Financial News

[southsider2k5]

At one time rubber, coal, etc were the most important resource in the world. Petroleum has had its day in the sun, but nothing lasts forever. The reason the US is still dependent on oil is because you can buy oil cheaper than you can make other options. As soon as the economic incentives turn the other way, youll see electric cars, etc. In terms of resources you have China/USA (maybe Canada/Russia), just isnt an overwhelming concern, because in reality the US has a lot more oil in its borders, we just have decided not to use it.

 

Well more like isn't allowed to use it...

[Balta1701]

I dont think I ever said otherwise. Just merely the US has oil and if a worst case scenario happened (Us looses access to all foreign oil) the US, unlike UK, France or many other AAA nations, actually has oil within its borders and could access it if necessary.

 

Once again why the US is a far more stable economy.

This is complete nonsense.

 

If the U.S. lost access to foreign oil, we'd have the strategic petroleum reserve and that's it. U.S. oil production is 1/3 of current U.S. consumption. Additional production capacity would take years to come online, and there is absolutely no way that the U.S. could ever come close to tripling its production. Even if you take into account the fact that we're now importing a ton from the Canadian tar sands operation, we'd still need to double "North American" production just to make up for what the U.S. currently imports from elsewhere.

 

The UK (which you cite, incorrectly) is much closer to balanced in terms of its production and consumption. It's spent much of the last 25 years as an oil exporter.

[Balta1701]

Well more like isn't allowed to use it...

Don't tell me you're on the 15 billion barrels > 200 billion barrels math also.

[Soxbadger]

its only nonsense if you act like the US would one day wake up and have 0 access to oil. There would clearly be indicators which would allow the US time to get things online and increase production.

 

And unless you can show me otherwise, I have found no information to suggest the UK is in a better position than the US. Contrary Ive found articles that basically say since 2005 the UK has been on a very quick decline, with most of them citing 2021 as a date where UK will be down 75% of its total reserves.

 

http://webarchive.nationalarchives.gov.uk/...s/file43846.pdf

 

 

[Balta1701]

And U.S. oil production is down 40% from its early 1970's peak.

 

Anyway...your original statement was "if a worst case scenario happened (Us looses access to all foreign oil)". You then said "its only nonsense if you act like the US would one day wake up and have 0 access to oil. There would clearly be indicators which would allow the US time to get things online and increase production." Yeah.

 

And there is jack squat the U.S. could do to double its daily output. Absolutely nothing. If you drilled everywhere immediately and forced everything into production at gunpoint, you could likely pull off less than half a million additional barrels per day within a decade.

[Soxbadger]

Right because it was a simple statement unless it gets taken to the absurd.

 

The US wont lose access to all oil overnight, so if over time (years) the US was to see a reduction of oil to eventually 0 they would have 2 possibilities: 1) increase US production and 2) use alternative methods.

 

This really all stems from a post where I said the US has access to resources, which still stands true. Just because the US doesnt have unlimited access to oil does not change the fact that the US has access to more resources than most countries.

 

I just dont see what youre arguing here, is it that the US economy is less stable than European economies? Where are you going with this?

[Balta1701]

That increased economic growth has for the last 100 years always required increased oil consumption, but for about the last 6 years oil production has reached a maximum value which is nearly impossible to surpass (because new production is barely offsetting declines).

 

Therefore, somehow now we need to produce economic growth without increased oil production. You saw this spring what happens otherwise; as the global economy tries to expand, oil prices surge to counter demand, and the price surges until demand growth stops.

 

The us economy doesn't have access to the most important resource of the 20th century any more; cheap abundant energy. Without that, growth won't happen.

[Soxbadger]

Thankfully we are in the 21st century.

 

Its like saying that "Increased economic growth was dependent on access to bronze" until it turned to iron, until it turned to steel, until it turned to coal, until it turned to rubber, until it turned to oil. And Im not even sure that your statement is true, Coal is arguably still the cheapest source of energy and Im pretty sure the US has something like 20% of the worlds coal.

[Balta1701]

Thankfully we are in the 21st century.

