Energy Sector Trends Paint "A Very Alarming Picture"

[FRED]

http://www.itulip.com/images/200oil.gif
Energy Sector Trends Paint "A Very Alarming Picture"

Oil could reach as high as $200 by the third or fourth quarters of this year

by Joseph Dancy, LSGI Venture Fund (http://lsgifund.com/), Adjunct Professor of Energy Law, SMU School of Law

While energy demand may be tempered by a slowdown in global economic growth, longer term growing energy demands and supply constraints will continue to present incredible challenges. Much more capital will need to be allocated to the sector to address supply issues, which should create opportunities for investors. We noted the following developments in the energy sector last month:
The concept of 'peak oil' has been derided by the big oil companies for years, but last week the chief executive of the oil giant Royal Dutch Shell, Jeroen van der Veer, released a study forecasting the end of easy oil. Dr. Jim Buckee, retired president and chief executive of major independent Talisman Energy, claims he was not surprised that Royal Dutch Shell admitted oil supplies were getting tighter. Dr. Buckee says 'peak oil' is either here, or very close. "It is the underlying decline of the world's major fields that is the dominant driving factor here," he said."If you think that at the moment the world is consuming 30-plus billion barrels a year of oil and is finding seven or eight billion barrels a year, and this state of affairs has been going on now for 20 or more years. . . It's obviously unsustainable and the world is increasingly drawing on the bigger, older fields. You couple that notion with the irreversibility of decline and you've got a very alarming picture."
Dr. Buckee says the cost of a barrel of oil could reach as high as $200 by the third or fourth quarters of this year, and that prices would have to get that high before it would have any particular impact on demand. "I don't think that really we've seen any rationing of consumption by price," he said. Source: (ABC Premium News (Australia))
http://www.itulip.com/images/OilPrice.gif
Oil at $100 a barrel gives exporters an incentive to pump more, but their difficulty in doing so indicates the world is struggling to sustain production. A growing number of leading industry figures, including the CEO’s of Total and ConocoPhillips, now question mainstream forecasts for supply. They suggest the era of "plateau oil" is nearer than many in the business have admitted.Some argue it may not be possible to boost flows beyond the current rate of 86 million barrels per day (bpd). Conventional supply from non-OPEC producers have missed forecasts in recent years and appear for now to have hit an "effective plateau", according to the International Energy Agency (IEA), adviser to industrialized countries. (Reuters)

Global demand for oil is likely to grow by about 1.4 million barrels a day in 2008 according to forecasts by Lehman Brothers. Current global demand is roughly 86 million barrels per day. Some experts predict lower economic growth will reduce demand. Lawrence J. Goldstein, an economist at the Energy Policy Research Foundation, expects global demand to grow by less than a million barrels a day in 2008 due to slowing economic growth. (New York Times)
Nigeria has warned energy companies it wants to renegotiate oil and gas exploration and production contracts covering offshore oilfields in the next three months, claiming record prices are yielding a windfall to Western oil firms operating in that region. It is the first time Nigeria has come up with a timeframe for renegotiating the complex agreements. The government signaled late last year it would review the contracts in an effort to secure a greater share of profits from offshore production.The Nigerian move reinforces a global trend of oil-exporting countries demanding better concession terms to reflect surging prices. Oil executives say the government's decision to follow the example of countries such as Russia, Algeria and Venezuela. Militant violence in Nigeria has shut in a fifth of output since 2006. (Financial Times)

Royal Dutch Shell, the largest foreign company in the strife-torn Niger River Delta, said it would take a $716 million charge against earnings due to the deteriorating security situation. Industry sources say that in addition to the production shutdown about 435 miles of pipeline and thousands of barrels a day of crude oil and condensates have been stolen. Much of the pipeline has been used for pillars in house construction. Nigeria's government is also not paying its share of joint-venture investments in the Shell venture, claiming it cannot fund its portion. Nigeria has budgeted only $5 billion of the $9 billion it was supposed to invest in the Shell operated project in 2008.

Nigeria is one of the major OPEC exporters of light, sweet crude oil, so any disruptions in supply will quickly impact world markets. (Washington Post, BusinessWeek)

With oil markets booming Gulf states will enjoy a staggering, unprecedented increase in wealth over the next decade that will give them vast financial power across the globe. By one estimate, the five oil-and-gas-exporting nations – Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Oman, with a combined population of 23 million citizens – will add $6.2-trillion (U.S.) to their revenues over the next 14 years. That's roughly the equivalent of adding Canada's total annual output to their revenues every two years. Those estimates assume oil prices of $70 per barrel. The producer’s revenues would increase at higher average selling prices.
The International Energy Agency (IEA), a state-backed oil watchdog for industrialized countries, attributed recent record oil prices to pressures caused by strong demand and falling stock levels. In its monthly oil market report for January, the IEA forecast demand in 2008 of 87.8 million barrels per day (bpd), an increase of 2.3 percent, or 2 million bpd from 2007 levels. (AFP)
Average gasoline demand last month was 7 percent higher compared to the same week last year, even with prices 30% higher, according to a MasterCard report.http://www.itulip.com/images/EnergyTable.gifChina is set to become the world's largest consumer of energy by about 2010 according to a study by the International Energy Agency (IEA). The World Energy Outlook report predicts that China will overtake the US in its energy use.The Chinese economy has expanded by 11.4% over the past year, reaching its fastest growth rate in 13 years. The Chinese economy is very energy inefficient. It takes more than four times as much energy to generate a unit of GNP in China than in does in the U.S. according to a recent study published by Gordon Feller (chart at right).

