill. Not unexpected you might think. What surprised many however was ex-President Clinton, following Bush at the podium, agreed with George W. and admonished the Obama administration for its “ridiculous delays” in issuing offshore drilling permits, something the economy just “doesn’t need”. Clinton’s remarks followed on the heels of a New Orleans court ruling giving the White House 30 days to act on five outstanding drilling permits pending now for between four and nine months. In a CNN Money special, it was pointed out that the EIA “estimated the country would lose 74,000 barrels a day in oil production in 2011 as a result of a six-month drilling moratorium.”

With hundreds of thousands depending on oil and gas drilling for work, it is as yet unknown just how many of Obama’s policies are putting people out of jobs – and preventing the creation of new ones. What we do know however, is that ‘green’ jobs in the alternative energies industries just aren’t cutting the employment ice. In mid-March, a new study by Verso Consultancy estimates that for every new green job created by diverting public money into renewable energy projects in the UK, 3.7 British jobs were destroyed.

Meanwhile US energy policy persists in pursuing the myth that renewables are the economically viable future, with fossil fuels already, as the president said in January, “yesterday’s energy”. With 85 percent of global energy set to come from fossil fuels till at least 2035 no matter what wishful thinkers may prefer, current US energy policy – much like European – is pure political pantomime.

And hard to bear to bear for Americans, knowing the Aladdin’s Cave of global energy power is right beneath their feet.

See link below for graphs:

Sunday, March 27, 2011

10 Most Bizarre Economic Bubbles in History

Great educational entertaining reading. Aivars Lode

10 Most Bizarre Economic Bubbles in History

Business Pundit Filed in archive Capitalism, Economics, Finance by Julian on March 23, 2011

Economic bubbles have been around since the birth of currency. Created by a wide range of factors, from excessive monetary liquidity to plain old human greed, exuberance and stupidity, they can be described as a trade in products or assets valued far higher than they should be – which is inevitably followed by a crash in prices.

Seek to uncover the causes behind some of history’s most famous bubbles and you’ll find that many arose out of a pretty bizarre set of circumstances. It seems that these economic events can strike the most unusual of markets at the most unlikely of times. Below we take a look at 10 such examples.

10. Tulip Mania

In 1593, tulips were brought from Turkey to Holland and the Dutch instantly fell in love with this most beguiling of flowers. By the latter months of 1636, certain varieties of tulip were worth more than an Amsterdam house! While demand grew exponentially, supply was initially low, compounded by bulb buyers filling their inventories and the four to seven years it takes tulips to reach flowering size.
The Dutch started trading their homes for tulip bulbs, which increased 20 times in value in a month. But these over-inflated prices could not last long, and within weeks prices fell to one hundredth of this value.

9. South Sea Bubble

The term “bubble” itself originates from the inflated stock prices of the South Sea Company, a British joint stock company granted exclusive rights to trade with South America in 1720, in return for financing the British government’s war debt.
This was a time of lavishness and opulence in Britain, with many wealthy speculators desperate to invest in a company that wildly promised astronomical returns, trading wool and fleece for piles of jewels and gold. Shares in the company quickly reached 10 times their value. But when the bubble burst, many of the country’s elite were left destitute.

8. Rhodium Bubble

Every bit as mysterious as it sounds, the Rhodium Bubble of 2008 saw prices of the rare chemical element increase from $500 per ounce in late 2006 to $9,500 per ounce in July 2008, before falling even more rapidly back to $1,000/oz in January 2009. Nobody’s quite sure what sparked the buying frenzy, but it seems to have been a combination of demand in the American car industry, a bullish market in rare metals and at least one rogue speculator on Wall Street leading on the herd of investors.

