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Political Freelancers Use Web to Join the Attack
http://www.nytimes.com/2008/06/29/us/politics/29opposition.html?hp=&pagewanted=all
Political Freelancers Use Web to Join the Attack
Ann Johansson for The New York Times
A Brave New Films campaign producer, Jason Zaro, with Phillip Cruess, a camera operator and an editor for the group.
By JIM RUTENBERG
Published: June 29, 2008
CULVER CITY, Calif. — The video blasted across the Internet, drawing political blood from Senator John McCain within a matter of days.
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Ann Johansson for The New York Times
Robert Greenwald, a director, takes aim at John McCain from Culver City, Calif.
Brave New Films
A former John McCain ally, the Rev. Rod Parsley is in an anti-McCain video.
Produced here in a cluttered former motel behind the Sony Pictures lot, it juxtaposed harsh statements about Islam made by the Rev. Rod Parsley with statements from Mr. McCain praising Mr. Parsley, a conservative evangelical leader. The montage won notice on network newscasts this spring and ultimately helped lead Mr. McCain, the likely Republican presidential nominee, to reject Mr. Parsley's earlier endorsement.
In previous elections, an attack like that would have come from party operatives, campaign researchers or the professional political hit men who orbit around them.
But in the 2008 race, the first in which campaigns are feeling the full force of the changes wrought by the Web, the most attention-grabbing attacks are increasingly coming from people outside the political world. In some cases they are amateurs operating with nothing but passion, a computer and a YouTube account, in other cases sophisticated media types with more elaborate resources but no campaign experience.
So it was with the Parsley video, which was the work of a 64-year-old film director, Robert Greenwald, and his small band of 20-something assistants. Once best known for films like "Xanadu" (with Olivia Newton-John) and the television movie "The Burning Bed" (with Farrah Fawcett), Mr. Greenwald shows how technology has dispersed the power to shape campaign narratives, potentially upending the way American presidential campaigns are fought.
Mr. Greenwald's McCain videos, most of which portray the senator as contradicting himself in different settings, have been viewed more than five million times — more than Mr. McCain's own campaign videos have been downloaded on YouTube.
"If you had told me we would have hit one million, I would have told you you were crazy," said Mr. Greenwald, who said he had no ties to the Democratic Party or Senator Barack Obama's campaign.
Four years ago, the Internet was a Wild West that caused the occasional headache for the campaigns but for the most part remained segregated from them. This year, the development of cheap new editing programs and fast video distribution through sites like YouTube has broken down the barriers, empowering a new generation of largely unregulated political warriors who can affect the campaign dialogue faster and with more impact than the traditional opposition research shops.
Already there are signs that these less formal and more individual efforts are filling a vacuum created by a decline in activity among the independent advocacy groups — so-called 527s and similar operations — that have played a large role in negative politics in the last several election cycles. Especially on the conservative side, independent groups have reported trouble raising money, and some of the biggest players from 2004 have signaled that they will sit it out this time around.
The shift has by no means gone unnoticed by the campaigns. And while strategists in both parties suspect that traditional political operatives affiliated with the campaigns or parties frequently pose as independent grassroots participants by hiding behind anonymous Web identities, few have been caught this year.
The change has added to the frenetic pace of the campaign this year. "It's politics at the speed of Internet," said Dan Carol, a strategist for Mr. Obama who was one of the young bulls on Bill Clinton's vaunted rapid response team in 1992. "There's just a lot of people who at a very low cost can do this stuff and don't need a memo from HQ."
That would seem to apply to people like Robert Anderson, a professor at Elon University in North Carolina whose modest YouTube site features videos flattering to Mr. Obama and unflattering to Mr. McCain, or Paul Villarreal, who from his apartment in Wilkes-Barre, Pa., has produced a harsh series of spots that attack Mr. Obama and make some claims that have been widely debunked.
Counting the audience for such videos can be tricky, as sites like YouTube list only the number of times they have been viewed, not the number of people who view them. That said, according to YouTube, Mr. Villarreal's video was viewed about 50,000 times. And it cost him just $100 to produce, for software, he said. He said he had no connection to the Republican Party or the McCain campaign, though he said he had reached out to them and not heard back.
The better-circulated political videos have generally come from people with some production experience. One of the most widely seen anti-Obama videos was created by Jason Mitchell, who produces evangelical Christian programming in Durham, N.C.
A conservative-leaning version of YouTube called Eyeblast.tv has recorded millions of hits on the video. But as is often the case with such videos, how many of the viewers come to sneer rather than applaud is hard to tell.
"Four years ago I would just be a 'political activist,' " Mr. Mitchell said. "Now, they call me a 'communications political strategist,' and that's only because of the Internet."
Mr. Mitchell, 29, said his cash expenses to make and distribute the segment were about $50, a fraction of the roughly $100,000 that it would cost to broadcast a 30-second spot on a television news program with an audience of a few million, like "Meet the Press." "That's dirt cheap for an ad," Mr. Mitchell said.
Mr. Mitchell said he was motivated by what he said were deep-rooted misgivings about Mr. Obama on social issues, his level of experience and background. But it is unlikely any television station would have accepted the video if he had tried to run it.
The segment's announcer notes that Mr. Obama's father was Muslim, asserts that the candidate attended a Muslim grammar school in Indonesia for two years, and asks, "When we are at war with Islamic terrorism, can Americans elect a man with not one, not two, but three Islamic names?" One onscreen image shows Mr. Obama's face morphed with that of Osama bin Laden.
Mr. Mitchell says he sticks close to the factual record, but the video has been widely criticized as over the line. Mr. Obama is a Christian. The school he attended in Indonesia was secular.
Three weeks ago, the Obama campaign started a Web site called "Fight the Smears" to, among other things, debunk portrayals of Mr. Obama as Muslim. It allows its users to e-mail the information easily to friends.
"What we're really trying to do is knock down important things that are wrong, which also diminishes the power of the next set of rumors," said Mr. Carol, the Obama aide.
With Web-based attacks proliferating, campaigns are leaving behind the assumption that to respond to highly negative or false accusations is to needlessly publicize them. "It poses a more complicated version of the age-old dilemma that campaigns always find themselves in," said Phil Singer, who was the press secretary for Senator Hillary Rodham Clinton's campaign. "Do you address something head on and risk making it a mainstream phenomenon? Or ignore it and risk allowing it to take on a life of its own?"
The presidential campaign of former Gov. Mitt Romney of Massachusetts developed an effective if labor intensive technique. It flooded YouTube with positive videos of Mr. Romney. "The new model of response is to dominate the market share of information about your candidate," said Kevin Madden, Mr. Romney's former press secretary.
Several Republican communications strategists, speaking on condition of anonymity, said that was precisely what Mr. McCain might have to do. He is coming under harsh attack on YouTube in videos that, some Republicans say, take his words out of context. A simple search of his name automatically produces several negative videos. Mr. Greenwald, whose shop is responsible for many of them, said he was determined to keep it that way.
With a budget of $900,000 from donations, Mr. Greenwald has built a mini-factory of anti-McCain propaganda at his firm, Brave New Films. He takes no payment for his efforts, which are regulated by laws governing nonprofit groups and include other subjects, like critiques of Fox News.
In a darkened room here, three young assistants edit digital images on equipment that barely takes up a full desk, trolling the Web for political news and culling through Mr. McCain's past and present statements. A system of hard drives catalogs cable news.
Mr. Greenwald was not always so politically active. He gave money to politicians or groups sporadically, but was not among Hollywood's elite donor class.
Mr. Greenwald said he had a political awakening after Sept. 11 and dedicated himself to making liberal films, an endeavor he said he could afford having been "lucky enough to have been majorly overpaid in commercial film and television relative to any rational measure."
His highest impact has been with his video about Mr. Parsley. The montage was created with help from David Corn, Washington Bureau chief for Mother Jones, who unearthed video of Mr. Parsley inveighing against Islam and saying, "America was founded in part with the intention of seeing this false religion destroyed."