China's crude oil imports rose 12.4 percent in 2007 to a new record. Crude oil imports for 2006 increased 16.9 percent from the previous year. (Xinhua)
China is facing widespread, temporary electric power shortages that could affect global energy markets if they aren't resolved soon. The distribution system is having trouble keeping up with the country's rising demand for electricity. Regulators said yesterday that 13 provinces and major regions, including the industrial-and-export hub of Guangdong in the south, will experience a total shortfall of about 70 gigawatts of electricity - one-tenth of China's total. Coal stockpiles have fallen to less than half typical levels, analysts said. (Wall Street Journal)http://www.itulip.com/images/chinacoal.gifChina’s Prime Minister Wen Jiabao responded to growing public anxiety about inflation by announcing that China would freeze energy prices in the near term, even as international crude oil futures have continued to surge. Inflation has hit an 11-year high in China.
Crude oil production in Mexico's huge Cantarell oil field will continue to decline this year at around the same pace as in 2007, Pemex announced. Average daily production at Cantarell is forecast to drop by 200,000 barrels in 2008, increasing pressure on the state-owned oil monopoly to ramp up output at smaller oil fields.The decrease in production would be a drop of 16 percent from Cantarell's December 2007 output of 1.26 million barrels per day (bpd), its lowest level of the year. Yields at Cantarell declined 16 percent during 2007, slightly more than forecast. Pemex aims to keep its total crude output at around 3.1 million bpd by increasing production at other fields. Total Mexican output in 2007 declined by 5.3 percent. (Reuters)

The Energy Information Administration reported a record-high 274 Bcf natural gas draw from storage for the week ended January 25th. The five-year average draw is 185 Bcf. The draw from storage surpassed the previous record-high withdrawal of 260 Bcf (in January 1997) and comes on the back of powerful heating degree days that were 21% above normal.Low nuclear utilization is one reason for the strong incremental gas demand. Imports from Canada are also lagging. For the month the draw was 659 Bcf compared to a five year average draw of 580 Bcf. Working gas in storage now totals 4% above the five-year average and 13% below last year’s levels.

http://www.itulip.com/images/natgas.gifDepending on the weather the next couple of months the volumetric draw from storage could be the largest we have ever seen. The chart at right from AmericanOilman.com tells the story. From a five year high (blue line) in week 49 of 2007 we have fallen quickly (yellow line) in 2008.

If trends continue we will need to inject much more natural gas into storage this spring and summer than we did in 2007, which should help keep prices firm.

Before 2010, the price for a thousand cubic feet of natural gas will be $10 per thousand cubic feet, T. Boone Pickens predicted at a presentation last month. Crude oil prices will reach $100 a barrel again before the end of 2008. "We are importing 62 percent of our oil now, and the two largest producers are Saudi Arabia and Russia,” Pickens said. "And the two largest consumers of oil are ourselves and China. . . We have kind of got ourselves in a bit of a spot that is going to get even more uncomfortable.” (NewsOK.com)
http://www.itulip.com/images/liquidfuels.gifThe latest production figures published on theOilDrum.com website indicate that liquids production has jumped upward the last few months after more than two years of flat production. ‘Liquids’ includes both crude oil and natural gas liquids. Data is from the Energy Information Administration (red line) and the International Energy Agency (blue line), both credible sources.If 2008 global demand forecasts of nearly 88 million barrels per day are correct, even the spike in production will not meet the growing demand. In that case demand would have to be met by draw-downs in inventories. Or supplies would need to be rationed by higher prices.

While OPEC decided against expanding output in a meeting last month, some oil traders say that OPEC members such as Saudi Arabia, United Arab Emirates and Angola have allegedly added around one million barrels a day to world supply since early last fall. If so, this spare capacity will assist in meeting growing demand and natural resource depletion rates inherent in many of the older fields. (Wall Street Journal)We think the supply and demand trends in the energy sector are long term issues, and that they present very attractive opportunities for investors.

Joseph Dancy
LSGI Venture Fund (http://lsgifund.com/)
Adjunct Professor of Energy Law, SMU School of Law
February 23, 2008

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[jk]

kudos to lukester for his interest and perseverance in making the above post not-so-much news but confirmation.

[Lukester]

OIL PRICES WILL CRASH DOWN TO $40 A BARREL. IT'S JUST A MATTER OF TIME! WHY? ... BECAUSE, WE'LL HAVE A GLOBAL DEFLATIONARY VORTEX OF CATACLYSMIC PROPORTIONS. ELLIOTT WAVE HAS ACCURATELY FORECAST IT (FOR A FULL DECADE)!!! PRECHTER KNOWS HOW TO ASTUTELY READ THE SOCIONOMIC MOOD! [TM]. WHEN YOU CAN READ THE SOCIONOMIC MOOD, EVERYTHING IS REVEALED AS PLAIN AS DAY!

