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Re: Stratfor analysis

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  • Bill Trost
    ... Note the sentence in the last paragraph that states, But to inflict the same kind of damage that occurred in the 1975 crisis, for instance, oil prices
    Message 1 of 5 , Aug 31, 2000
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      --- In energyresources@egroups.com, "Scott " <lynx5_5@h...> wrote:
      > Can one of the experts comment on the Stratfor analysis of US
      > economy resistance to oil price shock ?
      >
      > http://www.stratfor.com/MEAF/commentary/0008300143.htm
      >
      > Their view seems to be that only absolute, physical insufficiency
      > would have any effect on US economy. Deluded ? What is truth ?

      Note the sentence in the last paragraph that states, "But to inflict
      the same kind of damage that occurred in the 1975 crisis, for
      instance, oil prices would have to reach nearly $40 per barrel." It
      would be trivial for oil prices to reach that level (betcha a gallon
      of gas they will) by the end of the year. Stratfor's optimism is
      naive.

      Oh, and to support my claim, note that the _Weekly World News_ this
      week announced that there will a second Great Depression starting in
      October. Be glad at least *someone* in the media is paying attention.
      (-:

      [For the safely non-American among you, the _Weekly World News_ is a
      supermarket tabloid that also publishes things like sightings of
      Satan, UFO abductions, and the latest miracle weight-loss diet]
    • Dale Griffith
      ... consideration: (snip) ... (snip, and original post moved to bottom of this reply) With due respect to professor Rechsteiner s views on the Stratfor
      Message 2 of 5 , Sep 1, 2000
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        --- In energyresources@egroups.com, "Rechsteiner Rudolf" <info@r...>
        wrote:
        >
        >
        > I would like to express the opinion that the stratfor analysis (Oil,
        > Politics and Power Part II: The Irony of High Prices) is
        > fundamentally flawed and methodologically biased.
        > Saying this the following points should be taken under
        consideration:
        (snip)
        > I would like to express a completely contrarian view:
        (snip, and original post moved to bottom of this reply)



        With due respect to professor Rechsteiner's views on the Stratfor
        reports, I think a case could be made that the relative impact of the
        next oil crisis on the US and other developed countries having some
        level of domestic petroleum endowment will be less severe than that of
        other countries. However, it may be for reasons other than those
        cited by Stratfor.

        To put the US situation in context, it is useful to review the
        analysis of Matthew Simmons "The Oil World: 1973 Compared To 2000".
        (look in the section Research Reports at:)
        http://www.simmonsco-intl.com

        Simmons is in agreement with Rechsteiner that the perceived
        improvement in oil use/GDP ratio is illusory. Simmons points out that
        the US per capita oil consumption now is actually higher than in 1970.

        But while Simmons cites several parallels between the US of 2000 and
        the US of 1973 that make the US vulnerable to the next oil crisis,
        there are also some significant differences that should be taken into
        account when projecting its impact:

        1. The 1970's was a period of high inflation, resulting in
        devaluation of the US dollar. This inflicted economic pain on the oil
        exporting countries which received a fixed per barrel dollar price for
        their exports, but had to buy their imports with devalued dollars. At
        the present time, in spite of the increased balance of payments
        problem, the US dollar is still strengthening in relation to other
        currencies. It is now the importing countries other than the US which
        feel the economic pain of paying for their imports in dollars.

        The question for the US and the rest of the world is what will happen
        to the US dollar during an economic downturn. It could be argued that
        the dealers in currency will place their speculative bets in favor of
        the US and other countries that have at least some remaining domestic
        oil production. Those countries which import nearly all of their
        energy will likely see their currency fall.

        In addition, the US dollar will most likely be a currency of choice
        for oil exporting countries which have the need of imports to support
        populations expanding at phenomenal rates of around 3%. They also
        will likely want US dollars while they remain in the market for
        weapons systems which are available from the US.

        2. The US use of oil for transportation is indeed profligate. But
        the recent trend toward SUVs and light trucks for personal
        transportation is parallel to the emergence of low fuel efficiency
        1973 automobiles which were large and used low technology emissions
        controls which further depressed fuel economy. But in the years which
        followed the energy crises, affluent buyers quickly turned to smaller
        vehicles. Even as Cadillac rushed a mini-Cadillac into production for
        luxury car buyers, the Volkswagen diesel Rabbit suddenly became a
        status symbol for the affluent who paid premium prices far above the
        "sticker" price for the chance to buy one.

        As production and customer acceptance of more fuel efficient
        automobiles increased, in a short time they rapidly changed the
        overall fleet fuel economy. A similar response would be predictable
        in the next oil crisis. While increased fuel efficiency can be
        counterproductive in the long run, it would have the effect of
        reducing the level of imports in the short run, and certainly in less
        time than alternative energy sources could be put into the mix of
        total energy supplies.