 

Its like saying that "Increased economic growth was dependent on access to bronze" until it turned to iron, until it turned to steel, until it turned to coal, until it turned to rubber, until it turned to oil. And Im not even sure that your statement is true, Coal is arguably still the cheapest source of energy and Im pretty sure the US has something like 20% of the worlds coal.

Ah, but you're missing the efficiency part. Oil contains more energy but a ton on it gets wasted due to the 2nd law of thermodynamics and smaller engines.

 

Even if you went to all coal, you're using less energy...unless you're turning the coal into hydrocarbons, which takes a ton of energy.

 

Not counting the whole "destroying the world" part, or the "poisoning your whole population" part of course.

[Soxbadger]

Youd have to show me some facts, because everything I can find (from scientists as im not one) suggests coal is cheaper:

 

http://greenecon.net/understanding-the-cos..._economics.html

 

In our example, a ton of coal on the average produces approximately 6,182 KWH of electric at a cost of about $36 per short ton (2,000 pounds). Under this measure coal cost less than$0.01 per KWH. In comparison, a barrel of oil at $70/barrel produces 1,700 KWH at a cost approximately $0.05 per KWH. Let’s provide some measures to understand energy costs.

Energy Units and Conversions KEEP

 

Energy Comparison

1 ton of coal = 6,182 KWH

1 barrel of oil = 1,699 KWH

1 cubic foot of gas = 0.3 KWH

 

Energy Costs

1 ton of coal costs $36 = $0.006 per KWH

1 barrel of oil costs $70 = $0.05 per KWH

1 cubic foot of gas $0.008 = $0.03 per KWH

 

The reason I said arguably is im not sure, but the facts I can find, suggest coal is cheaper.

Edited August 12, 2011 by Soxbadger

[Balta1701]

A ton of Coal versus 1 barrel of oil? A full 55 gallons of oil weighs somewhere around 280 lbs, which means that per unit mass, you need to multiply that electric total for gas by a factor of about 8 to get the units right.

[Soxbadger]

Never said anything about weights. Just that per KWH coal is cheaper, which was the question right? You said cheap abundant energy and its just not true that the US doesnt have access to it.

 

Everyone knows the reason why oil supplanted coal is because you cant hook up a coal tank to your car.

[Balta1701]

Never said anything about weights. Just that per KWH coal is cheaper, which was the question right? You said cheap abundant energy and its just not true that the US doesnt have access to it.

 

Everyone knows the reason why oil supplanted coal is because you cant hook up a coal tank to your car.

And the reason why you can't use coal in a car is that you get more energy per unit mass out of gasoline. Once you're going to kwh, you're converting to electricity, which also factors in the efficiency of the engine.

[Soxbadger]

Im just citing the facts. Currently coal is cheaper per kwh. Which is why I said "arguably". I understand the benefits of oil, otherwise I would have said "Coal is cheaper than oil".

[Balta1701]

But that still doesn't mean that it can be used as a source of cheap energy to replace the fact that oil production has plateaued.

[southsider2k5]

Futures are only at 115 pt difference before the open with about 600k emini's traded!

[StrangeSox]

[NorthSideSox72]

S&P absolutely did the downgrade to save their own image. The main rating agencies got slammed, rightly, for applying ratings far to pretty to a lot of bad debt, and S&P is trying to look tough and reliable now.

 

First, a true US debt default was never going to happen, though defaults on other obligations may have. If a real default on US debt occurred, the entire global system melts down. So lowering the rating on US debt makes no sense, when it was and is currently a political issue. The only way lowering it makes sense is if the US was actually, truly, unable to pay service on its debt. That may happen in the future (though I doubt it), but it isn't any reasonable threat right now. This is why other agencies kept it at AAA.

 

Second, if US debt is now AA+, then no way in hell are countries like France and Italy AAA, in fact they should be well below the US rating. This is another reason why the S&P downgrade was complete garbage.

 

The markets realized this, and are rallying. Company execs are now scooping up company stock like mad, because they see it too. Buffet sees it, other see it.

