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A curious
phenomenon worth attention from pathologists in the financial press is the now nearly complete de-coupling of the finance sector from
the salient ominous trend in the oil sector: the fast-developing permanent oil export shock. By
that I mean a severe decline in export ability by those nations currently
supplying the US, Europe, China, and Japan -- an export decline that will far
exceed actual production decline rates in Saudi Arabia, Russia, Venezuela,
the North Sea, Mexico, and Iran.
This story or scenario developed by
Jeffrey Brown and statisticians at The Oil Drum.com,
is pretty easy to understand:
production declines in these nations will combine with greater internal oil
consumption to severely curtail exports in a shockingly brief time frame. The
populations of Saudi Arabia,
Venezuela, and Iran are growing; car sales in Russia are up 50 percent this year; even Norway is
using more of its own oil every year. These nations are consuming about 25
percent of their total liquids (regular crude plus natural gas liquids and
condensates). Basically, the picture shows that net exports from these
nations will run to zero in nine years. And they will be low enough within
five years to throw the importing nations into complete economic paralysis.
The situation is even darker for the US because
our number three source of imports, Mexico, is showing production declines
far worse than the other exporting nations, suggesting not only that the US
will receive no oil from Mexico in only two or three years, but also that the
Mexican economy is likely to collapse and plunge that nation into political
turmoil -- just what we need along our 2000-mile border.
It's against this background that the stock
market melt-up of 2007 presents a virtually psychotic picture of
disconnection from reality, because the oil story says, essentially, that the
global economy as we know it can't possibly continue to operate, and that therefore
investment in its future operations is certain to go up in a vapor.
The standard argument against this is that a
combination of new "technology" and "new oil" (coming
on-line from recent discoveries) will save everyone's ass. Well, the
"new oil" is mostly hypothetical (e.g. Chevron's "Jack"
discovery in the deep-water Gulf of Mexico).
The little real new oil (Russia's
Kashagan field) will A.) not
come into full production for a decade and B.) not
offset Russia's
imminent steep overall production decline. The US is hoping (wishing really)
that the Alberta tar sands will save our ass, but it is a pathetically
delusional hope, since we already import more than 13 million barrels-a-day
and the Canadians project maximum tar sands oil production not to exceed 5
million b/d after 2010 -- not to mention the fact that they have already
signed long-term contracts with China for substantial amounts of that
production, and apart from the issues entailed by the depletion of Canada's
natural gas supply, which is crucial to the production of oil from tar sands.
As for new technology saving the day --
apparently even the science jocks in the US have not figured out that
technology and energy are not the same thing. Someone should inform them.
The psychosis in the stock markets might be
explained by the fact that we are at a peculiar point in history: just coming off the absolute peak
of the energy supply wave, which has allowed for a fabulous accumulation of
surplus wealth, now sloshing through the markets. This may be so, but
unfortunately the surplus wealth comes in the form of "money," and
the "money" that is out there is subject to equally fabulous
distortions and perversions, due to the fact that it is all leveraged into
hallucinated multiples via credit rackets, and, perhaps more fundamentally,
pegged to the unreal expectation that industrial economies will continue to
grow and thus continue to multiply the value of invested "money."
These two conditions -- the gathering oil
export storm and the gathering crisis of capital -- are the reasons why I
think 2007 will be a pivotal year. We're at the halfway point. Oil production
(all liquids) has not exceeded the all-time peak of a year ago (or the
crude-only peak of December 2005). Every day thousands of new driver's
licenses are issued to Saudi Arabian men. Every day, thousands of new cars
are sold in Russia (and China and India). Every day the price of
crude oil on the futures markets creeps a few cents higher. Every day the US version of
"money" (the dollar) loses a few clicks of value against other
world currencies. The markets and the American public are headed for a
collision with reality. When it happens, perhaps this fall, it is not going
to be pretty.
By :
James Howard Kunstler
www.kunstler.com/
James
Kunstler has worked as a reporter and feature
writer for a number of newspapers, and finally as a staff writer for Rolling
Stone Magazine. In 1975, he dropped out to write books on a full-time basis.
His
latest nonfiction book, "The Long
Emergency," describes the changes that American society faces in the
21st century. Discerning an imminent future of protracted socioeconomic
crisis, Kunstler foresees the progressive dilapidation
of subdivisions and strip malls, the depopulation of the American Southwest,
and, amid a world at war over oil, military invasions of the West Coast; when
the convulsion subsides, Americans will live in smaller places and eat
locally grown food.
You
can purchase your own copy here : The Long
Emergency . You can get more from James Howard Kunstler - including his artwork, information about his other
novels, and his blog - at his Web site : http://www.kunstler.com/
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