A number of readers have written in with remarks like "Wow" about the latest web bot hit.  Not that the linguistics-based time predictive software  technique developed by www.halfpasthuman.com is amazing to me anymore - I've gotten sort of used to it and now expect to have a good idea of coming events well in advance - but for newcomers to the idea that the future sends subtle linguistic/language/context changes in how we communicate in advance of actual events is most times a rather hard concept for folks to get their arms around.

In the past 30-days here, we've had two rather remarkable "hits."  In other words, when we issued our pan Pacific 9.5 earthquake warning a week or so before the rumors in Hawaii of a pending 9.5 earthquake hit - causing hundreds of residents to panic and call 9-11 and other emergency services - we scored a "hit" just as we scored another one with the Nov. 22nd report that there'd be talk of "rainstorms on Mars" shortly, based on immediacy values in the language shifts.  And sure enough, that's what NASA unveiled yesterday - just about spot on with my assessment that there'd be discussion of "erosion" talk.  See yesterday's item and the NASA news conference reports for more.

But that's not our topic this morning.  There's a very long-term forecast that deals with "encounters with scarcity" and other variations of the words for "shortage."  If I can bring up a quick graphic for you to consider this from Visual Thesaurus, NOT web bot model space (it's too early in the day to even try to explain that, because you'll see how much linguistically hangs around the concept of "scarce" (as in scarcity).  Here are two views, one emphasizing the left hand side of word model space, while the other emphasizes the right (I rotated the model a bit for you):

You can try the 2-D version of the word model at www.visualthesaurus.com, but in the 3D model, you can spin the model around and I find it pretty useful while trying to sort out what the web bot runs are trying to get at linguistically.  But back to our main point of the morning.

We know, or at least think we know from past "hits" with the web bots, that the BIGGER an event is (e.g. impacting lots and lots of humans) the more lead time we get linguistically.  For example, the Hawaii 9.5 quake rumor "hit" had lots of high immediacy values, but lacked the long lead time before a real 9.0+ quake, that we saw in August of 2004 with the Banda Aceh quake.  There, we had 4+ months of lead time, specific references to 300,000 dead, and "land driven back to a previous age...'  A pretty good description.

Now, with the "encounters with scarcity" stuff, because this has been kicking around modelspace for what will be a year in February, when it arrives (presuming it will, which seems like a decent bet) it will likely be a gigantic event.  If I were guessing, I would say that it will become apparent with the huge emotional release period that comes right after mid March 2007, but not guarantees on that - there's no book on how to do this stuff and Cliff is sort of writing it as we learn.

But take a look now at what the word frequency chart for "shortage" has done since March of this year:

This is not to claim that it's anything scientifically provable, because there are a hundred and one ways the could happen out of natural events.  For example, the Google-urus could have simply changed their indexing strategy recently, or the cache for this word didn't get flushed.  Still, it's a darned interesting thing to watch.

---

I've referred to Robert Kaplan's book "The Coming Anarchy" more often than I can remember, but with good reason.  If you check out the condensed version which appeared in the Atlantic Monthly's online section, notice if you will the sub-headline:  "How scarcity, crime, overpopulation, tribalism, and disease are rapidly destroying the social fabric of our planet".

Other books have recently started to echo the notion that at some juncture, absent some kind of new input of raw materials or energy, there will be a gradual simmering down of the global population into something of a stew where the US would lose its economic hegemony and the rest of the world catches up.  And along in there somewhere, the whole notional of globalism/globalist capitalism goes bankrupt because that system depends on playing the spread between different economic strata.  As the prior stratification becomes more homogenous, globalism looses its edge, and we go back to making things, growing things, and trying to get along all in our own backyard.

The big issue is, however, whether we can do that without blowing each other to smithereens.  But that's another point for another morning.

---

Today, I'll just leave you with a link to the "shortage" returns from Google and you can look through the list of stories which reflect, at their core, the trends which Kaplan so insightfully pointed out more than a decade back:

• Skills shortage in England.

• A DRAM shortage (Taiwan report)

• A nurse shortage (South Africa)

• A rural teacher shortage (Australia)

• ...and the list continues, although it will no doubt change by the time you get to it.

This is not to be alarmist, but I'd offer that folks are seeing more spot shortages today than they did, say, a year ago.  Steve Quayle shared an email from one of his readers that goes to the idea of food availability and prices:

"I called ****** Grains in Montpelier, Id. and asked if their list prices on the web were up to date, and was told, "until next week" when prices would change. So I began asking about shipping prices and the receptionist passed me to ****, who knew more about those things. After talking about shipping prices, we went back to food prices and how much we could expect them to go up.

He asked, "have you been keeping up with the prices of wheat and barley, on the radio" I told him not really. He said they are at an all time high because we are exporting all of our wheat overseas. He said that Australia usually exports its wheat to the nearby Asian nations, but because of their crop failure they were importing from us, as are the other countries. He said they are getting all they can get. (I took notes on what he said), and that the United States has no stockpile of grains.

Then he talked about milk and said all of our milk in powder form is going overseas, and especially the instant. I said we were getting whey, and he told me that whey comes in different grades, the highest being sweet whey, on down to edible whey that they sell to the bakeries.

He said they can get the baker whey but nobody can get the sweet whey and said "everybody else is getting what is left on the tail end" (whatever he means by that). He said the other two things there will be shortages on are potatoes and sugar."