YOU MUST INSTEAD BEWARE OF DA 'FLATION! (A unique patented EWI product - which changes meaning, in smooth and uninterrupted fashion, with each season - neat!)

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[Rajiv]

I hope that was posted in a fit of sarcasm! ;)

[jimmygu3]

http://www.elliottwave.com/images/the/web_ads/2807_AS_Theorist.jpg

Lukester (a.k.a. Robert R. Prechter Jr.),

Your cover's blown! All further references to elliottwave.com will now be redirected to VancouverGoinUp.com, as per iTulip's one-strike spamming policy.

[Lukester]

Ah, c'mon Rajiv. I was just getting warmed up for my "Elliott Wave Vaudeville" routine, and you have to puncture the mood?

You know as well as I do that "Socionomics" is a very delicate construct. It does not react well to skepticism and it really wilts under critique! The only way people are going to "get Socionomics" and the imminent plunge of all inflationary signals is if we permit the general suspension of disbelief here.

The problem is, iTulip readers like you are far too JAUNDICED and CYNICAL in your general outlook to grasp the subtelties Prechter is (droning) on about.

[Lukester]

Lukester (a.k.a. Robert R. Prechter Jr.),

Your cover's blown! All further references to elliottwave.com will now be redirected to VancouverGoinUp.com, as per iTulip's one-strike spamming policy.


AAARRGGHH!! BWAAAAA!! :o :o :o

[FRED]

AAARRGGHH!! BWAAAAA!! :o :o :o

Seriously, what happens to other commodity prices if oil goes to $200?

Back in Sept. 2005 the folks over at Resource Investor made the following gold price forecast (http://www.resourceinvestor.com/pebble.asp?relid=12626) if oil went to $100:

"Looking ahead to a possible $100/bbl spike, the “new era” ratio of 8.72bbl/oz would imply a gold price of $872/oz. At the long-term average, $100/bbl implies a gold price of $1,744/oz."

The historical relationship between the gold and oil price, as both are correlated to the money supply and dollar exchange rate value, have not held at least so far. If the ratio reverts to the mean, we can expect gold prices of $3,500 or higher if oil goes to $200.

Joe Dancy has sent us another article that we will print this coming week titled "Experts: Global Food Shortages Could ‘Continue for Decades’ " that suggests that, as Jim Rogers has been telling us for years, the real money is to be made in agricultural commodities. He says, for example:
From 1961 to 1970, the price of crude oil was static at about $1.80 per barrel. Based on the quality of wheat produced in Saskatchewan during that 10-year period, average price received by farmers was $1.58 a bushel.

A barrel of oil and a bushel of wheat were about the same value back in the 1960’s. Today wheat might surpass $8 a bushel for this crop year, but a barrel of oil sells for around $90. A bushel of wheat has gone from being on par with a barrel of oil to being worth less than a tenth as much. (Star Phoenix (Canada))

[Lukester]

... Seriously, what happens to other commodity prices if oil goes to $200?

Hey! That's MY HOBBYHORSE you just climbed onto!

Seriously Fred - this is the single issue I've been nagging on about for a year now. If this is the inevitable path of oil prices, a whole host of investment ideas pop up - appearing in a whole new light today all over again, in terms of valuation underpinnings. As you note, compared to the oil price itself, these other commodity inflation proxies start to look very attractively priced all over again today, despite their seven year run-up. Petroleum's projected future price trajectory shifts the valuation of everything requiring energy to produce in the next five years - sharply upwards.

I'm curious also to read iTulip analysis of how a constantly ramping oil price may have large implications for inflation bias upon global monetary aggregates. This is the area, global commodities in a screaming uptrend, where Elliott Wave's host of "gurus" begin to appear like real dolts. Genuine resource depletion in the early 21st Century, vs. exponential population and GDP growth explosions in half the world. Prechter must be smoking crack not to understand how it shifts the entire inflation > deflation debate.

Armed with a high degree of certainty about the future price of oil, Roger's RICI fund, or agricultural soft commodities, or Gold and Silver, or the future cost of mining all raw materials - these all start to appear as still cheap. If the cyclical paradigm of oil prices is plausibly really broken this time around (until we roll out a new energy source worldwide, which is a massive logistical undertaking - e.g. 50 trillion dollars to re-tool the world!), this shines a spotlight on all the lagging commodities which are linked historically to oil prices.

I've been waiting for iTulip to start parsing the implications of this for a long time! This BTW is why I would be skeptical of the slightest dimming of Russian power in upcoming years. I think countries like Russia and Canada / Australia will go from strength to strength. Canadians will definitely be "looking down their noses" at us poor Americans in another 20 years. Fancy that! Scorn and condescension, from our Canadian cousins (after all we've done for them over the years!)! :eek:


270

(future Canadian Natural Resource Czars, expressing scorn and
condescension, while looking southwards)
__________________________________________________

[Chris]

Joe Dancy has sent us another article that we will print this coming week titled "Experts: Global Food Shortages Could ‘Continue for Decades’ " that suggests that, as Jim Rogers has been telling us for years, the real money is to be made in agricultural commodities.