 

[StrangeSox]

Dr. Coffee on the Daily Show Wednesday had a good analogy of how S&P and other ratings agencies work:

 

random source that sums up the analogy better than I could remember

Dr. Coffee explains that Standard and Poors, Moodys, and Fitch, the three big rating agencies, had, over the last few years, been paid for their ratings. As Coffee says, these rating agencies”sysetmatically inflated their ratings.” He said that, ” as the quality went down, the ratings went up.” Dr. Coffee further stated that the agencies were “probably the group most responsible for the financial collapse in 2008.” Since the rating agencies were paid by the seven or eight investment banks ( which had been major players in dispersing tainted derivatives around the world) which had real market power over the ratings agencies, the agencies agreed to play ball. But the ballgame went as follows, according to Dr. Coffee.

 

A home town team (the investment banks with the nearly worthless derivatives) hires an umpire ( the ratings agency) to officiate at each game. The agreement stipulates that the umpire will be paid on the quality of his calls (in favor of the team) and will work on an inning by inning basis with the understanding that should the home town team not like the umpire’s calls, the employment will end and that umpire will never again work in the league.

 

[StrangeSox]

GOP economic adviser accidentally shows that the stimulus worked, multiplier of around 4

 

[southsider2k5]

Well I bet we can start to guess what doesn't get hit...

 

http://www.newser.com/article/d9p2d7dg0/ap...rcommittee.html

 

AP analysis: Special interests gave $3 million to members of new budget supercommittee

Special interests gave millions to budget panel

By JACK GILLUM | Associated Press | 9 hours, 57 minutes ago in Politics

 

 

The 12 lawmakers appointed to a new congressional supercommittee charged with tackling the nation's fiscal problems have received millions in contributions from special interests with a direct stake in potential cuts to federal programs, an Associated Press analysis of federal campaign data has found.

 

The newly appointed members _ six Democrats and six Republicans _ have received more than $3 million total during the past five years in donations from political committees with ties to defense contractors, health care providers and labor unions. That money went to their re-election campaigns, according to AP's review.

 

Supporters say the lawmakers were picked for their integrity and experience with complicated budget matters. But their appointments already have prompted early concerns from campaign-finance watchdog groups, which urged the lawmakers to stop fundraising and resign from leadership positions in political groups.

 

The congressional committee, created as part of the debt limit and deficit reduction agreement enacted last week, is charged with cutting more than $1 trillion from the budget during the coming decade. If the committee doesn't decide on cuts by late November _ or if Congress votes down the committee's recommendations _ spending triggers would automatically cut billions of dollars from politically delicate areas like Medicare and the Pentagon.

 

The lawmakers represent a large swath of political ideology and geography, but they have some things in common: They received more than $1 million overall in contributions from the health care industry and at least $700,000 from defense companies, the AP found. Those two industries, especially, are sensitive to the outcome of the committee's negotiations because the automatic spending cuts could affect them most directly.

 

The committee's co-chairs _ Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Texas _ each received support from lobbyists and political committees, including those with ties to defense contractors and health care lobbyists. Hensarling's re-election committee, for instance, received about $11,000 from Lockheed Martin and $8,500 from Northrop Grumman.

 

Companies like Lockheed rely heavily on government contracts: More than 80 percent of Lockheed's net sales during the first six months of 2011 came from the U.S. government, according to Securities and Exchange Commission records. And in SEC filings two weeks ago, Northrop expressed concern of a "material adverse effect" on its finances had the debt ceiling not been raised.

 

The other panel members are Sens. Max Baucus, D-Mont.; John Kerry, D-Mass.; Jon Kyl, R-Ariz.; Pat Toomey, R-Pa.; and Rob Portman, R-Ohio; and Reps. Jim Clyburn, D-S.C.; Xavier Becerra, D-Calif.; Chris Van Hollen, D-Md.; and Michigan Republicans Dave Camp and Fred Upton.

 

The AP's analysis shows the extent to which special interests have directly supported the 12 members during their tenures in Congress, including support from agriculture businesses ($600,000) and labor unions ($580,000). Big checks also came in from the banking and insurance industry.