To be sure, some of the shortages are minor - and most certainly not life impacting - but they're curious, nevertheless:

"Was just reading another reader's letter about Helium shortages.

Here's another shortage, trivial no doubt but since you track shortages, I thought I'd mention it.

The other day I went to get some No. 4 whipping twine. Whipping twine is what sailors use to tie around the ends of rope so it doesn't fray. I usually get it at a chandlery near my house but since I was closer to a **** Marine, I stopped there. They directed me to the aisle where it was supposed to be. They had bins for various sizes of whipping twine. Four out of five were empty and all they had was some twine that was too heavy for my needs. So off I went to my usual place. Lo and behold, they were all out as well. They did have some no 4 whipping twine, but it was green, not their best seller and not what I wanted. All the white was gone and back ordered.

Ok, our economy isn't going to collapse because sailors can't whip the ends of their lines (ropes), they can always duct tape them if they have to, but it's like one of those stories from the former Soviet Union where you can never get what you want but have to buy what you can get because down the line you can trade it for something you really need. So anyway, I bought three spools of the green whipping twine."

Whipping the end of your mooring lines (or jib sheets) with a second-choice color may not seem like a big deal, but it points out how complex the JIT delivery system has become.

As I wrote not too long ago in the paper "Death by JIT" companies are trying wherever possible to reduce inventory levels to near zero because they represent money at rest.  Of course, when the inventory systems are not properly anticipatory of future events, spot shortages of things like whipping twine occur for our mariner/reader, or on a larger scale, we see high demand for grains because of the Australia drought and the emergent hype about ethanol fuels.

Going forward, you might want to look through Kaplan's article and reorder your thinking a bit about what's important and what is not. Tomorrow I will get back to a more "headline oriented" approach to our morning reports and save the longer views for the Peoplenomics subscribers. But I think it's important now and then to step back from what passes as "news" to try and get a handle on what's BS/filler/cult of personality pabulum for the unaware masses, and what's really important and helps you prepare/restructure your life as events allow.  And don't plan on fish and chips or surf & turf after 2048...if we make it that far.

---

My quirky outlook on life probably got started growing up in a predominantly Asian neighborhood in Seattle.  Asians have a different, and at times brilliantly insightful way of looking at things.  I wasn't the only one in my impacted, apparently.  My younger sister who works for a company in Seattle than makes things that fly, uses as her email tag line: 

"If all is not lost, where is it? "

(You're welcome to use it, but give her credit...)

The rest of the day's news is the usual mix of stuff, moving at mostly glacial speed, which I'll distill down for you this morning for you as "Brilliance of Humans."

• We read that British authorities have now labeled the death of an ex-spy as a murder. And this country produced Sir Arthur Conan Doyle? What do you think their clue was?

• The headline at Canada.com "Iraq risks a "slide toward chaos"  Eh?

• Now that the Iraq Study Group has discovered that the war in Iraq is not working (eh?) George Bush and Tony Blair will meet today to talk about things. Or, the headline might just as well read "Tweedledee to meet you know who..."

• Woman on airplane lights match to cover passing of gas.

A few point out that CNN's Miles O'Brien fell asleep during the senate discussion of global warming this week, but my take is that he has good sense and he might as well be Rip van Winkle: The senate is one of the few things that moves slower than glaciers.

---

That said, the National Center for Policy Analysis says the public is vastly uninformed on Global Warming.  "Free fish & chips for them all in 2048," I sez I, arghhh..."Now where's my whipping twine?  No, the white whipping twine!"  But seriously...

65-years ago today, America was attacked at Pearl Harbor.  America rose to the challenge and defeated those who would have enslaved free people.  A remembrance today for those who paid freedoms highest price.

---

Japan thanks to US help rebuilding their country, is now the world's largest hold of foreign exchange reserves although China is coming on strong.  The US by 2005 had fallen to eighth in the world. That's a hell of a change in 65 years.

Wednesday Dec. 6, 2006

Another web bot hit

Rainstorms of Mars

I don't think the folks at www.halfpasthuman.com will have a problem with me letting this one out a few hours ahead of the actual event, but back on November 22 in part one of the current future predictive technology (web bot) run (ALTA 907), the time monks sent out an advisory about some odd linguistics that seemed to point with some fair immediacy impacts to "Mars - A Dark and Stormy Night."  In part, they offered this:

"In the past we have come across strange lexical groups which went to the idea that 'Iapetus is Alive!' or rather, 'iapetus is awakening'. Hmmm. Ok, and now we have a small set, completely and correctly {ed note: referential integrity checks out for the set} populated which is headed by the aspect of 'mars' as in the planet, and which has supporting aspects suggesting the very outlandish idea of a 'rain storm'.

---

So we thought to let you know of the possibility for 'inclement weather' should your winter vacation plans include a trip to 'mars'. Though we do note that 'after the rainstorm', the resulting 'lakes/rivers', and such waters will be quite 'clear/clean' and apparently 'wind driven'. There are also some other cautions offered within the data set for those hardy persons taking the 'mars' grand tour this winter in that the modelspace suggests that 'refuge in a cave' will *not* be wise, likely due to the rising waters from the rainstorm. And further that the 'engaging/grasping vines/pipes' should be avoided as they are 'without integrity'. Or as the aspects/attributes would have it, are 'lying about their elevations, {and} sweet air'. Hmmm. Lying pipes...imagine that. My how advanced, down here it is just the politicians that lie.