Fred, i don't want to be seen to be stealing ITulip's thunder but the Dancy article was published here at FinancialSense recently.

http://www.financialsense.com/fsu/editorials/dancy/2008/0222.html

[jk]

All further references to elliottwave.com will now be redirected to VancouverGoinUp.com....
i literally laughed out loud. thanks for that:D.

more seriously, i think we have to careful about deductions like "once upon a time a bushel of wheat cost the same as a barrel of oil, so therefore...." while oil seems to be getting harder to come by, agriculture has had a revolution in fertility, powered in part by hydrocarbon based fertilizers, i know, but more recently also by genetic modification. another key input into food is water! china has a very low availability of fresh water per capita compared to other countries, so grain exports to china are also implicit water exports to china. let's be careful about conclusions based on simple historical relationships; we must understand what forces underlie these historical relationships to see to what extent they still apply.

[zoog]

Seriously, what happens to other commodity prices if oil goes to $200?

Back in Sept. 2005 the folks over at Resource Investor made the following gold price forecast (http://www.resourceinvestor.com/pebble.asp?relid=12626) if oil went to $100:

"Looking ahead to a possible $100/bbl spike, the “new era” ratio of 8.72bbl/oz would imply a gold price of $872/oz. At the long-term average, $100/bbl implies a gold price of $1,744/oz."

The historical relationship between the gold and oil price, as both are correlated to the money supply and dollar exchange rate value, have not held at least so far. If the ratio reverts to the mean, we can expect gold prices of $3,500 or higher if oil goes to $200.

Joe Dancy has sent us another article that we will print this coming week titled "Experts: Global Food Shortages Could ‘Continue for Decades’ " that suggests that, as Jim Rogers has been telling us for years, the real money is to be made in agricultural commodities. ...

Happened across this (http://www.greenfaucet.com/commodities/the-hierarchy-of-agriculture) yesterday:

...It is also important to stress that not all agricultural stock groups are the same. In fact, there exists a hierarchy of order in which investors should be aware of when placing funds into this sector.

The order goes like this; fertilizer producers first, seed and crop growers second and then machinery builders hold a tertiary position. As stated earlier, food producers do not count as having exposure to rising agricultural prices as they clearly show a negative correlation due to higher input costs....Personally, I'd be more inclined to buy into Rogers agricultural commodities index via RJA, but it's interesting to see the hierarchy of recent returns for companies involved in different parts of the process (click the link for more on that). It surprises me a little that the fertilizer producers have been so profitable, considering that petroleum is such a major component of fertilizers and so their costs must be increasing. Apparently they have been more successful at passing those costs on to food producers than the food companies have been passing on again to consumers.

[EJ]

Happened across this (http://www.greenfaucet.com/commodities/the-hierarchy-of-agriculture) yesterday:

Personally, I'd be more inclined to buy into Rogers agricultural commodities index via RJA, but it's interesting to see the hierarchy of recent returns for companies involved in different parts of the process (click the link for more on that). It surprises me a little that the fertilizer producers have been so profitable, considering that petroleum is such a major component of fertilizers and so their costs must be increasing. Apparently they have been more successful at passing those costs on to food producers than the food companies have been passing on again to consumers.

Speaking of passing on costs, wine drinkers in the US can expect large price hikes in March and April for European imports. How much? If you like premium Champagne, for example, and are paying $45 today you can expect to pay the range of $60 shortly.

[metalman]

Speaking of passing on costs, wine drinkers in the US can expect large price hikes in March and April for European imports. How much? If you like premium Champagne, for example, and are paying $45 today you can expect to pay the range of $60 shortly.

shit! tomorrow i sell an oz of gold to buy cases of taittinger and moet!

[Jay]

One thing I can't quite understand is why the Bush presidency would add to inflationary pressures on the price of agricultural commodities with their biofuel subsidies. Are these subsidies just a simple political sop to corn belt politicians and their constituents?

That seems too narrow a view to be the whole answer to me. I keep asking, what else would they have to gain with these policies? Especially if they know that dollar deflation policies would put a ton of pressure on them politically anyway because of their inherent inflationary effects on commodity prices. It's a double whammy that makes no sense.

Tinfoil hat theories anyone? I keep coming up with the fact that they must WANT commodity prices to soar but why? To take more money from the lower classes around the globe including the US where food costs make up a significant portion of income? To put political pressure on countries that are worried that their people might revolt due to the high prices? Can't you see some countries in private begging the US to reverse their biofuel subsidies for these reasons?

But hey, I really don't know squat when it comes down to it and am just barely trying to hang on with most of the conversations here, so someone sort this out for me please.

[metalman]

One thing I can't quite understand is why the Bush presidency would add to inflationary pressures on the price of agricultural commodities with their biofuel subsidies. Are these subsidies just a simple political sop to corn belt politicians and their constituents?