7. Railway Mania

Railway Mania, another British phenomenon, grew throughout the early 1840s, peaking in 1846 when a staggering 9,500 miles of new railway lines were authorized, around a third of which were never actually built. As the price of railway shares increased, more money poured in, largely from the new, affluent middle classes that had arisen from the smoke of the industrial revolution.
As few had predicted, it ultimately became clear that building railway lines was not as lucrative and easy as investors had been told by wily entrepreneurs. The collapse was unavoidable, and many middle-class families lost their life savings as a result.

6. Romanian Property Bubble

Romania is said to be the country with the highest house price to income ratio in the world. Spectacularly, the price of an old communist-era apartment rose by 1,000% between 2002 and 2007, leaving apartment prices in Romania’s capital city, Bucharest, rivaling those in Paris or London.
Factors thought to have contributed to the boom include growth in the Romanian banking system, high salaries being earned abroad, a poor supply of properties – and money laundering requirements restricting the activities of corrupt businessmen.

5. Mississippi Bubble

In 1716, John Law established the Banque Générale Privée and a year later the Compagnie d’Occident (or The Mississippi Company), which ended up with a complete monopoly on France’s colonial trade, not to mention responsibilities for collecting French taxes and minting money. The company’s share prices sky-rocketed from 500 to 18,000 livres a share.
The popularity of company shares was so great that they prompted the need for more paper bank notes, which The Mississippi Company was only too happy to print. And when shares generated profits, investors were paid in those very same notes. The bubble finally burst when it became clear that the number of notes being issued was far in excess of the metal coinage the company held. As you might expect, John Law fled France soon afterward, disguised as a woman!

4. Florida Land Boom

In the early 1920s, daring entrepreneurs like Carl G. Fisher went to great lengths to promote Miami as a tropical haven, at one stage erecting an enormous billboard in New York’s Times Square reading, “It’s June in Miami.” Before you could say “Everglades,” developers were pouring into the area, ordering vast amounts of building supplies in the process.
These supplies clogged the rail system, and rail companies soon banned the use of their routes for this purpose. Then in January 1926, a schooner sank blocking Miami harbor, starving the area of building supplies altogether. The 1926 Miami Hurricane was the final nail in the coffin, rendering many local developers bankrupt.

3. Poseidon Bubble

In the 1960s, nickel was in high demand and prices were greater than ever thanks to the Vietnam War, but industrial action against the world’s major supplier, Inco, had led to a supply shortfall. When Australian mining company Poseidon NL discovered a potentially lucrative nickel mining site at Windarra, Western Australia, its share price grew dramatically along with investments in other mining companies and mining in general.
Numerous new and dodgy companies were listed, some of which didn’t even have mining leases. Many investors lost money on them, negative press ensued, and share prices in mining plummeted. By the time Poseidon started producing nickel, nickel prices had dropped too and insufficient profits ensured the company was not able to stay afloat.

2. Dot-com Bubble

The dot-com is one of the most well known bubbles in living memory but also one of the strangest. The bubble grew to bursting point between 1995 and 2001 with investment pouring into thousands of new internet firms, many practicing risky policies of growth over profit (brand building and networking in particular), believing that if they built up their customer bases rapidly enough then profits would surely follow.
Novelty and a difficulty in valuing these companies led to some rather enthusiastic investments. But the growth in the tech sector proved deceptive. Poor business practices led to high profile court cases, and the stock market began to tumble, along with hundreds of dot-coms. The bubble finally burst on March 10, 2000, resulting in a mild but long-felt recession.

1. Uranium Bubble

Of all commodities, what could be stranger than uranium? In the 1970s, uranium hit spot prices of around $110 a pound, but dropped down to below $20 pound in the 1990s, and this is were it stayed… until 2005. A perception of future nuclear energy demand from emerging economies, reactor lifetime extensions in the West and low inventories of uranium led to a swift increase in prices from 2005 to 2007, causing a huge spike in stock prices for uranium mining and exploration companies.
Alas, these prices could not be sustained. A sharp fall post-2007 caused many mining and exploration companies to go bust. But the bubble did leave a lasting legacy: known and inferred uranium reserves increased by 15% in that two year period alone.