We offer these snips from the technology that let's up "peek into the future down at the archetype level" so you can do three things. 

First, we will see if the future scanning technology got close in making its prediction 14-days in advance of today's events.  And those events are what?

Dec. 4, 2006 MEDIA ADVISORY: M06-186

NASA Schedules Briefing to Announce Significant Find on Mars

WASHINGTON - NASA hosts a news briefing at 1 p.m. EST, Wednesday, Dec. 6, to present new science results from the Mars Global Surveyor. The briefing will take place in the NASA Headquarters auditorium located at 300 E Street, S.W. in Washington and carried live on NASA Television and www.nasa.gov. 

The agency last week announced the spacecraft's mission may be at its end. Mars Global Surveyor has served the longest and been the most productive of any spacecraft ever sent to the red planet. Data gathered from the mission will continue to be analyzed by scientists.

Panelists include: - Michael Meyer -- Lead Scientist, Mars Exploration Program, NASA Headquarters, Washington - Michael Malin -- President and Chief Scientist, Malin Space Science Systems, San Diego, Calif. - Kenneth Edgett -- Scientist, Malin Space Science Systems - Philip Christensen -- Professor, Arizona State University, Tempe, Ariz.

Reporters at participating agency field centers will be able to ask questions. For more information about NASA TV streaming video, downlink and schedule information, visit the web at:

http://www.nasa.gov/ntv 

Your second task will be to try and put together what the web bots seem to be saying about Mars.  To me, it sounds like not the discovery of water itself on Mars, although it could be that, but rather that erosion (as in caused by falling rain) is likely to be the central topic as well as some discussion about "wind driven"  and maybe a reference to 'caves" along in the discussion somewhere.

Third thing?  I mean if the boss isn't cracking the whip too hard today:  Whip out your copy of Immanuel Velikovsky's book "World's in Collision" or at least read the summary at Wikipedia:

"The book proposed that around the 15th century BCE, a comet or comet-like object (now called the planet Venus), having originally been ejected from Jupiter, passed near Earth. The object changed Earth's orbit and axis, causing innumerable catastrophes which were mentioned in early mythologies and religions around the world. Fifty-two years later, it passed close by again, stopping the Earth's rotation for a while and causing more catastrophes. Then, in the 8th and 7th centuries BCE, Mars (itself displaced by Venus) made close approaches to the Earth; this incident caused a new round of disturbances and disasters. After that, the current "celestial order" was established. The courses of the planets stabilized over the centuries and Venus gradually became a "normal" planet. "

A simplified version of events in Venus as either comet or wandering small planet gets captured by the Sun's gravity.  It comes trucking into our solar system and goes near-missing Mars, but the gravitational fields are such that the water is sucked off Mars and whipped into space as Mars goes truck about.  Fast forward a few years and earth goes through the clouds of water in space and it rains for how long?  Care to guess 40-days and 40 nights?

Today's NASA conference is not likely to carry the discussion anywhere near this far, but if you sort of read between the lines, the implications for religion are interesting, as humans fill in with "science" some of the history written of in Old Testament events.

Next thing you know, we'll find out that some of the passages in Ezekiel are talking about UFO's and that demons, trolls, and elves from our mythological past were captured in current myths in caricature form.  Nothing would surprise me less. And thanks to the time monks, neither would a discussion of wind-driven rain caused erosion on Mars.

Peak Oil Real?

The debate continues about Peak Oil.  Some argue that it's a "made up" deal by oil companies.  Others, like one reader who sent this in, think one way or the other, the end will come:

In bold below - this is what has been bugging me for a while; George, we have modified the bell curve into a plateau, borrowing from the future. If this is correct, then We Will Crash; period. So our decent into totalitarianism, our manipulation of the markets, etc. is with this Reality in mind. Not so much a diabolical plot or conspiracy, just the box canyon result of prior decisions. The shit is going to hit the fan. And everything points that direction from fundamentals (which we are all starting to doubt) to geo-political changes to web-bots.

 

following your oil drum link from this morning - mcgowanjm on Saturday January 28, 2006 at 10:13 AM EST Backward induction Backward induction is a technique to solve a game of perfect information. It first considers the moves that are the last in the game, and determines the best move for the player in each case. Then, taking these as given future actions, it proceeds backwards in time, again determining the best move for the respective player, until the beginning of the game How much does it take to push people away from their natural strategies?

I have a suggestion for the geologists and petroleum engineers. Figure out what the heck your measurements and estimates mean, and then perfect the formula to eliminate the magical guess work. The more I look at it, the more I seriously think that no one has figured out how to do estimates of oil reservoir volume correctly It almost sounds as if no one wants to admit that a parabolic growth law has any kind of importance.

 

And FSU Oil Shock Model here

However, if you discount OPEC reserves by 50%, it becomes clear that we are WELL past that half-way point. So production should have already begun to decline. This suggests that, as widely feared, only the use of water injection and water flood techniques to keep reservoir pressure artificially high have kept production rates up for the past several years. The problem with this is that when a field who's production rate has been artificially sustained beyond the half-way point finally does begin to decline, its rate of decline tends to be very, very high. 10-18% has been suggested (by Simmons and others) as the decline rate for fields that have been pressed to the limits with injection technologies. This is critical, because while Peak Oil may be a quite manageable problem at 2% depletion, 10%+ depletion means that world production will fall by half in less than 7 years. That would be absolutely catastrophic. No wonder this story isn't available on CNN.