That seems too narrow a view to be the whole answer to me. I keep asking, what else would they have to gain with these policies? Especially if they know that dollar deflation policies would put a ton of pressure on them politically anyway because of their inherent inflationary effects on commodity prices. It's a double whammy that makes no sense.

Tinfoil hat theories anyone? I keep coming up with the fact that they must WANT commodity prices to soar but why? To take more money from the lower classes around the globe including the US where food costs make up a significant portion of income? To put political pressure on countries that are worried that their people might revolt due to the high prices? Can't you see some countries in private begging the US to reverse their biofuel subsidies for these reasons?

But hey, I really don't know squat when it comes down to it and am just barely trying to hang on with most of the conversations here, so someone sort this out for me please.

total mystery to me. every pol that tries to take it on loses...

“Mr. President, enough is enough. The American taxpayers have subsidized the ethanol industry, with guaranteed loans and tax credits, for more than 20 years. Since 1980, government subsidies for ethanol have totaled more than $10 billion. The Finance Committee amendment to ISTEA, if not stricken, would give another $3.2 billion in tax breaks to ethanol producers.

“Current law provides tax credits for ethanol producers which are estimated to cost the Treasury $770 million a year in lost revenue, and the Congressional Research Service estimates that loss may increase to $1 billion by the year 2000. These huge tax credits effectively increase the tax burden on other businesses and individual taxpayers.

“…the Department of Energy has provided statistics showing that it takes more energy to produce a gallon of ethanol than the amount of energy that gallon of ethanol contains.

“Finally, let me quote Stephen Moore, of the CATO Institute, who puts it very succinctly in a recent paper: ‘...[V]irtually every independent assessment--by the U.S. Department of Agriculture, the General Accounting Office, the Congressional Budget Office, NBC News and several academic journals--has concluded that ethanol subsidies have been a costly boondoggle with almost no public benefit.’

“So why do we continue to subsidize the ethanol industry? I think James Bovard of the CATO Institute put it best in a 1995 policy paper: ‘...[O]ne would be hard-pressed to find another industry as artificially sustained as the ethanol industry. The economics of ethanol are such that, for the industry to survive at all, massive trade protection, tax loopholes, contrived mandates for use, and production subsidies are vitally necessary.’”

guess who? Statement of Senator John McCain on Amendment to Prohibit Extension of Ethanol Subsidies Mar 11, 1998! (http://www.itulip.com/energyandmoney.htm)

[jk]

re: why the bush administration would support ethanol.

my only thought is that both bush and cheney come out of the oil industry. ethanol scores points for corn-belt republicans, fakes points for "energy security," and does nothing to threaten the power of the oil industry.

further, it creates a fake ethanol industry for wall st. to capitalize, and i don't think there are any tears shed in the white house over driving up the cost of food. food, btw, is a relatively small part of the american budget [8.5%], but about 35% of the chinese household budget, so no harm there either from w's perspective.

[metalman]

Fred, i don't want to be seen to be stealing ITulip's thunder but the Dancy article was published here at FinancialSense recently.

http://www.financialsense.com/fsu/editorials/dancy/2008/0222.html

looks like yesterday. why didn't they publish it will all the charts?

[Jim Nickerson]

One thing I can't quite understand is why the Bush presidency would add to inflationary pressures on the price of agricultural commodities with their biofuel subsidies. Are these subsidies just a simple political sop to corn belt politicians and their constituents?

That seems too narrow a view to be the whole answer to me. I keep asking, what else would they have to gain with these policies? Especially if they know that dollar deflation policies would put a ton of pressure on them politically anyway because of their inherent inflationary effects on commodity prices. It's a double whammy that makes no sense.

Tinfoil hat theories anyone? I keep coming up with the fact that they must WANT commodity prices to soar but why? To take more money from the lower classes around the globe including the US where food costs make up a significant portion of income? To put political pressure on countries that are worried that their people might revolt due to the high prices? Can't you see some countries in private begging the US to reverse their biofuel subsidies for these reasons?

But hey, I really don't know squat when it comes down to it and am just barely trying to hang on with most of the conversations here, so someone sort this out for me please.


I believe if one looks at all the problems of the world and had to come up with one solution it would be population control, something which I am sure someone, somewhere is talking or writing about but not in the MSM, or in the Catholic domain, or in the anti-abortion crowd or any place where life is "precious" unless you are born without a possible pot to pee in, and without possible water to drink, or food to eat, or schools for education, or industry for employment.

A sure way to wipe out a few millions (I really have no idea the number) is to starve them to death. If that isn't the plan, in view of everything else failing to control population (mainly men keeping their dicks in their loin cloths, pants, or whatever the robe,) in my opinion it should be the plan.

[zmas28]

If agricultural commodities are in the early phases of a rally as suggested by one of the articles, it'll be interesting to see how the biofuels debate proceeds in regards to economic viability as well as political viability.

[Verrocchio]

A sure way to wipe out a few millions (I really have no idea the number) is to starve them to death. If that isn't the plan, in view of everything else failing to control population (mainly men keeping their dicks in their loin cloths, pants, or whatever the robe,) in my opinion it should be the plan.

