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02/12/2011

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Greg Hickey

Dave, I also have been watching the spreads between Brent and WTI. I've read reports that the lower prices in the US are due to oil coming down from Canada.
Usage in the US may be lower than normal, but I believe it is rebounding, as evidenced by the uptick in gasoline price at the pump.
One point I would like to make is that the US may enjoy a "comparative advantage" in the price of energy for some time. If our next door neighbor can sell us energy cheaper than the rest of the world, we may see a pick-up in our economy. Even as we devalue our currency. This should increase exports, put price pressure on imports and maybe bring some jobs back to this country as banks restart lending as economic activity improves. My hope is that we will not squander this window in time, and will use the opportunity to invest in renewables and conservation.

BJ

The truths those wishing to make a buck, or two, don't want you to know.

The first gas-fired internal combustion engine was produced in 1860. The world's population at that time was around 1.3 trillion people. Meaning there are 4 times as many people on this planet as there was before fossil fuels were used in place of manual labor. This gives you an idea of how many humans our planet can actually support, without access to fossil fuels.

http://en.wikipedia.org/wiki/History_of_the_internal_combustion_engine
http://en.wikipedia.org/wiki/World_population

Something that is seldom mentioned in regard to alternative energy is, is the efficiency of energy production. That is how much energy is consumed versus produced by the process. No energy conversion is 100% efficient. Every action or process step requires energy. All our energy originates in the sun. Many overlook the energy required by the human body, even though we are like any other machine.

Little truths like this:

"For example, electricity at 10 cents per KWH is equivalent to burning barley at $7.49 a bushel. Accounts for efficiency of the burning."

http://www.builditsolar.com/References/fuelsrs.htm#HeatContent

Another thing to consider, can the means of alternative energy production be produced in the absence of fossil fuels? Which basically boils down too, could it be produced, transported, assembled, and maintained prior to 1860? Do they require fossil fuel based lubricants, plastics, etc?

Another thing to consider, what is the life span of these alternative energy production methods? All moving parts wear out, glass gets pitted and scratched, things get dirty, contaminated, etc.

The biggest question of all, could mega amounts of cheap food be produced prior to 1860?

Why is this significant, the supply of fossil fuels is expected to be depleted within the lifetime of our children. Long before then, the price will be greatly increased, and rationed. Wars over oil reserves will likely increase consumption of said oil. How much oil has been used by the US military in Iraq, Afghanistan? Not a real concern, then why is China arming itself?

For the optimists out there, there is a chance scientists will rewrite the laws of physics as we currently know them, and the world will be saved, at least until global population meets the limits of that new technology.

Can science find that miracle? I don't know, but a lot of scientists are more concerned with "life out there" than life here on planet earth. A lot of American simply don't get it, and our policy makers don't want them to get it.

BJ

In response to Stephen Leeb's interview:

The US represents 5% of the world's population. Despite this, the US has set the bar for consumer consumption. All the talk is about developing consumer consumption in China and other 3rd world countries, to be less reliant on the US consumer. Is that consumption going to occur in the absences of oil? How millions if not billions of cars are they "hoping" to sell in China and India?

Americans still believe the world, if not the universe, revolves around them. Boy, are we ever slowly waking up to a whole different reality.

BJ

For those who are big supporters of alternative energy, which costs more than energy produced from fossil fuels, consider this:

"President Obama's 2012 budget will propose cutting $2.5 billion from a program that helps low-income people cope with high energy costs in the cold of winter and heat of summer, according to a source familiar with the budget process. The reduction is steep, and might impact millions of families. In 2010, the program received $5.1 billion in federal funds, which were then distributed to states that have both low average incomes and high energy costs."

http://money.cnn.com/2011/02/11/news/economy/obama_heating_cuts/index.htm


Yet:

"Obama is expected to include a $78 billion reduction in defense spending over five years [$15.6 billion per year]. But most of those proposed cuts are likely to be slated for 2014 and 2015. And his funding request for 2012 is expected to be higher than the Pentagon's current funding."

http://money.cnn.com/2011/02/11/news/economy/obama_budget_debt/index.htm

(Given that there will be a republican elected as president in 2012, what are the chances the defense budget will actually be cut?)

Change you can truly not believe.

How long before there will be riots in American cities? Well, that all depends on when the poor can no longer feed and shelter themselves. Given there is no intention of creating jobs for millions of Americans, who are no longer employable in today's reality, it probably wont be too long.

If you aren't going to employ people, nor feed and shelter them, then you had better be prepared for the consequences.

But hay, how is that search for life hundreds of billions of light year away going?

Tony Weddle

Dave,

Take a look at the EIA's short term energy outlook (STEO):

http://tinyurl.com/4vfhnp5

Although January's estimate shows a stock build, the previous seven months, on the trot, showed stock draws (from worldwide stocks). Obviously, stocks are part of supply but doesn't this indicate that, generally, production has not been keeping up with demand?

I checked the previous edition of the STEO and found that it estimated stock builds (from significant to slight) for the three months up to December, so their estimates have been significantly revised. Maybe January will turn out to be the 8th straight month of stock draws, after a couple of revisions.

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