Mr. Greenwald's team combined it with video of Mr. McCain calling Mr. Parsley, "one of the truly great leaders in America, a moral compass, a spiritual guide." The montage spread quickly across liberal Web sites, and made its way onto ABC News. Mr. McCain released a statement rejecting Mr. Parsley's endorsement shortly thereafter.
"For years I sat in conversations with people who said the only way we can be effective is we have to raise $1 billion and buy CBS," Mr. Greenwald said. "Well, Google raised a couple of billion and bought YouTube, and it's here for us, and it's a huge, huge difference."
Ann Johansson for The New York Times
Robert Greenwald, a director, takes aim at John McCain from Culver City, Calif.
Political Freelancers Use Web to Join the Attack
Ann Johansson for The New York Times
A Brave New Films campaign producer, Jason Zaro, with Phillip Cruess, a camera operator and an editor for the group.
By JIM RUTENBERG
Published: June 29, 2008
CULVER CITY, Calif. — The video blasted across the Internet, drawing political blood from Senator John McCain within a matter of days.
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Enlarge This Image
Ann Johansson for The New York Times
Robert Greenwald, a director, takes aim at John McCain from Culver City, Calif.
Brave New Films
A former John McCain ally, the Rev. Rod Parsley is in an anti-McCain video.
Produced here in a cluttered former motel behind the Sony Pictures lot, it juxtaposed harsh statements about Islam made by the Rev. Rod Parsley with statements from Mr. McCain praising Mr. Parsley, a conservative evangelical leader. The montage won notice on network newscasts this spring and ultimately helped lead Mr. McCain, the likely Republican presidential nominee, to reject Mr. Parsley's earlier endorsement.
In previous elections, an attack like that would have come from party operatives, campaign researchers or the professional political hit men who orbit around them.
But in the 2008 race, the first in which campaigns are feeling the full force of the changes wrought by the Web, the most attention-grabbing attacks are increasingly coming from people outside the political world. In some cases they are amateurs operating with nothing but passion, a computer and a YouTube account, in other cases sophisticated media types with more elaborate resources but no campaign experience.
So it was with the Parsley video, which was the work of a 64-year-old film director, Robert Greenwald, and his small band of 20-something assistants. Once best known for films like "Xanadu" (with Olivia Newton-John) and the television movie "The Burning Bed" (with Farrah Fawcett), Mr. Greenwald shows how technology has dispersed the power to shape campaign narratives, potentially upending the way American presidential campaigns are fought.
Mr. Greenwald's McCain videos, most of which portray the senator as contradicting himself in different settings, have been viewed more than five million times — more than Mr. McCain's own campaign videos have been downloaded on YouTube.
"If you had told me we would have hit one million, I would have told you you were crazy," said Mr. Greenwald, who said he had no ties to the Democratic Party or Senator Barack Obama's campaign.
Four years ago, the Internet was a Wild West that caused the occasional headache for the campaigns but for the most part remained segregated from them. This year, the development of cheap new editing programs and fast video distribution through sites like YouTube has broken down the barriers, empowering a new generation of largely unregulated political warriors who can affect the campaign dialogue faster and with more impact than the traditional opposition research shops.
Already there are signs that these less formal and more individual efforts are filling a vacuum created by a decline in activity among the independent advocacy groups — so-called 527s and similar operations — that have played a large role in negative politics in the last several election cycles. Especially on the conservative side, independent groups have reported trouble raising money, and some of the biggest players from 2004 have signaled that they will sit it out this time around.
The shift has by no means gone unnoticed by the campaigns. And while strategists in both parties suspect that traditional political operatives affiliated with the campaigns or parties frequently pose as independent grassroots participants by hiding behind anonymous Web identities, few have been caught this year.
The change has added to the frenetic pace of the campaign this year. "It's politics at the speed of Internet," said Dan Carol, a strategist for Mr. Obama who was one of the young bulls on Bill Clinton's vaunted rapid response team in 1992. "There's just a lot of people who at a very low cost can do this stuff and don't need a memo from HQ."
That would seem to apply to people like Robert Anderson, a professor at Elon University in North Carolina whose modest YouTube site features videos flattering to Mr. Obama and unflattering to Mr. McCain, or Paul Villarreal, who from his apartment in Wilkes-Barre, Pa., has produced a harsh series of spots that attack Mr. Obama and make some claims that have been widely debunked.
Counting the audience for such videos can be tricky, as sites like YouTube list only the number of times they have been viewed, not the number of people who view them. That said, according to YouTube, Mr. Villarreal's video was viewed about 50,000 times. And it cost him just $100 to produce, for software, he said. He said he had no connection to the Republican Party or the McCain campaign, though he said he had reached out to them and not heard back.
The better-circulated political videos have generally come from people with some production experience. One of the most widely seen anti-Obama videos was created by Jason Mitchell, who produces evangelical Christian programming in Durham, N.C.
A conservative-leaning version of YouTube called Eyeblast.tv has recorded millions of hits on the video. But as is often the case with such videos, how many of the viewers come to sneer rather than applaud is hard to tell.
"Four years ago I would just be a 'political activist,' " Mr. Mitchell said. "Now, they call me a 'communications political strategist,' and that's only because of the Internet."
Mr. Mitchell, 29, said his cash expenses to make and distribute the segment were about $50, a fraction of the roughly $100,000 that it would cost to broadcast a 30-second spot on a television news program with an audience of a few million, like "Meet the Press." "That's dirt cheap for an ad," Mr. Mitchell said.
Mr. Mitchell said he was motivated by what he said were deep-rooted misgivings about Mr. Obama on social issues, his level of experience and background. But it is unlikely any television station would have accepted the video if he had tried to run it.
The segment's announcer notes that Mr. Obama's father was Muslim, asserts that the candidate attended a Muslim grammar school in Indonesia for two years, and asks, "When we are at war with Islamic terrorism, can Americans elect a man with not one, not two, but three Islamic names?" One onscreen image shows Mr. Obama's face morphed with that of Osama bin Laden.
Mr. Mitchell says he sticks close to the factual record, but the video has been widely criticized as over the line. Mr. Obama is a Christian. The school he attended in Indonesia was secular.
Three weeks ago, the Obama campaign started a Web site called "Fight the Smears" to, among other things, debunk portrayals of Mr. Obama as Muslim. It allows its users to e-mail the information easily to friends.
"What we're really trying to do is knock down important things that are wrong, which also diminishes the power of the next set of rumors," said Mr. Carol, the Obama aide.
With Web-based attacks proliferating, campaigns are leaving behind the assumption that to respond to highly negative or false accusations is to needlessly publicize them. "It poses a more complicated version of the age-old dilemma that campaigns always find themselves in," said Phil Singer, who was the press secretary for Senator Hillary Rodham Clinton's campaign. "Do you address something head on and risk making it a mainstream phenomenon? Or ignore it and risk allowing it to take on a life of its own?"
The presidential campaign of former Gov. Mitt Romney of Massachusetts developed an effective if labor intensive technique. It flooded YouTube with positive videos of Mr. Romney. "The new model of response is to dominate the market share of information about your candidate," said Kevin Madden, Mr. Romney's former press secretary.
Several Republican communications strategists, speaking on condition of anonymity, said that was precisely what Mr. McCain might have to do. He is coming under harsh attack on YouTube in videos that, some Republicans say, take his words out of context. A simple search of his name automatically produces several negative videos. Mr. Greenwald, whose shop is responsible for many of them, said he was determined to keep it that way.
With a budget of $900,000 from donations, Mr. Greenwald has built a mini-factory of anti-McCain propaganda at his firm, Brave New Films. He takes no payment for his efforts, which are regulated by laws governing nonprofit groups and include other subjects, like critiques of Fox News.
In a darkened room here, three young assistants edit digital images on equipment that barely takes up a full desk, trolling the Web for political news and culling through Mr. McCain's past and present statements. A system of hard drives catalogs cable news.