It is absurd not to believe that Peak Oil will happen sometime. You can't have growing consumption from a finite resource any other way.  The question then boils down to one of timing.  And the $64 trillion dollar question is:  Who out there has anything to gain from telling the truth - and then, how would we recognize it when it came along?

Heavy Helium Thoughts

I recently reported that there seems to be a national helium shortage here and they - and now comes an interesting email from a reader whose family has bumped into it head-on:

Hi George, ***** ******** here. I just thought you might like to hear about the confirmed helium shortage that you eluded to earlier this year.

 

My wife is a balloon decorator. She does parties and events of all kinds and of course uses helium in many of her jobs and creations. I told her about the coming helium shortage when you first mentioned it about 6 months ago. At the time, we checked around with her wholesale supplier in Dallas (All American Balloons) and a local supplier here in Mount Pleasant, Texas (Red Ball Oxygen). No word or news at that time from people we thought would be in the know.

 

Well, things have certainly changed and not for the better. The local price of a large tank of helium is going up from about 15 FRN's to about 25 FRN's. This was just announced a few days ago.

 

What I found extremely interesting is this...

My wife just got back from her Dallas supplier and they were in the warehouse portion where the supplier stores their helium for deliveries. My wife saw about 100 tanks of helium in a storage area, but not in the delivery area as it was also full.

 

When she remarked about how the supplier had increased their volume in helium tanks for deliveries, she was told by the supplier that what she saw was their "hedge" against a rising helium price and a definite shortage in the future that they said was affecting their supply ability.

 

Obviously this is a confirmed "hit" because of how it directly affects our livelihood. This isn't mere rumor or conjecture, but actual first hand knowledge from my wife's own experiences.

We don't hear much about the helium shortage - at least since the Macy's T-Day parade...but at some point, I will likely be shopping for some for our welding rig.

Rubber Stamp

Senate Armed Services Committee gives it to SecDef nominee (and shoo-in) Robert Gates. How many ways can you rewrite that?

The Rich Get Richer

If you're keeping track (like you have time, right?) the richest one percent of humans own 40% of the world's assets. And the richest 10% own 85% of the world while the bottom o50% of humans own barely 1% of global wealth.

---

Pretend for a moment you just popped into this dimension after zipping hundreds of light years to check out this recently radiating planet (nuke bombs since 1945, and cell phones since you bought one).

The Prime Directive (from Star Trek's "do not interfere with native cultures) kick in, so you can't just go smashing down doors to interview people - you'll have to make due with cattle sampling.  But you have to complete an assessment of the planet to see if it qualifies as an "advanced civilization."  So you fill out the check list:

____Planet ecology stable and healthy:  (   ) Yes   ( X ) No.

        Notes:  Planet dying, all fish gone by 2048  Algae produced oxygen follows.

____Wealth pretty evenly distributed  (   ) Yes    ( X )  No.

        Notes: See story above.  Are you kidding?

____Planet population living harmoniously  (   ) Yes  ( X ) No.

        Notes:  See:  Iraq, Afghanistan, most of Middle East, Oil outlook

____Populations have time for spiritual pursuits  (   ) Yes  ( X ) No.

        Notes: See ABC Traffic center  and various religious conflicts.  No time!

____Financial Systems functional   (   ) Yes   ( X )  No

        Notes: See derivatives bubble  Markets safe until 2006 bonuses passed out.

And like dolphins, another advanced race here watching us - that is if you follow the storyline of the "Hitch Hiker's Guide to the Galaxy" said, "So long and Thanks for all the fish." Douglas Adams had it right.

Swingin' Saddam

Ever since the "hanging judge" was brought in to replace the first judge in the Saddam Hussein trial, we've known it would only be a matter of time till he swung.  Today, Saddam was back in court after loudly telling anyone who was still paying attention to him, that he wouldn't attend his appeal.

With the outcome never in doubt, why are mainstream media even bothering?  It reminds me of the Old West saying.  "We'll give you a fair trial before we hang you..."

Chavez Following the GOP

While some headline writers insist on labeling Hugo Chavez Left Wing, he's now promising to eradicate poverty through socialism, reports Fox News from an AP story.

It seems to me that what Chavez is planning follows the path blazed by the neocons: Huge deficit spending, central government control and spinning events this way or that. Chavez has a long way to go in order to equal the financial mess the republicorps in the District of Corruption have foisted on America under their false flag of "conservatism.".  Run us to bankruptcy and then turn it over to the democorps to sort out. Same old, same old...

House Work

OK, the Washington Post says "Culture Shock on Capitol Hill: House to Work 5 Days a Week".  Do you have the same fear I have?  If they can screw things up on less than 40-hours a week, just think how much move governating they can cobble up if they really work at it!

 Katie bar the door...

Tuesday December 5, 2006

It all gets back to Oil

While we still have one week to go before the December Federal Reserve Open Market Committee meeting, there are some things off on the horizon that may lead to a rude awakening for investors in a week.