Jim, I respect your opinion on most topics, but your opinion is that a few million should be starved to death? Surely there must be an alternative that you would consider.

[Jim Nickerson]

Jim, I respect your opinion on most topics, but your opinion is that a few million should be starved to death? Surely there must be an alternative that you would consider.

Verrochio, you have no burden socially or civilly to respect anything I write and no hard feelings here; however, you chose to offer no argument that a single solution to more of the world's problems than anything else so far offered up is population control.

I would consider education, birth-control, government sterilization, pleading with everyone on the planet to stop popping out kids, and I imagine all those things have been tried multitudinous times and failed and will continue to fail because people had rather screw rather than stopping and thinking about the consequences. So when push comes to shove in a few more generations the only thing that is going to stop population growth is unchecked disease: AIDS, ebola, bird-flu, MRSA, nuclear war, multiple natural disasters, or starvation-- the last which may be a common part of any of several of above.

So being extremely cynical about government, it truly would not surprise me if the Bible-beaters in office are using the back door approach of using edible grains for fuel with the notion of fuck that part of the world that needs to eat. We need fuel and economic growth, screw those who are producing populations that exceed the countries' abilities to feed, water, educate, employ or care for regarding health--which prolonging life with health care also defeats the purpose of population control.

At some point the population of the planet must be controlled. Edit: If populations won't do it themselves, then surely forcing starvation upon them or allowing it to happen on top of all the other blights with which the poor of the world have to contend will work toward solving the problem.

[GRG55]

One thing I can't quite understand is why the Bush presidency would add to inflationary pressures on the price of agricultural commodities with their biofuel subsidies. Are these subsidies just a simple political sop to corn belt politicians and their constituents?...

On the one hand I keep reading on iTulip (from the community, not EJ) and elsewhere "woe is us, the USA doesn't make anything that the world needs any more".

But in fact the US government/taxpayers have been subsidizing the feeding of much of the rest of the world for decades. The value of US agricultural exports is now rising (as is the value of quite a few other exports that originate in the US) in part to compensate for the falling US$, and in part because of perceived, if not real, scarcity.

At a time when the USA needs to keep attracting foreign capital to fund the current account, rising agricultural prices are a "boon" (apologies to Hillary). Whether the Bush Administration was "deliberate" in engineering this outcome is debatable.

For the first time in my recollection the United Nations World Food Program is running televsion ads on European television (are you seeing those in North America also?). For decades the UN WFP had the benefit of massive amounts of food contributions from the USA as the government sought to eliminate one (taxpayer subsidized) surplus after another, before the next crop season started. No more. The WFP, and the people it seeks to help, now have a very big problem (Maybe the Zimbabwe representative on the WFP executive has some good ideas? :rolleyes: ).

I'll conclude with what I have pointed out before...while the media and the economic impact of the credit crunch continues to keep the spotlight on the levered parts of the economy (Wall St, financials, homebuilders, mortgage mongers, consumer discretionary like cars, etc.) some important parts of the US economy, that have been ignored for a quarter century, are doing just fine. Contrary to popular opinion the US still makes some things the world needs and wants (and in the case of agriculture the USA no longer has to give the stuff away). These areas, IMO, are not a bad place to go looking for good investment ideas.

EDIT ADDED LATER: That last paragraph sounds distinctly Kudlowish. Yikes!!

[c1ue]

I see you're all coming over to the Dark Side *vaudevillian sneer*

I pointed out a long time ago that all things being equal, and whether or not it is deliberate, that the biofuel effort only benefits the US by both increasing the value of US agricultural exports and reducing imported oil dependence.

To this I'll add that the biofuels also do not themselves reduce overall oil demand.

That millions will starve in the poorer parts of the world - is irrelevant from a geopolitical perspective.

[GRG55]

I see you're all coming over to the Dark Side *vaudevillian sneer*

I pointed out a long time ago that all things being equal, and whether or not it is deliberate, that the biofuel effort only benefits the US by both increasing the value of US agricultural exports and reducing imported oil dependence.

To this I'll add that the biofuels also do not themselves reduce overall oil demand.

That millions will starve in the poorer parts of the world - is irrelevant from a geopolitical perspective.

Not sure we will see "starvation" in France, but if these cheese price increases continue we'll see something happen. Perhaps tractors blocking the motorways? Or the TGV train drivers on strike yet again?

If this excerpt, referencing cake, is any indication perhaps another glorious revolution: ..."Distributors and manufacturers are carving up the cake between themselves to the detriment of consumers..."

Trust the French to lose their heads over a wee bit of food inflation, eh...