Mr. Greenwald was not always so politically active. He gave money to politicians or groups sporadically, but was not among Hollywood's elite donor class.
Mr. Greenwald said he had a political awakening after Sept. 11 and dedicated himself to making liberal films, an endeavor he said he could afford having been "lucky enough to have been majorly overpaid in commercial film and television relative to any rational measure."
His highest impact has been with his video about Mr. Parsley. The montage was created with help from David Corn, Washington Bureau chief for Mother Jones, who unearthed video of Mr. Parsley inveighing against Islam and saying, "America was founded in part with the intention of seeing this false religion destroyed."
Mr. Greenwald's team combined it with video of Mr. McCain calling Mr. Parsley, "one of the truly great leaders in America, a moral compass, a spiritual guide." The montage spread quickly across liberal Web sites, and made its way onto ABC News. Mr. McCain released a statement rejecting Mr. Parsley's endorsement shortly thereafter.
"For years I sat in conversations with people who said the only way we can be effective is we have to raise $1 billion and buy CBS," Mr. Greenwald said. "Well, Google raised a couple of billion and bought YouTube, and it's here for us, and it's a huge, huge difference."
Ann Johansson for The New York Times
Robert Greenwald, a director, takes aim at John McCain from Culver City, Calif.
Brazil's Petrobras could become one of the world's top oil companies if its three new deepwater wells are as plentiful as some expect.
http://online.barrons.com/article/SB121461388928412709.html?mod=b_hps_9_0001_b_this_weeks_magazine_home_right
MONDAY, JUNE 30, 2008
FEATURES MAIN
Drilling Deep and Flying High
By KENNETH RAPOZA
Brazil's Petrobras could become one of the world's top oil companies if its three new deepwater wells are as plentiful as some expect.
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THERE ARE GUSHERS and then there are gushers.
At a time when the oil industry is struggling mightily to find new wells, Brazil's Petrobras is sitting atop what appears to be the Western Hemisphere's biggest find in 30 years. The Tupi oil field, discovered off Rio de Janeiro two years ago and 65% owned by Petrobras, may contain as much as eight billion barrels of oil, an amount that would boost Brazil's reserves by more than 50%.
As if that weren't enough, the company has since found three other potentially lucrative, deepwater wells in the same area. And, with sophisticated operations in the Gulf of Mexico, it could be a big winner in President Bush's new drive to lift U.S. moratoriums on offshore drilling.
[pic]
Newscom; inset: Tomohiro Ohsumi/Bloomberg News
Petrobras operates rigs like this one off Brazil. Its president, Jose Sergio Gabrielli, inset, sees "practically zero" risk that the latest finds will be duds.
All this and high oil prices, too. Can it get any better?
In fact, Petrobras is a singularly tantalizing investment. "Buying Petrobras today is like having the opportunity to invest in Saudi Aramco 40 years ago," says Shawn Reynolds, portfolio manager of Van Eck Global's $1.03 billion Hard Assets Fund. Saudi Aramco, Saudi Arabia's state-owned oil company, today is the world's largest oil corporation in terms of proven reserves and production.
Investors already have struck it rich with Petrobras' stock (ticker: PBR for the American depositary receipts). Recently trading around $70, it has more than doubled over the past 12 months, far outpacing such rivals as ConocoPhillips (COP), Chevron (CVX) and ExxonMobil (XOM). Yet, bulls say the stock could climb another 25% or so within a year, perhaps hitting $90.
"If you're in oil, you have to own this stock," says Robert Levitt, asset manager of $500 million Levitt Capital Management, in Boca Raton, Fla. "They are sitting on the biggest oil find in years, that's why. You don't look at resource companies based on earnings; you look at their oil reserves. Exxon and Conoco aren't making any new discoveries. Petrobras just made the biggest one in years."
The Tupi field, named after a Brazilian native tribe, holds anywhere from five billion to eight billion barrels of oil, Petrobras says. Last year, the company made another find nearby, the Carioca well. And this past May, Petrobras announced the discovery of the Bem-Te-Vi field, followed in June by the Guara -- in the same basin, under 1.33 miles of ocean and rock.
Petrobras holds a 65% stake in this collection of wells, with the British oil and gas company BG Group (BG.UK) holding 25% and Galp Energia of Portugal holding the rest. So, if Tupi were to yield six billion barrels of oil, Petrobras would effectively add about four billion to its current proven reserves of 11.7 billion barrels.
EXACTLY HOW MUCH PETROLEUM the three newer wells are likely to yield is still unknown. But, as Petrobras' president, Jose Sergio Gabrielli, told the Wall Street Journal this month, the risk of finding no oil in the basin where it is drilling is "practically zero." He was unavailable to comment for this article.
Table: The Petrobras Edge
Analysts say that Tupi's potential is already priced into the stock, but oil from the other three is not. If those wells prove productive, the stock could surge. On the other hand, if they turn out to be duds, the stock would stop rising and probably fall in the short term.
Though it could take a year for the picture to become clear, there's good reason for optimism. "Gabrielli has a plan to develop those discoveries, and it is not going to take any technological leaps," says Annette Hester, an energy policy analyst for the Center for Strategic and International Studies in Washington and the Center for International Governance Innovation in Canada. Hester is in a good position to know: She recently met with Gabrielli in Rio de Janeiro to discuss the company's latest finds. "They've been deepwater drillers for 40 years and have the people and have the processes in place," she adds. "They've got top-line people. Are they credible? Absolutely." In a clear sign of progress, Petrobras already has contracted many of the drilling vessels needed for the sites.
Not only is the company promising, but the stock looks reasonably priced, trading at about 14 times estimated 2009 earnings. That's a bit higher than the multiples of ExxonMobil and other oil majors -- but they're not sitting on big new oil fields. JP Morgan, which last week upgraded Petrobras' ADRs from Neutral to Overweight, sees them headed to $85. Reynolds of Van Eck Global has a target of $85 to $90.
THAT'S NOT TO SAY that Petrobras, 55.7% of which is controlled by Brazil's government, doesn't face challenges "...The company carries a lot of risk," says Roberto Padovani, chief strategist at investment bank WestLB. "You see, the government never lets Petrobras raise gasoline prices because of inflation fears, and that causes it to lose [revenue], compared to its peers."
In May, Brasilia allowed gasoline prices to rise for the first time in nearly three years. They jumped 10% at the refinery level.
[pic]
Meanwhile, Petrobras' style of deepwater drilling, which goes below the salt masses in ocean floors, is about three times as costly as normal deepwater drilling, says Levitt, the asset manager. "It's not like Iraq, where you poke your finger in the sand and the oil comes out."
Still, if the new discoveries are proven, Petrobras will become an oil giant, like Venezuela's Petroleos de Venezuela. "Petrobras has everything to be one of the top three oil majors in the world," says Adriano Pires, director of the Brazilian energy and infrastructure consultancy CBIE.
The company still hasn't been able to make Brazil a pure net exporter of oil. In 2008's first four months, it posted an oil and oil derivatives (mostly diesel) trade deficit of $2.7 billion, versus a shortfall of $378.5 million a year earlier, according to Brazil's National Petroleum Agency, ANP.
The Bottom Line
Petrobras stock, which has more than doubled in the past year, could rise another 25% if three offshore wells discovered by the company prove as plentiful as some expect.
But investors clearly have big hopes for the company. Petrobras' market value now is close to $300 billion, more than double its level last year. The only U.S. oil company valued higher is ExxonMobil, with a market capitalization near $460 billion.
"With oil prices where they are, I don't think Petrobras is overvalued," says Ilan Goldfajn, a senior partner at Ciano Investments, a Rio de Janeiro hedge fund. "At these oil prices, I see an upside."
KENNETH RAPOZA is a reporter for Dow Jones Newswires in Sao Paulo. His colleague ROGERIO JELMAYER contributed to this story.
E-mail comments to mail@barrons.com
MONDAY, JUNE 30, 2008
The Petrobras Edge
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By some measures, Petrobras is more expensive than some other integrated majors. But the promise of the potentially huge offshore oil find in Brazil has boosted its stock recently.