        3. The US has not taxed petroleum use on anything like the scale of
        other nations. While this encouraged consumption in the US, there is
        now the possibility, if not the present political will, to use
        taxation to discourage use.

        It is a great irony that in the countries where oil has been heavily
        taxed while oil was plentiful in the marketplace, the public furor now
        is to reduce the tax so as to favor continued consumption in a tight
        market. So the response to the next oil crisis may produce public
        support in the US for a tax increase which lowers consumption, while
        other countries may be faced with changing tax policies to ones which
        favor consumption.

        4. Political stability in any nation depends to a great extent on the
        availability of cheap food. Cheap food depends on fertilizer
        including nitrogen, and nitrogen depends on energy. In the US, the
        major grain crops are produced using highly efficient direct injection
        of ammonia into the sub soil. In developing nations, the technology
        is to broadcast solid fertilizer.

        You can find studies, by Pimentel for example, that cite the use of
        energy as fertilizer in Asia and developing nations to be much greater
        per unit of food output than it is in the US.

        In the US, while natural gas is rapidly being depleted, it would be
        possible to import it in the form of fertilizer made in other
        countries with natural gas available. Obviously, developing nations
        with inefficient agricultural methods would find it difficult to
        compete in that market.

        Finally, none of what I have said should be taken out of context. I
        am only talking about relative outcomes, and only in the short run of
        a few years while oil production plateaus and prices rise rapidly.
        After that, all bets are off. And even considering the possible
        situation in the US, it is worthwhile to recall that during the
        previous oil crises, there were many disparities. Auto worker and
        industrial unemployment reached levels of 20% or so, even while some
        of the luxury car makers enjoyed record production.

        Dale




        --- In energyresources@egroups.com, "Rechsteiner Rudolf" <info@r...>
        wrote:
        >
        >
        > I would like to express the opinion that the stratfor analysis (Oil,
        > Politics and Power Part II: The Irony of High Prices) is
        > fundamentally flawed and methodologically biased.
        > Saying this the following points should be taken under
        consideration:
        >
        > - the pretended comparative advatage of US economy and some
        > other countries is based on a relative perception of the improvement
        > of the oil consumption/GDP ratio in recent years in the US. (no word
        > on the bad start numbers of US energy consumption!!)
        >
        > The absolute real growth of oil consumption since oil crisis I
        (1974)
        > and oil crisis II (1979) and the much higher level of energy
        > consumption are ignored by stratfor.
        >
        > - It is remarkable that stratfor analysis in its natural gas
        > consumption judgement uses per capita numbers to „proove"
        > that
        > Europeans are worse off because they consume more natural gas. Why
        > this different methodology for oil and gas??? Why should Europeans
        be
        > worse off when they consume less fossil energy than an average
        > American?
        >
        > - Analyzing the energy efficiency Stratfor switches to the
        > relative improvement, hiding the low efficency in countries like
        USA,
        > Canada or Russia that still persist (they are visible in their graf-
        > file).
        >
        > I would like to express a completely contrarian view:
        >
        > It is true that some countries like Argentina or the United Kingdom
        > are well positioned in the coming third oil crisis because they are
        > gas- and/or oil net exporters and they dispose of a formidable
        > potential of renewable energy like wind or hydro or both (Patagonia,
        > North Sea).
        >
        > In general though I believe that countries like USA, Canada or
        > Australia will be most affected by high oil prices, because they
        have
        > a high (fossil) energy consumption and they import more and more of
        > their consumption.
        >
        > One big difference between now and 1973/1979 is that the US are
        > pumped pretty empty by now, im-porting some 56% of total oil
        > consumption (in 1973/79 it was only about 20%). Oil brings a big new
        > drain of dollars to the US that will affect the economy and the
        stock
        > market.
        >
        > I might predict a slump in US car sales and in airplane industries,
        > if the oil price rises more, which seems the case in the short run
        as
        > well as in the long run too.
        >
        > The only viable remaining conventional reserve in the US are coal
        and
        > renewables, but coal is produ-cing greenhouse gases and is not
        usable
        > for cheap traditional automotive transport (cars and planes) and
        > renewables like wind or solar need some time to be developed and
        > there is no comprehensive support strategy for these technologies by
        > the US-government that is comparable in quality to the huge German
        or
        > Japanese programs for wind and solar energy.
        >
        > Additionally it would be stupid to rely more on natural gas in the
        > US, as there is not that much natural gas left in the US. (confer
        > www.oilcrisis.com. Or
        > http://www.eia.doe.gov/oiaf/servicerpt/depletion/pdf/sroiaf(2000)
        > 04.pdf ) On the long run, the Ger-mans (as well as Danish, Dutch,
        > Swedish Spanish and Swiss) know that they have to and want to go out
        > of fossil and nuclear fuels and the growth rates in wind and solar
        > are formidable, as well as for energy efficiency
        >
        > Consider also that it is much too early to judge the long term
        > implications of high oil prices (as the moderator does), because the
        > real high level is only a few months old, and future prices soared
        > only in recent weeks to (for the last 15 years) unprecedented and
        > persisting levels.
        >
        >
        > In general I think that European countries are a lot better off than
        > the US: Energy efficiency is higher, we drive less and better cars
        > and there are nation-wide public transport systems running that can
        > be accelerated quickly.
        > Oil and gas prices in Europe were much higher all the past decades
        > and the relative increase in prices is lower than in the US. This
        > does not mean that Europeans will be unaffected by higher oil
        prices,
        > but there is a lot going on in wind energy and other renewables.
        >
        > The Third world is too heterogenous to be judged in one perspective.
        > Countries like China have a huge potential of wind (some 300 GW at
        > least) and are promoting solar heating in a coherent approach.
        >
        > It is a clear misperception to talk about „energy guzzlers of
        > Asia"
        > as stratfor does. There is no Asian energy guzzler except the former
        > USSR-nations. Japan for example is one of the world leaders in
        energy
        > efficiency and has a solar PV-program running that will bring prices
        > down to 10 US-Cents a kilowatt-hour within the next dozen years.
        >
        > The real and only energy guzzlers in the world are nations like the
        > US who consume some 25% of energy with some 4% of world population.
        >
        > Is this clear misperception by stratfor done for propaganda reasons
        > or what?
        >
        > Rudolf Rechsteiner
        > Ph.D.(economics)
        > lecturer for environmental policy at Basel-university, Switzerland,
        > Congress Member of the Swiss Parlament
        > info@r...
        > www.rechsteiner-basel.ch
        >
      • S. Morningthunder
        From: Htoeco@aol.com In 1972-73 when oil prices jumped from $.50/barrel to $34/barrel, the U.S. emergy/money ratio was 7 trillion solaremjoules per dollar and
        Message 3 of 5 , Sep 1, 2000
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          From: Htoeco@...