Commodities Boom Sends French Food Prices RocketingMon Feb 25, 2008 8:06pm GMTPARIS (Reuters) - Prices of grain and milk-based food products have surged in France in recent months due to booming commodities prices, a French consumer group said in a report.A monitoring of over 1,000 products between the end of November and early January in five supermarkets showed that yoghurt, milk and pasta had most suffered from the surge in many agricultural commodities that started last year."They're not rising, they've caught fire," monthly 60 Millions de Consommateurs said in its March report, circulated ahead of publication on Tuesday."Everywhere since the start of the year, spaghetti, yoghurt, camembert cheeses, have seen staggering rises in prices," it said, stressing that the surge had hit all types of products, famous brands as well as supermarket own-brands.Two hundred products saw a rise of more than 10 percent over six weeks, with the packs of spaghetti reviewed rising between 31 and 45 percent, plain yoghurts between 17 and 40 pct and bottled milk between 20 and 37 pct.Prices of agriculture products have surged across the board this year, hitting everything from cereals to milk and meat. Some economists have labeled the rise "agflation," attributing it to tight stocks and surging demand from emerging countries."The rise in milk and durum wheat prices is indisputable. It is an excellent pretext...to boost prices," the magazine says.French Secretary of State for Consumer Affairs Luc Chatel said the surge in global farm commodities could explain dearer food prices but added it was too often used as an alibi to pass on "totally unjustified" rises."Distributors and manufacturers are carving up the cake between themselves to the detriment of consumers," he told France 3 televisionFrench inflation rose to its highest annual level in at least 11 years in January, reinforcing public concern about rising living costs that have damaged President Nicolas Sarkozy's popularity.Prices paid by consumers in the euro zone's second biggest economy were flat month on month but rose 3.2 percent from a year earlier on an EU harmonised basis, driven by surging energy and food prices, statistics office INSEE said last week.(Reporting by Sybille de La Hamaide, Editing by Peter Blackburn)
http://uk.reuters.com/article/consumerproducts-SP/idUKL2552499120080225

[metalman]

Not sure we will see "starvation" in France, but if these cheese price increases continue we'll see something happen. Perhaps tractors blocking the motorways? Or the TGV train drivers on strike yet again?

If this excerpt, referencing cake, is any indication perhaps another glorious revolution: ..."Distributors and manufacturers are carving up the cake between themselves to the detriment of consumers..."

Trust the French to lose their heads over a wee bit of food inflation, eh...Commodities Boom Sends French Food Prices RocketingMon Feb 25, 2008 8:06pm GMTPARIS (Reuters) - Prices of grain and milk-based food products have surged in France in recent months due to booming commodities prices, a French consumer group said in a report.A monitoring of over 1,000 products between the end of November and early January in five supermarkets showed that yoghurt, milk and pasta had most suffered from the surge in many agricultural commodities that started last year."They're not rising, they've caught fire," monthly 60 Millions de Consommateurs said in its March report, circulated ahead of publication on Tuesday."Everywhere since the start of the year, spaghetti, yoghurt, camembert cheeses, have seen staggering rises in prices," it said, stressing that the surge had hit all types of products, famous brands as well as supermarket own-brands.Two hundred products saw a rise of more than 10 percent over six weeks, with the packs of spaghetti reviewed rising between 31 and 45 percent, plain yoghurts between 17 and 40 pct and bottled milk between 20 and 37 pct.Prices of agriculture products have surged across the board this year, hitting everything from cereals to milk and meat. Some economists have labeled the rise "agflation," attributing it to tight stocks and surging demand from emerging countries."The rise in milk and durum wheat prices is indisputable. It is an excellent pretext...to boost prices," the magazine says.French Secretary of State for Consumer Affairs Luc Chatel said the surge in global farm commodities could explain dearer food prices but added it was too often used as an alibi to pass on "totally unjustified" rises."Distributors and manufacturers are carving up the cake between themselves to the detriment of consumers," he told France 3 televisionFrench inflation rose to its highest annual level in at least 11 years in January, reinforcing public concern about rising living costs that have damaged President Nicolas Sarkozy's popularity.Prices paid by consumers in the euro zone's second biggest economy were flat month on month but rose 3.2 percent from a year earlier on an EU harmonised basis, driven by surging energy and food prices, statistics office INSEE said last week.(Reporting by Sybille de La Hamaide, Editing by Peter Blackburn)
http://uk.reuters.com/article/consumerproducts-SP/idUKL2552499120080225


good thing we don't have that problem here.
Governor Frederic S. Mishkin to the rescue! (http://www.federalreserve.gov/newsevents/speech/FEB22F7FF19A4DAC8BAC77C755F96DFD.htm)

"We might worry that, under some circumstances, the objectives of stabilizing inflation and economic activity could conflict, particularly in the short run. However, economic research over the past three decades suggests that such conflicts may not, in fact, be that serious. Indeed, stabilizing inflation and stabilizing economic activity are mutually reinforcing not only in the long run, but in the short run as well. In my remarks today, I would like to outline how economic researchers came to that conclusion, and in so doing, explain why it is so important to achieve and maintain price stability."

Does Stabilizing Inflation Contribute to Stabilizing Economic Activity? February 25, 2008

if it's so important to achieve and maintain price stability then why don't they do it?

this is one of those whistling past the graveyard speeches fed goofballs spew from time to time.

might this per chance be one of those times when it "appears" that "the objectives of stabilizing inflation and economic activity could conflict"? but it's not true! it just looks that way!

how about "anything we do to tame inflation crashes the banking system and economy and anything we do to save the banking system and economy pours gasoline on the inflation fire".

that'd be honest. but i will not hold my breath waiting for that speech.