Company/ Chevron Conoco
Phillips Exxon
Mobil Petrobras
Ticker CVX COP XOM PBR
Recent Price# $99.36 94.02 87.60 68.83
YTD Change# 6.5% 6.5 –6.5 19.5
Revenue 2008E (bil) $297 222 643 66
EPS 2008E $11.69 11.93 9.17 3.62
P/E Ratio 2008E## 8.5 7.9 9.6 19.0
Proven Reserves 12/07 (mil bbl) 10.8 10.6 22.7 11.7§
Cash Flow (bil)* $37.3 47.2 73.7 27.5
Debt (bil)** $6.8 21.5 10.0 23.9
Annual Dividend $2.6 2.0 1.8 1.1
E=Estimate.
# Through June 25.
## Based on recent price and estimated 2008 earnings.
* As measured by annualized earnings before interest, taxes, depreciation and amortization, through March.
** As of March 31.
§ This figure is as of June 2008.
Sources: Thomson Reuters; company reports
MONDAY, JUNE 30, 2008
FEATURES MAIN
Drilling Deep and Flying High
By KENNETH RAPOZA
Brazil's Petrobras could become one of the world's top oil companies if its three new deepwater wells are as plentiful as some expect.
TEXT SIZE
DIGG
Find out about distributing multiple copies of this article SINGLE PAGE
REPRINTS
GET RSS
THERE ARE GUSHERS and then there are gushers.
At a time when the oil industry is struggling mightily to find new wells, Brazil's Petrobras is sitting atop what appears to be the Western Hemisphere's biggest find in 30 years. The Tupi oil field, discovered off Rio de Janeiro two years ago and 65% owned by Petrobras, may contain as much as eight billion barrels of oil, an amount that would boost Brazil's reserves by more than 50%.
As if that weren't enough, the company has since found three other potentially lucrative, deepwater wells in the same area. And, with sophisticated operations in the Gulf of Mexico, it could be a big winner in President Bush's new drive to lift U.S. moratoriums on offshore drilling.
[pic]
Newscom; inset: Tomohiro Ohsumi/Bloomberg News
Petrobras operates rigs like this one off Brazil. Its president, Jose Sergio Gabrielli, inset, sees "practically zero" risk that the latest finds will be duds.
All this and high oil prices, too. Can it get any better?
In fact, Petrobras is a singularly tantalizing investment. "Buying Petrobras today is like having the opportunity to invest in Saudi Aramco 40 years ago," says Shawn Reynolds, portfolio manager of Van Eck Global's $1.03 billion Hard Assets Fund. Saudi Aramco, Saudi Arabia's state-owned oil company, today is the world's largest oil corporation in terms of proven reserves and production.
Investors already have struck it rich with Petrobras' stock (ticker: PBR for the American depositary receipts). Recently trading around $70, it has more than doubled over the past 12 months, far outpacing such rivals as ConocoPhillips (COP), Chevron (CVX) and ExxonMobil (XOM). Yet, bulls say the stock could climb another 25% or so within a year, perhaps hitting $90.
"If you're in oil, you have to own this stock," says Robert Levitt, asset manager of $500 million Levitt Capital Management, in Boca Raton, Fla. "They are sitting on the biggest oil find in years, that's why. You don't look at resource companies based on earnings; you look at their oil reserves. Exxon and Conoco aren't making any new discoveries. Petrobras just made the biggest one in years."
The Tupi field, named after a Brazilian native tribe, holds anywhere from five billion to eight billion barrels of oil, Petrobras says. Last year, the company made another find nearby, the Carioca well. And this past May, Petrobras announced the discovery of the Bem-Te-Vi field, followed in June by the Guara -- in the same basin, under 1.33 miles of ocean and rock.
Petrobras holds a 65% stake in this collection of wells, with the British oil and gas company BG Group (BG.UK) holding 25% and Galp Energia of Portugal holding the rest. So, if Tupi were to yield six billion barrels of oil, Petrobras would effectively add about four billion to its current proven reserves of 11.7 billion barrels.
EXACTLY HOW MUCH PETROLEUM the three newer wells are likely to yield is still unknown. But, as Petrobras' president, Jose Sergio Gabrielli, told the Wall Street Journal this month, the risk of finding no oil in the basin where it is drilling is "practically zero." He was unavailable to comment for this article.
Table: The Petrobras Edge
Analysts say that Tupi's potential is already priced into the stock, but oil from the other three is not. If those wells prove productive, the stock could surge. On the other hand, if they turn out to be duds, the stock would stop rising and probably fall in the short term.
Though it could take a year for the picture to become clear, there's good reason for optimism. "Gabrielli has a plan to develop those discoveries, and it is not going to take any technological leaps," says Annette Hester, an energy policy analyst for the Center for Strategic and International Studies in Washington and the Center for International Governance Innovation in Canada. Hester is in a good position to know: She recently met with Gabrielli in Rio de Janeiro to discuss the company's latest finds. "They've been deepwater drillers for 40 years and have the people and have the processes in place," she adds. "They've got top-line people. Are they credible? Absolutely." In a clear sign of progress, Petrobras already has contracted many of the drilling vessels needed for the sites.
Not only is the company promising, but the stock looks reasonably priced, trading at about 14 times estimated 2009 earnings. That's a bit higher than the multiples of ExxonMobil and other oil majors -- but they're not sitting on big new oil fields. JP Morgan, which last week upgraded Petrobras' ADRs from Neutral to Overweight, sees them headed to $85. Reynolds of Van Eck Global has a target of $85 to $90.
THAT'S NOT TO SAY that Petrobras, 55.7% of which is controlled by Brazil's government, doesn't face challenges "...The company carries a lot of risk," says Roberto Padovani, chief strategist at investment bank WestLB. "You see, the government never lets Petrobras raise gasoline prices because of inflation fears, and that causes it to lose [revenue], compared to its peers."
In May, Brasilia allowed gasoline prices to rise for the first time in nearly three years. They jumped 10% at the refinery level.
[pic]
Meanwhile, Petrobras' style of deepwater drilling, which goes below the salt masses in ocean floors, is about three times as costly as normal deepwater drilling, says Levitt, the asset manager. "It's not like Iraq, where you poke your finger in the sand and the oil comes out."
Still, if the new discoveries are proven, Petrobras will become an oil giant, like Venezuela's Petroleos de Venezuela. "Petrobras has everything to be one of the top three oil majors in the world," says Adriano Pires, director of the Brazilian energy and infrastructure consultancy CBIE.
The company still hasn't been able to make Brazil a pure net exporter of oil. In 2008's first four months, it posted an oil and oil derivatives (mostly diesel) trade deficit of $2.7 billion, versus a shortfall of $378.5 million a year earlier, according to Brazil's National Petroleum Agency, ANP.
The Bottom Line
Petrobras stock, which has more than doubled in the past year, could rise another 25% if three offshore wells discovered by the company prove as plentiful as some expect.
But investors clearly have big hopes for the company. Petrobras' market value now is close to $300 billion, more than double its level last year. The only U.S. oil company valued higher is ExxonMobil, with a market capitalization near $460 billion.
"With oil prices where they are, I don't think Petrobras is overvalued," says Ilan Goldfajn, a senior partner at Ciano Investments, a Rio de Janeiro hedge fund. "At these oil prices, I see an upside."
KENNETH RAPOZA is a reporter for Dow Jones Newswires in Sao Paulo. His colleague ROGERIO JELMAYER contributed to this story.
E-mail comments to mail@barrons.com
MONDAY, JUNE 30, 2008
The Petrobras Edge
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By some measures, Petrobras is more expensive than some other integrated majors. But the promise of the potentially huge offshore oil find in Brazil has boosted its stock recently.