Chief among my present concerns/watch list is the Fed's self-proclaimed bias toward a tighter money supply.  This will be an exceptionally interesting Fed meeting to watch because world-wide there are investors with their hopes pinned on rate cuts by their local central banksters.  For example, people in Indonesia will find out about their rates on Thursday of this week. The outlook there is for a rate decrease. Investors in Canada are expecting the same thing, namely a rate decrease.

Last week, there were various currency moves starting - many of which (like the Australian dollar move) were based on the expectation that "Gentle Ben' would go with expectations and decrease rates.  But, pragmatically, can he afford to cut rates just now?

Irwin Kellner writes over at MarketWatch.com this morning that Ben Bernanke has in a real way, talked himself into a corner by admitting to 'inflation targets.'  While most investors, and those of us who don't invest, but who do own property, are concerned about declining housing prices and a softening of the economy, the Fed Chair continues to talk about incipient inflation.

The Fed's getting caught in a box again.  True enough, prices are going up at the store, and the means of production and self-sufficiency are also continuing to climb.  And OK, it's true that the main reason that inflation looks benign at the moment has almost everything to do with the election period drop in energy prices, which has come to a screeching halt now that the elections are history.  But the main thing that' is now 'out of kilter' in our view is that we have a separation of expectations from economic fundamentals.

Such periods are potentially dangerous for this reason: At some point investor expectations come back to fundamentals.  Gary Dorch (Global Money Trends) offers the notion that stagflation may be on the dinner menu for 2007.  That's where prices go up, the standard of living stalls (or runs backwards) and the government's efforts seem mostly futile to impact the problem.

Needs Must as the Oil Drives

If there's a single fundamental to focus on these days, it is oil.  And as goes oil, so too goes the US dollar and to some extent, gold.  Today, oil is back to $63, and while that's down a lot from the $78.40 high in July, there's a lot more to oil than just "regular" supply and demand.  There's also the chance that oil is beginning to trek down a road never traveled before, the genuine running out of energy.  Pull up a second cup of coffee...this is important stuff.  Getting this one exactly right will pay you more handsomely than any other investment out there.

---

My friend Jeffrey Brown generously forwarded me a copy of a post he made to The Oil Drum this week, in the continuing debate over whether Peak Oil has arrived, or whether it's a few years off:

"Resolved: World Net Oil Export Capacity is Now Declining Because of Involuntary Reductions in Production and/or Because of Increases in Domestic Consumption in Major Oil Exporting Countries

A Guest Post by Westexas@aol.com  (Jeffrey J. Brown)

Background Robert Rapier suggested that we debate this topic, and I agreed. In reality, there are only shades of gray difference between us regarding the timing of Peak Oil and Peak Exports. I believe that the crisis has hit, while Robert believes that the worst won’t be upon us until some time shortly after 2010.

In any case, in a guest post on The Oil Drum (TOD) in January 2006 http://www.theoildrum.com/story/2006/1/27/14471/5832,  I predicted, based on graphs primarily done by “Khebab,” who is now a TOD Contributor, that the world would see declining net oil exports this year.

I focused on the top three net oil exporters—Saudi Arabia (KSA); Russia and Norway—which together accounted for 48% of the (total liquids) exports by the top net oil exporters in 2004 (all production data based on EIA numbers, unless noted otherwise). Top exporters are defined as those exporting one mbpd or more.

In his most recent book, “Beyond Oil: The View from Hubbert’s Peak,” Kenneth Deffeyes outlined a simplified version of the mathematical techniques that M. King Hubbert used to accurately pick the time frame for the peak of Lower 48 oil production. The method, named “Hubbert Linearization” (HL) by Stuart Staniford on TOD, is outlined in the following article “Texas and US Lower 48 oil production as a model for Saudi Arabia and the world.” http://www.energybulletin.net/16459.html 

Deffeyes defines Qt as a mathematical estimate of the ultimate recoverable reserves for a region. Regions tend to peak, and start declining when they are about 50% depleted, i.e., the 50% of Qt mark.

The following regions have now shown lower production after crossing the 50% of Qt mark: Texas; Lower 48; Total US (which had a secondary, but still lower peak, after the North Slope production came on line); Russia; North Sea; KSA and Mexico.

In the January article, I outlined my “Export Land” model, which was inspired by work done earlier by Matt Simmons. I stipulated that we had a country producing 20 mbpd and consuming 10 mbpd.

I then stipulated Export Land hits the 50% of Qt mark, and over a five year period, production declines by 25% and consumption increases by 20%. Because of these two factors—falling production and rising domestic consumption—the net oil exports from out hypothetical exporter decline by 70%, from 10 mbpd to 3 mbpd.

Note that the underlying assumption, which I think is generally true, is that domestic demand is generally satisfied before oil is exported. We have a real life example of the Export Land model in the UK, which has gone from exporting one mbpd in 1999 to being a net importer in 2005.

Also note that I expect domestic consumption in the exporting countries to go up quite rapidly, at least initially, as oil prices rise faster than their production is falling.

What I found deeply troubling in January was that the top three net oil exporters were all past their respective 50% of Qt marks. In January, KSA was showing stable production, Russia was showing a slow rate of growth and Norway was in decline. I predicted, based on the HL method and based on the Export Land model, that we would see lower exports from these three countries in 2006.