 

The extent of potential conflicts could be even greater than the AP's analysis shows. The AP measured contributions from industry PACs to lawmakers' election committees. But it didn't capture amounts from independent expenditures, such as donations, from defense executives and their families or money given to leadership political committees.

 

Even still, influence can extend beyond direct campaign contributions. Senate records show that Murray, also the chairwoman of the Democratic Senatorial Campaign Committee, was named in so-called honoree payments of more than $1 million from lobbyists since 2008. Such honoree contributions are sent to groups associated with members of Congress or for events held in their honor.

 

Murray spokesman Matt McAlvanah said Thursday that the senator "has made a career out of standing up for working families and against special interests. And that's reflected in her personal story, her votes and the policies she has championed."

 

Already, even as the final appointments to the committee were announced Thursday, watchdog groups said the panel members will be under remarkable pressure from outside interests. Public Campaign, one such group in Washington, said establishing the committee "will make it cheaper for Wall Street, tax-dodging corporations and special-interest lobbyists to influence the spending cuts and revenue debate in Washington as the focus shifts to just 12 members of Congress."

 

Bob Edgar, president of the advocacy group Common Cause, said that "with the public already disgusted with Washington in the wake of the debt-limit debacle, it's vital that people have confidence that supercommittee members are thinking about the nation's best interests, not positioning their party or worrying about how their decisions appear to donors."

 

Public Campaign also called on Murray to step down immediately as head of the Democratic campaign committee.

 

The White House called such complaints "silly criticism."

 

"Elected members of Congress are responsible: They take an oath, they are responsible to serve their constituents and their country," White House Press Secretary Jay Carney told reporters this week. "We expect every member on the committee to take that responsibility seriously."

[StrangeSox]

12 senators got a total of $3M over the last 5 years? That's surprising low, honestly.

[southsider2k5]

http://blogs.marketwatch.com/thetell/2011/...rt-selling-ban/

 

The EDHEC-Risk Institute blasted four European nations for their ban on short sales on Friday, saying the restriction could have unintended spillover effects.

 

In a press release, the arm of the EDHEC Business School lashed out at Belgium, France, Italy and Spain for imposing or extending their bans as the markets have become more volatile.

 

“These hasty decisions are not only devoid of theoretical basis, but also fly in the face of empirical evidence,” the institute said in its release. It went on to say that short-sale bans can reduce liquidity and increase volatility, and thus reduce market quality. The institute also cited a series of articles recently put out by EDHEC Professor Ekkehart Boehmer and several co-authors that examined short-selling activity in depth.

 

“They established that short sellers are important contributors to efficient stock prices, that short interest contains valuable information for the market, that information is impounded faster and more efficiently into prices when short sellers are more active and that short sellers change their trading around extreme return events in a way that aids price discovery,” the press release said.

 

The institute also came out against using short sales as a “political smokescreen that is likely to be counterproductive.”

 

– Russ Britt

[southsider2k5]

Drilling? Who needs drilling...

 

http://www.cnbc.com/id/44121011

 

If history is any guide, another oil-induced recession may be just around the corner, at least for the United States and some of the other developed economies.

 

Every time that the cost of oil relative to global economic output has hit current levels — and that's even after sharp falls in spot prices this month — it has heralded a slump.

 

And while economists and analysts say a serious slowdown can still be avoided, many add that unless oil and energy prices fall much further and — most important — stay down, the world economy could be in serious trouble.

 

"We are in a danger area for the world economy," said Christophe Barret, global oil analyst at Credit Agricole [CRARF 9.35 0.35 (+3.89%) ].

 

The warning signal flashing is what economists call the "oil expense indicator": the share of oil expenses as a proportion of worldwide gross domestic product (GDP) (oil prices times oil consumption divided by world GDP).

 

Since 1965, this has averaged roughly 3 percent of GDP, and it has only exceeded 4.5 percent during three periods: in 1974, between 1979 and 1985 and in 2008.

 

Each period has seen severe global recessions.

 

In 1973/74, during the first global "oil shock," oil prices rocketed after an Arab oil embargo in response to an Arab-Israeli war disrupted oil flows and triggered panic buying.