Company/ Chevron Conoco
Phillips Exxon
Mobil Petrobras
Ticker CVX COP XOM PBR
Recent Price# $99.36 94.02 87.60 68.83
YTD Change# 6.5% 6.5 –6.5 19.5
Revenue 2008E (bil) $297 222 643 66
EPS 2008E $11.69 11.93 9.17 3.62
P/E Ratio 2008E## 8.5 7.9 9.6 19.0
Proven Reserves 12/07 (mil bbl) 10.8 10.6 22.7 11.7§
Cash Flow (bil)* $37.3 47.2 73.7 27.5
Debt (bil)** $6.8 21.5 10.0 23.9
Annual Dividend $2.6 2.0 1.8 1.1
E=Estimate.
# Through June 25.
## Based on recent price and estimated 2008 earnings.
* As measured by annualized earnings before interest, taxes, depreciation and amortization, through March.
** As of March 31.
§ This figure is as of June 2008.
Sources: Thomson Reuters; company reports
Heiress Arrested Outside Downtown Diner - Boston News Story - WCVB Boston
Heiress Arrested Outside Downtown Diner - Boston News Story - WCVB Boston: "Heiress Arrested Outside Downtown Diner
Jacqueline Kent Cooke Asked 'Do You Know Who I Am?' Before Arrest, Police Say
POSTED: 10:50 am EDT June 28, 2008
UPDATED: 3:25 pm EDT June 28, 2008
[NEWSVINE: Heiress Arrested Outside Downtown Diner] [DELICIOUS: Heiress Arrested Outside Downtown Diner] [DIGG: Heiress Arrested Outside Downtown Diner] [FACEBOOK: Heiress Arrested Outside Downtown Diner] [REDDIT: Heiress Arrested Outside Downtown Diner] [RSS] [PRINT: Heiress Arrested Outside Downtown Diner] [EMAIL: Heiress Arrested Outside Downtown Diner]
BOSTON -- A 20-year-old heiress was arrested Saturday morning after police said she left the South Street Diner without paying and got behind the wheel of her car while drunk.
Jacqueline Kent Cooke, daughter of late Washington Redskins owner and billionaire Jack Kent Cooke, pleaded not guilty to charges of operating under the influence.
Police said an officer followed Jacqueline Kent Cooke and her friend after they left the restaurant without paying around 5:15 a.m.
The police report said the officer saw Jacqueline Kent Cooke’s keys to her BMX 325i fall out of her purse when she went back inside the restaurant to pay the bill, though she denied the car was hers.
The officer advised her to take a cab home, police said."
Jacqueline Kent Cooke Asked 'Do You Know Who I Am?' Before Arrest, Police Say
POSTED: 10:50 am EDT June 28, 2008
UPDATED: 3:25 pm EDT June 28, 2008
[NEWSVINE: Heiress Arrested Outside Downtown Diner] [DELICIOUS: Heiress Arrested Outside Downtown Diner] [DIGG: Heiress Arrested Outside Downtown Diner] [FACEBOOK: Heiress Arrested Outside Downtown Diner] [REDDIT: Heiress Arrested Outside Downtown Diner] [RSS] [PRINT: Heiress Arrested Outside Downtown Diner] [EMAIL: Heiress Arrested Outside Downtown Diner]
BOSTON -- A 20-year-old heiress was arrested Saturday morning after police said she left the South Street Diner without paying and got behind the wheel of her car while drunk.
Jacqueline Kent Cooke, daughter of late Washington Redskins owner and billionaire Jack Kent Cooke, pleaded not guilty to charges of operating under the influence.
Police said an officer followed Jacqueline Kent Cooke and her friend after they left the restaurant without paying around 5:15 a.m.
The police report said the officer saw Jacqueline Kent Cooke’s keys to her BMX 325i fall out of her purse when she went back inside the restaurant to pay the bill, though she denied the car was hers.
The officer advised her to take a cab home, police said."
Friday, June 27, 2008
Horse racing on congressional hot seat - MarketWatch
Horse racing on congressional hot seat - MarketWatch: "Horse racing on congressional hot seat
High-profile deaths of Eight Belles, Barbaro prompt hearings
By William Spain, MarketWatch
Last update: 6:29 p.m. EDT June 18, 2008
CHICAGO (MarketWatch) -- On the eve of a public grilling by Congress probing a recent spate of highly publicized racehorse deaths in the United States, track operators defended their overall safety records while hedging on the creation of a centralized governing body in a series of letters to the legislators overseeing the hearings.
A House panel is looking at whether the industry has in place sufficient, consistent standards to minimize inbreeding, doping and other practices that may lead to injury or death.
It was prompted by the death of Eight Belles, the filly who broke down and had to be euthanized minutes after finishing second in the Kentucky Derby last month. That tragedy followed two other high-profile deaths, those of 2006 Derby winner Barbaro and two-time European champ George Washington, put down after getting hurt in the 2007 Breeders Cup Classic in November.
Heavy publicity surrounding those events has drawn calls from politicians and other quarters for more stringent rules on racing and the creation of a national entity to oversee racing, much like those that rule"
High-profile deaths of Eight Belles, Barbaro prompt hearings
By William Spain, MarketWatch
Last update: 6:29 p.m. EDT June 18, 2008
CHICAGO (MarketWatch) -- On the eve of a public grilling by Congress probing a recent spate of highly publicized racehorse deaths in the United States, track operators defended their overall safety records while hedging on the creation of a centralized governing body in a series of letters to the legislators overseeing the hearings.
A House panel is looking at whether the industry has in place sufficient, consistent standards to minimize inbreeding, doping and other practices that may lead to injury or death.
It was prompted by the death of Eight Belles, the filly who broke down and had to be euthanized minutes after finishing second in the Kentucky Derby last month. That tragedy followed two other high-profile deaths, those of 2006 Derby winner Barbaro and two-time European champ George Washington, put down after getting hurt in the 2007 Breeders Cup Classic in November.
Heavy publicity surrounding those events has drawn calls from politicians and other quarters for more stringent rules on racing and the creation of a national entity to oversee racing, much like those that rule"
Sea Change: U.S. Shrimpers Go Green to Compete - WSJ.com
Sea Change: U.S. Shrimpers Go Green to Compete - WSJ.com: "Sea Change: U.S. Shrimpers
Go Green to Compete
'Free-Range Catch'
Is New Selling Point
In Troubled Industry
By ALYSSA ABKOWITZ
June 27, 2008; Page A4
TYBEE ISLAND, Ga. -- Meet the free-range shrimp.
As summer shrimping gets under way in the warm, coastal waters off the southeastern U.S., fishermen still are struggling to find a viable business model for survival. Nothing has stopped a price-depressing flood of foreign shrimp -- much of which is farm-raised and harvested without the backbreaking tasks of plying the ocean. And many environmentalists still view shrimpers as outdoor perpetrators who harm the ocean, turtles and cherished wildlife.
Fishermen battling competition from the flood of foreign shrimp and criticism from environmentalists struggle to find a viable business model. WSJ's Alyssa Abkowitz reports they are borrowing a page from organic farmers.
So shrimp fishermen are borrowing a page from organic farmers, some of whom let their chickens wander freely before being slaughtered and then sold at higher prices than their cooped-up cousins. Shrimpers are pushing their catch as an organically raised (and presumably happier-in-life) food with a fraction of the carbon tail-print of the millions of shrimp shipped in freighters that must cross the Pacific Ocean or travel from South America to the U.S."
Go Green to Compete
'Free-Range Catch'
Is New Selling Point
In Troubled Industry
By ALYSSA ABKOWITZ
June 27, 2008; Page A4
TYBEE ISLAND, Ga. -- Meet the free-range shrimp.
As summer shrimping gets under way in the warm, coastal waters off the southeastern U.S., fishermen still are struggling to find a viable business model for survival. Nothing has stopped a price-depressing flood of foreign shrimp -- much of which is farm-raised and harvested without the backbreaking tasks of plying the ocean. And many environmentalists still view shrimpers as outdoor perpetrators who harm the ocean, turtles and cherished wildlife.