2006 Data The EIA has now released a table showing the estimated production and exports from the top net exporters for 2005 (again all total liquids) http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.html,  and the data are very interesting, since we can compare the 2005 production, consumption and exports for various countries to the 2004 numbers. http://www.infoplease.com/ipa/A0922041.html 

KSA, Russia and Norway collectively have shown a 13% increase in domestic consumption from 2004 to 2005. Even Norway, which I expected to be flat, showed an 11% increase in consumption.

It appears that the only readily available current production data are for crude + condensate (C+C), but the EIA shows that these three countries are down, in September, 2006 by 3.7% from their December, 2005 production levels (KSA and Norway are down; Russia is basically flat). These data are subject to revision, but Khebab has demonstrated that the revisions tend to be downward with time.

In any case, if we assume that Total Liquids behave similarly to C+C, and if we use the same rate of increase in domestic consumption as 2004 to 2005 (which may be conservative given the rapidly escalating demand in KSA and Russia), this suggests that the top three net oil exporters are experiencing about an 8% decline (1.5 mbpd) in net oil exports in 2006 versus 2005 (based on data through September, 2006).

The EIA tracks C+C for 11 of the other 12 largest exporters. Their combined C+C production is up just barely (by 0.6% or 0.16 mbpd) from 12/05 to 9/06, which almost certainly translates to a decline in net exports, given the increasing consumption in most exporting countries.

Saudi Arabia: Why is their production falling? No one, as far as I know, now disputes that KSA’s production is falling. The question is why.

KSA is now at about the same stage of depletion that the prior swing producer, Texas, started declining.

In the spring, the Saudis announced that they could not find buyers for all of their oil, “Even their light, sweet oil,” when light, sweet oil was going for about $70 per barrel in the US.

At the same time that the Saudis were announcing that they could not find buyers for all of their oil, and that they were “voluntarily” reducing their production, they were vastly expanding their drilling program.

Their largest field, Ghawar, which at one time accounted for more than 50% of their production, is now at about the same stage of depletion that an analogue field, Yibal, started declining. The best case of Ghawar is that they are producing one-third water, after the field was redeveloped with horizontal wells.

At the same time that the Saudis announced their “voluntary” production cutbacks in the spring, their stock market started crashing. Interesting enough, Venezuela, which has long life unconventional oil reserves, has a booming stock market.

In my opinion, Saudi Arabia, like Texas in 1973, is at the start of a long term and irreversible decline in conventional oil production, with a long-term decline rate in the 4% to 5% range, perhaps sharper at first if Ghawar is crashing.

Russia: What next? Mathematically, Khebab has demonstrated that the recent rebound in Russian production was just making up for what was not produced following the collapse of the Soviet Union.

In my opinion, Russia will join Saudi Arabia in showing a long term and irreversible decline in conventional oil production next year.

The “Bidding Cycle” Theory Given the reports of lower production by the top three exporters, and one can assume increased consumption, someone must be conserving.

The Wall Street Journal recently ran a story, which profiled an African country, Guinea, which has been forced to conserve, “As fuel prices soar, a country unravels.” http://www.energybulletin.net/22775.html 

An excerpt from the article:

“The impact of today's energy crunch on the poor is plain in rich nations such as America: Expensive gasoline and soaring heating bills make a hard life harder. In impoverished countries such as Guinea, where per capita income is just $370 a year and surging gasoline prices have helped spark bloody riots, the energy shock has become a matter of life and death.”

I believe that we are going to see rounds of bidding cycles with available exports going to the winning bidders, e.g., the US so far this year, and with the losing bidders being forced to conserve, e.g., Guinea so far this year.

However, I predict that the next round of bidding (which I believe that we are currently in), against regions like Europe and China, instead of Africa, will be much tougher for the US.

The Expectation of an Infinite Exponential Growth Rate Versus The Reality of Exponential Decline Because of a steady increase in US petroleum consumption and because of a steady decline in US oil production, total US petroleum (crude oil + product) imports have been increasing at an annual rate of about 4% per year since 2001. This is one reason that assertions that year over year US petroleum imports may be flat is not much of a comfort.

In most of the US, it is simply a given that the “American Way of Life” is non-negotiable and that we can continue to increase our petroleum imports year after year.

Unfortunately, I predict that Americans are going to realize that the reality of exponential decline is going to trump expectations of an infinite growth rate.

While there are many suggestions for alternative energy sources and for the expanded use of other fossil fuel sources and the expanded use of nuclear energy, the reality in my opinion, is that the Net Oil Export Crisis is hitting so hard and so fast that our only recourse is to effectively implement a triage operation, where large portions of American suburbia are effectively abandoned.

I do strongly support a proposal to tax energy consumption to fund Social Security and Medicare, offset by eliminating or reducing the Payroll Tax, combined with a major push to implement Alan Drake’s Proposal for Electrification of Transportation. http://www.energybulletin.net/14492.html 

I am primarily supporting Alan’s proposal because he is advocating proven technology that we essentially perfected more than 100 years ago. Furthermore, he documents how the Swiss were able to survive-- by electrifying their transportation system and by restricting oil supplies to emergency uses--an oil supply cutoff in the Second World War.

The average American today uses about as much oil as 400 Swiss citizens used in the Second World War.

OK, a sobering assessment of oil. The Energy Bulletin yesterday published and article by Dmitry Orlov notes in his presentation "Closing the 'Collapse Gap": The USSR was better prepared for peak oil than the US" that:

"The US faces many of the same problems that contributed to the Soviet collapse

• Unwinnable wars (Afghanistan, Iraq... Iran?)