          In 1972-73 when oil prices jumped from $.50/barrel to $34/barrel,
          the U.S. emergy/money ratio was 7 trillion solaremjoules per
          dollar and half? of the US fuel was overseas oil. Now the
          U.S.emergy/money ratio is about 1.0 trillion solar emjoules per
          dollar and a fourth? of the US fuels are from overseas oil. If
          this is correct, to have as much effect on the US economy as in
          1973, the oil price will have to increase 14 times the present.

          First, my records show Net Imported Crude and Products as a % of total
          U.S. demand to have been 27.7% in 1972, 34.8% in 1973, 46.5% in 1977,
          and 51.3% in 1999, the latter being surpassed only by this year in
          progress; Imported Refiner Acquisition nominal Cost of $3.55 in 1972,
          $4.08 in 1973, and $37.05 in 1981, per barrel of oil.

          Secondly, final demand is likely to be controlled by the price
          presented to that most famous of all creatures, the consumer, who
          directly uses the lion's share of petroleum products. That means that
          one could suspect a constant $ price for refined products equal to
          that experienced at the Oil Crisis II high, would similarly coincide
          with a recessionary effect upon the economy, even if causality cannot
          be proven. Although there is some leeway due to higher real Disposable
          Incomes, such a historically based constant $ price for gasoline would
          currently be about $2.54 a gallon. Assuming gasoline to now average
          about $1.54 per gallon, a $42 increase per barrel of oil should,
          ceteris paribus, result in the requisite $1.00 increase per gallon of
          gasoline.

          (14 times the present: 13*$33=$429; $429/42=$10.21; $10.21 + the
          present $1.54= $11.75 per gal. gasoline. The ability of the
          U.S. economy to integrally adjust to such a stratospheric price would
          be inverse to the rapidity of its unfolding: if the price change were
          not to be again inflated away and reversed by feverish drilling, the
          result, in any case, would be a very different economic animal.)

          [ I am still hoping to find a way to have my emergy calculations for
          the Southern Arizona golf curse area checked for correctness and
          methodology, with intent to put the learning process itself on the
          web... ]

          --
          A perfect path of the Truth has come into being for our Journey to the
          other shore beyond the darkness.

          -- Rig Veda 1.46.11

          Steve Morningthunder

          mthunder@...
          mthunder@...
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