Fishermen battling competition from the flood of foreign shrimp and criticism from environmentalists struggle to find a viable business model. WSJ's Alyssa Abkowitz reports they are borrowing a page from organic farmers.
So shrimp fishermen are borrowing a page from organic farmers, some of whom let their chickens wander freely before being slaughtered and then sold at higher prices than their cooped-up cousins. Shrimpers are pushing their catch as an organically raised (and presumably happier-in-life) food with a fraction of the carbon tail-print of the millions of shrimp shipped in freighters that must cross the Pacific Ocean or travel from South America to the U.S."
ABC News: Too Many Tigers in One Indian Sanctuary
ABC News: Too Many Tigers in One Indian Sanctuary: "India tigers
White tigers swim in a pond on a hot day at the zoological park in the southern Indian city of Hyderabad April 27, 2008.
(Krishnendu Halder/Reuters)"
White tigers swim in a pond on a hot day at the zoological park in the southern Indian city of Hyderabad April 27, 2008.
(Krishnendu Halder/Reuters)"
Too Many Tigers in One Indian Sanctuary
http://abcnews.go.com/International/story?id=5044400&page=1
Too Many Tigers in One Indian Sanctuary
One of India's Top Reserves to Expand its Boundary to Accommodate Tiger Increase.
By KRITTIVAS MUKHERJEE
NEW DELHI, India, June 11, 2008 —
Tigers are doing so well in one of India's top reserves that authorities have agreed to expand its boundary to give them a bigger area to roam, a rare piece of good news for a country struggling to save its big cat.
Better conservation efforts have led to a crowding of tigers at the Jim Corbett reserve, and the animals have begun straying into buffer zones from core areas, officials said.
The 1,300-square km (500-square mile) reserve at the Himalayan foothills now has 164 tigers, up almost 20 percent over the past five years. Other animal numbers are also up at the reserve.
"Tigers are a highly territorial animal and the young will move away from where they were born and carve out their own space," said Rajesh Gopal of the National Tiger Conservation Authority.
"If we cannot increase the carrying capacity of a reserve, which is easier said than done, there will be internal conflict and mutual killing of tigers."
To avoid this, the authorities have decided to expand Jim Corbett's buffer zone by 30 square km initially.
But Gopal said the challenge was to ensure the safety of spillover tigers that tend to get killed by poachers and villagers.
The success at Jim Corbett is a rare silver lining in an otherwise grim fight in India to save tigers from poachers and habitat destruction.
Poorly armed and badly paid guards, mismanagement and corruption undermine the protection of tigers in India. There are thought to be just 1,411 left in India, according to a new survey that cut numbers by half since 2002 census.
The decline is even more alarming considering India had about 40,000 tigers a century ago. Conservationists say it is unlikely the dwindling population will ever recover, but the government is not giving up just yet.
In January, India said it would spend an estimated $150 million to save its tigers over the next five years, using some of the money to shift villages and tribal communities out of tiger habitats.
Experts say wildlife planning needs to be much better. For instance, experts say around 300,000 of India's poorest people living in its 28 tiger reserves need to be shifted out because many of them help poachers kill tigers and cut down forests.
Globally tigers are also in trouble. World Bank President Robert Zoellick said in the United States on Monday that the worldwide number was less than 4,000 from over 100,000 a century ago.
He was speaking in relation to a new global initiative by the World Bank to save tigers from extinction.
(Editing by Jerry Norton)
Too Many Tigers in One Indian Sanctuary
One of India's Top Reserves to Expand its Boundary to Accommodate Tiger Increase.
By KRITTIVAS MUKHERJEE
NEW DELHI, India, June 11, 2008 —
Tigers are doing so well in one of India's top reserves that authorities have agreed to expand its boundary to give them a bigger area to roam, a rare piece of good news for a country struggling to save its big cat.
Better conservation efforts have led to a crowding of tigers at the Jim Corbett reserve, and the animals have begun straying into buffer zones from core areas, officials said.
The 1,300-square km (500-square mile) reserve at the Himalayan foothills now has 164 tigers, up almost 20 percent over the past five years. Other animal numbers are also up at the reserve.
"Tigers are a highly territorial animal and the young will move away from where they were born and carve out their own space," said Rajesh Gopal of the National Tiger Conservation Authority.
"If we cannot increase the carrying capacity of a reserve, which is easier said than done, there will be internal conflict and mutual killing of tigers."
To avoid this, the authorities have decided to expand Jim Corbett's buffer zone by 30 square km initially.
But Gopal said the challenge was to ensure the safety of spillover tigers that tend to get killed by poachers and villagers.
The success at Jim Corbett is a rare silver lining in an otherwise grim fight in India to save tigers from poachers and habitat destruction.
Poorly armed and badly paid guards, mismanagement and corruption undermine the protection of tigers in India. There are thought to be just 1,411 left in India, according to a new survey that cut numbers by half since 2002 census.
The decline is even more alarming considering India had about 40,000 tigers a century ago. Conservationists say it is unlikely the dwindling population will ever recover, but the government is not giving up just yet.
In January, India said it would spend an estimated $150 million to save its tigers over the next five years, using some of the money to shift villages and tribal communities out of tiger habitats.
Experts say wildlife planning needs to be much better. For instance, experts say around 300,000 of India's poorest people living in its 28 tiger reserves need to be shifted out because many of them help poachers kill tigers and cut down forests.
Globally tigers are also in trouble. World Bank President Robert Zoellick said in the United States on Monday that the worldwide number was less than 4,000 from over 100,000 a century ago.
He was speaking in relation to a new global initiative by the World Bank to save tigers from extinction.
(Editing by Jerry Norton)
Experts Try to Lure Dolphins Back to Ocean
http://abcnews.go.com/GMA/GreatOutdoors/story?id=5260945&page=1
Experts Try to Lure Dolphins Back to Ocean
More Than 1,000 Boats Expected in River Soon, at Dolphins' Peril
By ANDREA CANNING, STEPHANIE DAHLE, MARIECAR FRIAS and JEN PEREIRA
June 27, 2008
While most people on the East Coast only see dolphins in an aquarium or zoo, one New Jersey town has a dozen dolphins getting along swimmingly in a local river.
But experts say that the longer the wayward dolphins stay, the more danger they face from whirling boat propellers.
And the warnings are growing with the popular Fourth of July holiday only a week away. Thousands of boats are expected to descend on the Sea Bright, N.J., waterfront.
"They won't stand a chance, I don't think," local boater Adam Hilsen said of the dolphins.
Marine experts are scheduled to begin work this morning to try and save the dolphins. They will try to send negative sounds and vibrations mimicking a predator under the water, hoping the dolphins will flee.
For three weeks, the dolphins, including three calves, have been trapped between the Shrewsbury and Navesink rivers after taking a wrong turn from the Atlantic Ocean.
No one is certain why the pod of bottlenose dolphins one of the most common dolphins swam up the lazy river, but it's likely they were finding food when they distractedly lost their way.
"It's possible the dolphins may have been following a school of fish or food source into the river," said Felicia Nutter, a veterinarian from the Mammal Marine Center in Sausalito, Calif.
Visitors began gathering, cameras in hand, about two weeks ago to watch the dolphins play. And it seems the entire town has fallen in love with the frolicking mammals.
"Everybody is becoming obsessed with 'dolphin watch,'" visitor Betty Stevens said.
The dolphins have come close to leaving the Sandy Hook Bay, but each time they are only moments away from freedom, the group turns around at a nearby bridge.
Experts blame vibrations from the bridge's traffic and current construction for the dolphins' abrupt turn-around.
This is not the first time dolphins have been stranded in these shallow waters. In 1993, three dolphins spent the summer and fall in the same river. Ultimately, the dolphins were scared by a rescue attempt and drowned after being trapped under ice.
But residents of Sea Bright are hoping for a happier ending for these beloved dolphins.
"[We're] hoping and praying that they make it into the ocean," resident Debbie Perkins said. "That's their home and that's where they belong; where they're safe."