• Declining oil production (Soviet oil production peaked a couple of years before [the Soviet] collapse

• Out of control military budgets

• Unsustainable deficits and foreign debt

• Balky, unresponsive, corrupt political system, incapable of reform

• Delusions of grandeur prevent honest discussion of problems"

[Orlov slide #5]

All of this builds the case that the West in general. and the US in particular, have become boxed in an unwinnable game.  We desperately need to possess the oil and gas reserves of many countries in order to maintain our high consumption lifestyle.  This in turn leads folks like Treasury Secretary Henry Paulson to continue to espouse a "strong dollar" policy.  Not because the fundamentals of the dollar justify a strong dollar, but because the USA business model turns toes up (think coroner's office) if energy gets too expensive.

So, when I read stories like Tony Blair's call today for an upgrade to the British nuclear arsenal, I think to myself "Aha!  Blair knows that as external wars crank down, the economy needs ways to crank back up...and this all fits in with the massive War on Terror [WOT] as the modern economic version of the CCC and Works Progress Administration as easily tools easily modulated by policymakers to avoid sinking any further into a lifestyle changing Second Depression."

You need more coffee yet?

Defending the Lifestyle

Political leadership of the US, ostensibly shared by two parties, is in my view, only a single party masquerading as a bi-partisan Democratic Republic. The illusion is maintained in politics, but the fact is politics is heavily underwritten by corporate boardrooms of America, which in turn have no interest in lowering the consumption levels of Americans because that's what drives sales growth, the Holy Grail of the Western Economic Miracle.

I wrote yesterday about the elections in Venezuela, and received an interesting note - and follow-up note - from a reader who has spent considerable recent time there.

"Just a clarification in regard to the Venezuela. Having family there and visited many times I wanted to clarify the REAL situation there. First of all, take my word for it, there was a massive election fraud there. Exit polls monitored by many international organizations showed that the opposition candidate Rosales was leading by over 70 percent. The results were apparently flipped. In fact countries such as Spain, France, even the BBC was projecting him to be the victor up until very late last night as evidenced by the exit polling. It is a gross misconception to believe that even the poor are still behind Chavez these days. Millions of Venezuelans including many former Chavez supporters have been holding protest rallies and support demonstrations for the main opposition candidate Rosales (apparently, a truly decent man who had the potential to unify the country with his policies of inclusion and positiveness. He has had an impressive record to date). The poor also do not want there children to become property of the state (beginning next year). They also do not want the elimination of currency and an insane transition to a barter society that Chavez announced last week. They have suffered that collapse of the economy under Chavez. The oil money has been squandered and sent out of the country to Cuba and many other leftist ventures. With the middle class being eliminated so have thousands of jobs for poor as well. (The middle class provided jobs and income for much of the poor). They do not like the tens of thousands of Cuban military that have been brought into the country to intimidate and repress them. There is such a huge list of social and economic disasters that have befallen the great Venezuelan people under this Communist government it would take me all day to write. I would suggest that you contact an objective journalist from there (if you can find one that has not been intimidated into silence or murdered). Believe me, the country and even the poor were better off before this totalitarian regime took over. It is a dangerous mess down there now…kidnapping is one of the major industries now that Chavez disarmed the Caracas police because, they were generally pro opposition. Crime is out of control. The news you get from most of the mainstream press is bought and paid for by Chavez. VERY inaccurate and misleading. Bottom line…If you liked Castro, you’ll love Chavez. "

His follow-up note brought a few more facts to light:

"I am writing to moderate my earlier email specifically in regard to the election fraud in Venezuela. Instead of the vote being flipped as I had heard rumors of it seems that it was more complicated than that (as most things are). I have heard reports that the "frontier" usually meaning the border area of Columbia was opened up (apparently, it is sealed off to a degree at election times) and thousands of non eligible voters were bussed in and were voting (repeatedly) at numerous locations around the country. This factor in addition to the rampant intimidation of voters (lots of people with guns riding around on motorcycles)...and a degree of denial or apathy among many voters seems to have added up to some substantial numbers for Chavez. As you might expect, it is very difficult to get truly accurate information in these situations. As for the rest of my email, it was accurate."

My point in yesterday's Venezuela story was not to deify Hugo Chavez.  I'm not a particular fan of the fellow, nor am I a fan of Fidel (or Raul) Castro. .

I get concerned when well-respected publications like the Washington Post offer headlines like "Latin America Takes Leftward Swing"  But, I also got an immediate sense of relief in the second paragraph of Frank Bajak's story when he says the political changes in S.A. are not about a yearning for Cuban-style communism:

"Instead, it's all about delivering life's basics _ food, shelter, health care _ to people excluded from the benefits of the free market that Washington has championed in the region for more than two decades."

America has a pretty good standard of living and a Constitution second to none. Yet for now, proponents of boardroom corporatism are still selling only the trite "more is better - more is the answer."  The unstated  boardroom assumption is that given more of everything - square footage of houses, calories at the fast food joints, and unlimited bandwidth to watch videos on cell phones - life will somehow be better.

Playing a new video game may be fun, a big house may be enjoyable, and a huge burger sounds pretty good right now.  However, the assumption table that get us to this level of social hypnosis is long and fraught with dangers, not the least of which is that Peak Oil isn't real.