[Nicolasd]

270

(future Canadian Natural Resource Czars, expressing scorn and
condescension, while looking southwards)

__________________________________________________



Hey Lukester ,you need to refresh my memory a little bit here about the so many good things US has done for Canada over they Years ??
Exporting french fries and hamburgers does not qualify :p
(Nor does the strong "invitation" to visit Irak.)

While on the subject of agriculture , perhaps a little shortage of food would do some good for the US overweigth population while decreasing the stress and demand on the underfinanced health care system ? :)

More seriously , during a global logistics meeting last month , my headquarter colleagues (based in Finland) have now declared the US as a LCC (Low Cost Country) to source manufactured goods as a viable alternative to China and Estonia where the trouble to reach acceptable quality levels for onecies or twocies type of production run does not warrant the trouble .:eek:

Looks like Scandinavia is ahead of Canada in some aspects !!!

[Verrocchio]

I would consider education, birth-control, government sterilization, pleading with everyone on the planet to stop popping out kids, and I imagine all those things have been tried multitudinous times and failed and will continue to fail because people had rather screw rather than stopping and thinking about the consequences.

Those are good alternatives to deliberately starving people, and I agree that even best efforts may only delay the same outcome for many: death by starvation or the same accompanied by disease. After the interminable delays caused by human ingenuity and exploitation of irreplaceable fossil fuels, Malthus may be shown to be correct. There is a finite limit to the earth's capacity to support human life. Still, there's a world of moral difference between acting to cause death (that's murder) and death that occurs because the social/agricultural/economic system is unable to provide needed sustenance.

[Jim Nickerson]

270


(future Canadian Natural Resource Czars, expressing scorn and
condescension, while looking southwards)

__________________________________________________



Hey Lukester ,you need to refresh my memory a little bit here about the so many good things US has done for Canada over they Years ??
Exporting french fries and hamburgers does not qualify :p
(Nor does the strong "invitation" to visit Irak.)

While on the subject of agriculture , perhaps a little shortage of food would do some good for the US overweigth population while decreasing the stress and demand on the underfinanced health care system ? :)

More seriously , during a global logistics meeting last month , my headquarter colleagues (based in Finland) have now declared the US as a LCC (Low Cost Country) to source manufactured goods as a viable alternative to China and Estonia where the trouble to reach acceptable quality levels for onecies or twocies type of production run does not warrant the trouble .:eek:

Looks like Scandinavia is ahead of Canada in some aspects !!!

Nicolas, it is nice to be able to look at someone's Profile and see something about them. It often adds to an individual's credibility, or might substract which is okay by me. At any rate, I think it is nice to see what people do. I'll put you on my list of posters who have cojones.

What are examples of "onecies or twocies"? Must be a trade vernacular.

[Nicolasd]

What are examples of "onecies or twocies"? Must be a trade vernacular.[/quote]

Hello Jim, What you picked-up on is not trade vernacular but any means but my shortcoming in English as I am French speaking (borned and raised in the french speaking province (Quebec) of Canada).

What I meant above is that for purchases of items that may be expensive in absolute term but purchased in very low quatity (say one, two , or five ) of fabricated pieces of metal (large bearing housings, brakets, gearcases, machined surfaces, castings ,etc) , we now source globally in the US for our different markets in the world as it is difficult to get quality out of China for anything less than say a 5000 item production run and despite the fact we have our own offices and own workshops in different places of China and Thailand.

Nicolas

[Lukester]

Alors Nicolas, si mon sarcasme notant que l'Amérique avait jamais fait n'importe quoi pour le Canada étaient plus explicite il aurait été aussi ferme que le beurre - vous pourriez le couper avec un couteau ! Il y a une autre erreur également, se prenant (ou son pays) trop sérieusement, mon vieux!

[Nicolasd]

Bonjour Lukester,

Votre sarcasme valait bien le mien , non ?
Quand au sérieux, peut-être que les émoticons n'ont pas remplis leurs fonctions adéquatement.

Nicolas

[Lukester]

Bonjour Lukester, Votre sarcasme valait bien le mien , non ? Quand au sérieux, peut-être que les émoticons n'ont pas remplis leurs fonctions adéquatement. - Nicolas

Naturellement ce n'est pas un problème, Nico. Ceci sont des plaisanteries. Ou non? Mais en tous cas, un costume de Pingouin c'est un peu trop formel pour moi ! Quelqu'un m'a dit que ces Pingouins étaient quelques industriels Canadiens super-riches ! Ils sembles très sérieux cependant. :D

[GRG55]

good thing we don't have that problem here.
if it's so important to achieve and maintain price stability then why don't they do it?...

Could it be that the mandate to "maintain price stability" has morphed into "managing inflation expectations" [as opposed to inflation itself]? Which lends itself more to luncheon-circuit jawboning instead of boring, sober, in camera interest rate tweaking?

An orchestra conductor, no matter how talented, who rarely performs in public wins no plaudits. Can't become the Maestro without heavy promotion...