Experts Try to Lure Dolphins Back to Ocean
More Than 1,000 Boats Expected in River Soon, at Dolphins' Peril
By ANDREA CANNING, STEPHANIE DAHLE, MARIECAR FRIAS and JEN PEREIRA
June 27, 2008
While most people on the East Coast only see dolphins in an aquarium or zoo, one New Jersey town has a dozen dolphins getting along swimmingly in a local river.
But experts say that the longer the wayward dolphins stay, the more danger they face from whirling boat propellers.
And the warnings are growing with the popular Fourth of July holiday only a week away. Thousands of boats are expected to descend on the Sea Bright, N.J., waterfront.
"They won't stand a chance, I don't think," local boater Adam Hilsen said of the dolphins.
Marine experts are scheduled to begin work this morning to try and save the dolphins. They will try to send negative sounds and vibrations mimicking a predator under the water, hoping the dolphins will flee.
For three weeks, the dolphins, including three calves, have been trapped between the Shrewsbury and Navesink rivers after taking a wrong turn from the Atlantic Ocean.
No one is certain why the pod of bottlenose dolphins one of the most common dolphins swam up the lazy river, but it's likely they were finding food when they distractedly lost their way.
"It's possible the dolphins may have been following a school of fish or food source into the river," said Felicia Nutter, a veterinarian from the Mammal Marine Center in Sausalito, Calif.
Visitors began gathering, cameras in hand, about two weeks ago to watch the dolphins play. And it seems the entire town has fallen in love with the frolicking mammals.
"Everybody is becoming obsessed with 'dolphin watch,'" visitor Betty Stevens said.
The dolphins have come close to leaving the Sandy Hook Bay, but each time they are only moments away from freedom, the group turns around at a nearby bridge.
Experts blame vibrations from the bridge's traffic and current construction for the dolphins' abrupt turn-around.
This is not the first time dolphins have been stranded in these shallow waters. In 1993, three dolphins spent the summer and fall in the same river. Ultimately, the dolphins were scared by a rescue attempt and drowned after being trapped under ice.
But residents of Sea Bright are hoping for a happier ending for these beloved dolphins.
"[We're] hoping and praying that they make it into the ocean," resident Debbie Perkins said. "That's their home and that's where they belong; where they're safe."
SAC Shuts Sigma Debt Unit, Cuts Fixed-Income Trades (Update1)
http://www.bloomberg.com/apps/news?pid=20601087&sid=awk4tPLkb1y4&refer=home
SAC Shuts Sigma Debt Unit, Cuts Fixed-Income Trades (Update1)
By Caroline Salas and Katherine Burton
June 27 (Bloomberg) -- SAC Capital Advisors LLC, the hedge- fund firm run by billionaire Steven Cohen, is shutting the debt business of its Sigma Capital Management LLC unit as part of broader bond-trading cutbacks, according to two people with knowledge of the decision.
The firm, which oversees $16 billion, will close the business on June 30, eliminating about eight employees, said the people, who asked not to be identified because the move hasn't been made public. Mark Davies, hired from Bear Stearns Cos. in 2007 to expand SAC Capital's fixed-income investing, is leaving the company.
SAC Capital is shifting the focus of its debt trading, said one of the people, who declined to be more specific. Some of the money SAC Capital had in fixed-income assets will be redeployed to equities, the person said.
The global credit rout spurred by the collapse of the subprime-mortgage market has led firms from Sailfish Capital Partners LLC to Peloton Partners LLP to liquidate funds or shut down this year. Fixed-income hedge funds are among the worst- performing groups, according to data compiled by Hedge Fund Research Inc. in Chicago. Fixed-income convertible arbitrage funds lost 4.5 percent through May.
Cohen, 52, started SAC Capital in 1992 and was originally known as a rapid-fire stock trader. As assets under management have grown, the firm has held positions for longer periods and has built bond, currency and commodity groups.
Jonathan Gasthalter, a spokesman for the Stamford, Connecticut-based firm, declined to comment.
Risk Out
Hedge funds have lost 0.2 percent this year through May, according to Hedge Fund Research. Riskier assets have underperformed as investors fled to safer investments. U.S. Treasuries have returned about 1.9 percent this year compared with a 0.86 percent loss for investment-grade corporate bonds, according to index data compiled by Merrill Lynch & Co.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.
To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net
Last Updated: June 27, 2008 15:57 EDT
SAC Shuts Sigma Debt Unit, Cuts Fixed-Income Trades (Update1)
By Caroline Salas and Katherine Burton
June 27 (Bloomberg) -- SAC Capital Advisors LLC, the hedge- fund firm run by billionaire Steven Cohen, is shutting the debt business of its Sigma Capital Management LLC unit as part of broader bond-trading cutbacks, according to two people with knowledge of the decision.
The firm, which oversees $16 billion, will close the business on June 30, eliminating about eight employees, said the people, who asked not to be identified because the move hasn't been made public. Mark Davies, hired from Bear Stearns Cos. in 2007 to expand SAC Capital's fixed-income investing, is leaving the company.
SAC Capital is shifting the focus of its debt trading, said one of the people, who declined to be more specific. Some of the money SAC Capital had in fixed-income assets will be redeployed to equities, the person said.
The global credit rout spurred by the collapse of the subprime-mortgage market has led firms from Sailfish Capital Partners LLC to Peloton Partners LLP to liquidate funds or shut down this year. Fixed-income hedge funds are among the worst- performing groups, according to data compiled by Hedge Fund Research Inc. in Chicago. Fixed-income convertible arbitrage funds lost 4.5 percent through May.
Cohen, 52, started SAC Capital in 1992 and was originally known as a rapid-fire stock trader. As assets under management have grown, the firm has held positions for longer periods and has built bond, currency and commodity groups.
Jonathan Gasthalter, a spokesman for the Stamford, Connecticut-based firm, declined to comment.
Risk Out
Hedge funds have lost 0.2 percent this year through May, according to Hedge Fund Research. Riskier assets have underperformed as investors fled to safer investments. U.S. Treasuries have returned about 1.9 percent this year compared with a 0.86 percent loss for investment-grade corporate bonds, according to index data compiled by Merrill Lynch & Co.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested.
To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net
Last Updated: June 27, 2008 15:57 EDT
Citigroup Distressed-Debt Team Leaving to Start Investment Fund
http://www.bloomberg.com/apps/news?pid=20601087&sid=abZKbGGYodBE&refer=home
Citigroup Distressed-Debt Team Leaving to Start Investment Fund
By Christine Harper
June 27 (Bloomberg) -- The Citigroup Inc. team that invests in distressed corporate bonds and loans is being broken up as its leaders leave to start a hedge fund later this year, according to a person familiar with the matter.
Jeff Jacob and John Humphrey, who set up the bank's global special situations group in 2004, will depart in about two months with six or seven members of their team, said the person, who declined to be identified because the plans aren't public yet. The group's assets, which amount to several billion dollars, will remain at Citigroup, where some will be placed in a customer- trading group's inventory and some will go into a new principal- investing division, the person said.
``We have decided to restructure our Global Special Situations Group in order to maximize the significant opportunities in the global distressed sector,'' said Danielle Romero-Apsilos, a spokeswoman at Citigroup in New York. She declined to elaborate on the team's plans or to say how much if any capital the bank might invest in the fund.
Citigroup has taken $43 billion in writedowns and losses from the collapse of the U.S. mortgage market, more than any other bank. Its shares have tumbled more than 40 percent in New York Stock Exchange composite trading this year amid fears the bank will post more losses as it writes down the value of debt securities it owns. The stock fell to its lowest level since 1998 yesterday after Goldman Sachs Group Inc. analyst William Tanona said the bank may reduce the value of its assets by $8.9 billion.
Performance Issue
The global special situations group invested in corporate bonds and loans, not in mortgage or structured credit, the person said. Joshua Rosner, a managing director at Graham Fisher & Co., said the departure of Jacob and Humphrey raises questions about how their assets had been performing.
``If the performance was great, given all the problems that Citi's been having you'd think it would be in the best interest of Citi to keep them,'' Rosner said.