As the House votes today on the Senate's offshore oil plan, things like next week's Fed meeting seem years off. 

This is the season of miracles, and I'd offer that we need one right about now.  A democorp CONgress that still feeds at the corporate trough won't make a significant difference.  The corporate/political alliance that got us here won't get us to the next level.  At some point I expect the investment community will awaken with a terrible start to the realization those Peak Oil guys can't be wrong forever. And when it does, needs must as oil drives.

And, oh yeah, a federal panel has voted against more security checks on electronic voting machines.  Somehow, it all fits.

(I should have saved this for Peoplenomics this week - but consider it a free think-piece to haul out and consider when you're making up your "What I'm going do better in 2007 list.)

M&A Frenzy

Talk today about Pfizer-Abbott. Then LSI buys Agere. RF Micro selling Bluetooth. Management group buying Stations Casinos maybe.  Yup, that's a frenzy.

X-Class Solar Flare

A major X-class flare from the sun today.  Not earth directed, but in a week or so, as the sun spins and we come up over sunspot 929, there might be some concern.

Monday December 4, 2006

Chavez Back

Venezuela's president Hugo Chavez had no trouble retaining his grip on power in voting Sunday.  Let's see: The guy has kept gas prices low at home, offered free oil to the poor in America, won't back down to corporate/oil company pressures on things like oil export taxes.  No surprise the common folks in Venezuela seem to like him.

---

On the other hand, there's the matter of a free press.  Reports have it that Chavez would like to shut down some of the TV stations which are critical of him.  Question is, who's funding the TV stations? Care to bet me that petrodollars are at work behind the scenes?

---

Speaking of which, we see that oil was down a bit in trading Monday.  No doubt part of that is due to some question about how OPEC will handle the question of cuts.  But to me, it looks like "noise trading" and not a significant move.  Oil has been headed up for a couple of months now.  Elections over, get it?  Besides, as Bloomberg reports, the falling dollar means higher oil prices.

---

Down 3 percent in a couple of weeks the dollar is bouncing a bit - we suspect dead cat bounce effect. So that will put short term downward pressure on gold, oil, and other things of value.  But the bigger trend is which way?

---

Globally, energy is not getting cheaper.  In the UK, for example, there are stories about how home energy bills will be going up billions because of infrastructure improvements planned by energy providers.

---

All of these energy notes are a pillar of the global economy...and I noticed with some interest today that Japan's  capital spending has slowed, and that may be lower GDP growth for them.  What's problematic about this?  A couple of things:  First, the Nikkei peaked in 1989 as best I can recall - near the 40,000 mark.  Today, it's struggling in the 15-16,000 range 15-years later.  The last thing the country needs is to slip into the "R" word (recession) now.

---

A characteristic of the global economy is that a pressure here means a displacement there.  So while Japans capital spending slows, we notice that China has now passed Japan in research and development spending. The folks at Japan's MITI are probably beside themselves over this, if I were guessing..

---

One of my pet theories is that you can get a sense of where an economy is going (macro view) by looking at patent applications, as they reflect innovation - and in turn, new products.  The US Patent office reported domestic US applications for patents were essentially flat from 2004 to 2005 (most recent annual report figures), at  218,220 in 2004 versus 218,472 in 2005.  (link, see table page 126).  On the other hand, foreign patent applications in the US climbed from 160,764 in 2004 to 191,060 in 2005. (Link: see page 128, totals at top of table).  The innovating is shift where?

Put nicely: The USA is not innovating like we used to, except in the area of unpatentable wildly creative bundles of debt paper, so the long term outcome  for the dollar shouldn't surprise you. Job growth seems to track innovation, and when the next Patent Office report comes out, we'll be sure to pass along the highlights.  But you see it already, China overtakes Japan in IP.

---

Enough about economics - back to politics...

Hillary Hype

Am I the only one who doesn't understand why anyone outside New York would vote for Hillary Clinton?  I must be overly sensitive to the notion elected aristocracies, be they from the corproyal families of Bush, Kennedy, or Clinton, but I would have expected the democorps to try and launch someone new...not more of the same.  But that's not the hype for now.  The stories are all seem to center on Hil and her run for the White House.  Spare me, please.

Nice Mellons

So nice are Mellon Financial's holdings that the Bank of New York is buying them.

You Are What You...

Nearly 400 people have turned up ill on the world's biggest cruise ship.  Norovirus.

---

E coli outbreak in New Jersey. In fact, if you're having trouble dieting put either food poisoning or e. coli into a news search engine to see what you get.  Might help the appetite.

Case Against Cell Phones

My natural disinclination to carry a cell phone (or anything else with recurring expense involved) was reinforced last week when it was reported the FBI has conducted audio surveillance using the microphone built into cell phones, even when the owners of such phones thought they were turned off.  Let's see: traffic accidents while dialing, questions about cancer risks, a monthly bill, long term contracts for decent rates, and subjecting yourself to interruptions in meetings, showers, trips to the bathroom.  Yeah, that's progress, ain't it? Plus, I'm subjected to hearing everyone else's dirt..  Sheesh!

 

---

News from Elliott Wave International

The Web UrbanSurvival Only

On to Our Chart!

Instead of our customary chart, this week you get a free peak at one of our other charts from www.peoplenomics.com - this is our "Global Markets Equally Weighted" chart:

 

 

Write when you get rich,

 

George Ure, The People's Economist