 

In 1979, revolution in Iran knocked out much of the country's oil output and was followed by a long Iran-Iraq war, bringing a second "oil shock."

 

In 2008, propelled by a housing bubble, speculative buying of new debt [cnbc explains] instruments and a commodities boom, oil prices exceeded $100 per barrel for the first time and soared to a record high above $147, helping trigger financial crisis and the worst slump since World War II.

 

This time, oil prices have soared following the loss of around 1.6 million barrels per day (bpd) of Libyan oil, uprisings across the Middle East and North Africa and rapid economic growth in China, India and other developing economies.

 

Using the oil expense indicator, economists say Brent crude [LCOCV1 108.82 0.80 (+0.74%) ], the international oil benchmark, would need to be in the low $90s per barrel to be under the 4.5 percent danger mark.

 

In fact, Brent hit a two-and-a-half-year high of more than $127 per barrel in April and, with the exception of an intra-day dip on Tuesday, has been over $100 for six months.

 

Even after a fall of more than $20 from its early-August high on worries over a slowdown in the developed economies, Brent is still not far off $110 per barrel.

 

Oil is a key global cost because it is crucial to every part of the economy, powering manufacturing and the production of food and other commodities, fuelling transport as well as being a building block for industries such as plastics and electronics.

 

If it is too high for too long, the results are dramatic.

 

RELATED LINKS

 

Schork Oil Outlook: Report Almost Unanimously Bullish

Brent Crude Seesaws in Wake of Bleak Sentiment Data

Oil Prices Follow U.S. Stock Market Gains

 

"The last two times that energy as a share of global GDP neared ... the current level, the world economy experienced severe crises: the double dip recession of the 1980s and the Great Recession of 2008," Merrill Lynch [MER'D 23.02 0.577 (+2.57%) ] analysts led by Francisco Blanch said in a note to clients.

 

Economists reinforce their warnings over the possibility of an impending slowdown with data showing that oil demand has begun to shrink in some countries in response to high prices.

 

Leading Indicator

 

Oil data lags, but the latest U.S. figures, for May, show a drop of 4.7 percent year-on-year in U.S. gasoline demand.

 

Deutsche Bank [DB 43.01 0.50 (+1.18%) ] analyst Adam Sieminski says he is concerned by a trend toward lower U.S. oil demand evident since last summer:

 

"The last time U.S. oil demand was falling was in 2007 and early 2008," Sieminski said in a note written with analyst Michael Lewis. "This was a leading indicator of the economic troubles that would hit the U.S. in the middle of 2008."

 

Analysts differ on exactly how high oil prices need to be and how long they need to stay up before they slow growth. Some economists argue the impact of oil prices has been exaggerated, and others note that not all recessions are caused by oil, such as slowdowns in the early 1990s and again a decade later.

 

But most economists argue there is a level at which fuel input costs become incompatible with continuing economic growth.

 

James Zhang, an analyst at Standard Bank [sBGOF 13.46 --- UNCH ], says the danger level comes with the oil expense indicator at around 5 percent:

 

"$100 per barrel represents about 5 percent for the 'oil expense indicator', which we think would be a threshold on an annual average level to potentially kill off global growth," he said.

 

"Absent any shocks, I don't believe an oil price, say in the range of $100 to $130, will necessary bring a recession itself, but a slower growth is almost ensured — another sharp jump in oil prices could act as a shock," Zhang said.

 

Barret said record high oil and commodity prices were putting unsustainable pressure on household expenditure, and while he like other economists is reluctant to predict recession, he thinks the warnings should be heeded:

 

"There is still a chance that oil prices will go down very significantly, and that could be a strong support to the economy. But if prices stay near $110 per barrel until the end of the year, we will have a major problem by the start of 2012," he said.

 

"We either get sharply lower prices or a recession [cnbc explains] that will bring down prices. Either way, oil prices must come down."

[StrangeSox]

Wait, doesn't that completely support what Balta's been saying for a while? That we're growth-limited by energy availability?