Jacob and Humphrey are starting their new fund because they see an opportunity in the market and have been approached by potential investors about starting a new business, said the person familiar with their plans.
Thomas Gahan, who ran Deutsche Bank AG's global capital markets division, said in March that was leaving to start his own investment firm, citing a ``huge opportunity across the credit spectrum.'' David Sherr, who oversaw Lehman Brothers Holdings Inc.'s securitization group, started his own hedge fund in March, and Rick Rieder, who managed a proprietary-trading fund at Lehman, brought about $5 billion of Lehman assets with him to a new hedge fund called R3 Capital Partners earlier this month.
Some members of Citigroup's global special situations group will join the customer-focused distressed sales and trading business led by Carl Meyer, while others will join a private investment business run by John Peruzzi, the person said. Both Meyer and Peruzzi will report to Carey Lathrop, who runs global credit trading, the person said. All are based in New York.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.
Last Updated: June 27, 2008 12:33 EDT
Citigroup Distressed-Debt Team Leaving to Start Investment Fund
By Christine Harper
June 27 (Bloomberg) -- The Citigroup Inc. team that invests in distressed corporate bonds and loans is being broken up as its leaders leave to start a hedge fund later this year, according to a person familiar with the matter.
Jeff Jacob and John Humphrey, who set up the bank's global special situations group in 2004, will depart in about two months with six or seven members of their team, said the person, who declined to be identified because the plans aren't public yet. The group's assets, which amount to several billion dollars, will remain at Citigroup, where some will be placed in a customer- trading group's inventory and some will go into a new principal- investing division, the person said.
``We have decided to restructure our Global Special Situations Group in order to maximize the significant opportunities in the global distressed sector,'' said Danielle Romero-Apsilos, a spokeswoman at Citigroup in New York. She declined to elaborate on the team's plans or to say how much if any capital the bank might invest in the fund.
Citigroup has taken $43 billion in writedowns and losses from the collapse of the U.S. mortgage market, more than any other bank. Its shares have tumbled more than 40 percent in New York Stock Exchange composite trading this year amid fears the bank will post more losses as it writes down the value of debt securities it owns. The stock fell to its lowest level since 1998 yesterday after Goldman Sachs Group Inc. analyst William Tanona said the bank may reduce the value of its assets by $8.9 billion.
Performance Issue
The global special situations group invested in corporate bonds and loans, not in mortgage or structured credit, the person said. Joshua Rosner, a managing director at Graham Fisher & Co., said the departure of Jacob and Humphrey raises questions about how their assets had been performing.
``If the performance was great, given all the problems that Citi's been having you'd think it would be in the best interest of Citi to keep them,'' Rosner said.
Jacob and Humphrey are starting their new fund because they see an opportunity in the market and have been approached by potential investors about starting a new business, said the person familiar with their plans.
Thomas Gahan, who ran Deutsche Bank AG's global capital markets division, said in March that was leaving to start his own investment firm, citing a ``huge opportunity across the credit spectrum.'' David Sherr, who oversaw Lehman Brothers Holdings Inc.'s securitization group, started his own hedge fund in March, and Rick Rieder, who managed a proprietary-trading fund at Lehman, brought about $5 billion of Lehman assets with him to a new hedge fund called R3 Capital Partners earlier this month.
Some members of Citigroup's global special situations group will join the customer-focused distressed sales and trading business led by Carl Meyer, while others will join a private investment business run by John Peruzzi, the person said. Both Meyer and Peruzzi will report to Carey Lathrop, who runs global credit trading, the person said. All are based in New York.
To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.
Last Updated: June 27, 2008 12:33 EDT
Market Abuse Is Rife, Just Not in Short Selling: Mark Gilbert
http://www.bloomberg.com/apps/news?pid=20601039&sid=aShrKcSPUa0A&refer=home
Market Abuse Is Rife, Just Not in Short Selling: Mark Gilbert
Commentary by Mark Gilbert
June 26 (Bloomberg) -- The Financial Services Authority has been investigating U.K. trading for evidence of what it calls market abuse. The regulator hasn't been able to make the charges stick. That's because it is looking in the wrong direction.
Run a six-month chart of the share price of HBOS Plc, the U.K.'s largest mortgage lender. The FSA wants us to mistrust the decline in the first two weeks of this month to a record low of 249 pence. It alleges dodgy dealing by malicious short sellers, who borrow stock and then spread mendacious gossip to drive a company's share price lower, pocketing profits along the way.
That's nonsense. Anyone who hasn't been living in a cave this year could come up with a laundry list of genuine reasons to short the shares of a mortgage lender -- especially as HBOS is in the middle of trying to raise 4 billion pounds ($7.9 billion) of fresh capital from its shareholders at 275 pence per share.
Want to see market abuse in action? Check out how HBOS popped higher from that June 12 low, when a 27 percent surge in just four trading sessions put clear blue sky between where the company traded and that all-important rights-offer price. All important, that is, for regulators trying to avoid the debacle of a failed fund-raising exercise by a leading British financial institution, and the underwriters on the hook to ensure HBOS gets its money.
Market Manipulation?
So what sparked the rally? Great news about the U.K. housing market? Revelations that the loan book at HBOS was in better- than-expected shape? A mysterious rebound in what John Maynard Keynes dubbed animal spirits?
None of the above. The FSA itself kick-started the revival by announcing on June 13 that short sellers would have to disclose their trades during rights offers, and that it might block the stock lending that enables investors to bet on a drop.
If that's not market manipulation -- coming after HBOS slumped below its offer price, with no investor consultation and no prior notice, and prompting a 14 percent, one-day jump in the beleaguered lender -- I don't know what is. The regulator has since had to issue no less than three so-called clarifications of its new rules, which came into force on June 20.
It isn't the FSA's job to attempt to bolster a faltering share sale by moving the goalposts on a Friday. It is ridiculous to suggest that hedge funds, the usual suspects that the authorities corral into a line-up whenever a market goes the ``wrong'' way, are somehow acting abusively by speculating that HBOS isn't worth as much as its management says it is.
Bearish on Bear
Think back to the collapse of Bear Stearns Cos. earlier this year. Skeptical shareholders proved absolutely justified in dumping the stock, amid regulatory mutterings of wrongdoing and malfeasance by investors. Moreover, its death certificate was signed by its peers, not by short sellers, after the banking community decided it had zero faith in the securities firm.
Why should investors be anything but bearish about U.K. mortgage lenders, which are cranking up their interest rates, demanding higher deposits and trying to shrink their home-loan businesses in a huge vote of no confidence in the outlook for real-estate values? Last week, HBOS almost doubled its prediction for how much U.K. house prices will decline this year, to 9 percent from 5 percent previously.
The backdrop to the difficulties HBOS is having is instructive. It was beaten to market by Bradford & Bingley Plc, Britain's biggest lender to owners of rental properties. In April, the mortgage company said it didn't need fresh capital. In May, it tried to raise 300 million pounds by selling shares at 82 pence, a 48 percent discount to the then-prevailing price.
Slash and Burn
By this month, a 48 percent slump in profit and a collapsing share price forced the company to slash that offer to 55 pence, and to sell a 23 percent stake to U.S. leveraged buyout firm TPG Inc. By June 2, the shares were trading as cheaply as 60 pence, down 75 percent in the year. This week, Bradford & Bingley is the target of a takeover bid by Clive Cowdery's Resolution Ltd.
Bradford & Bingley ended last week with a market value of about 423 million pounds, making its misadventure an embarrassment. HBOS is 25 times bigger, so a lot more is riding on its share sale. And it's not clear that the FSA medicine is even working; the shares closed below the rights-offer price at the end of two trading sessions this week.
The authorities can't keep wrapping the banking industry in cotton wool just because it is the banking industry. Banks, like children, have to be allowed to eat dirt, bruise knees, and fall off the swings occasionally. By propping them up, the authorities are abusing the market.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
Last Updated: June 25, 2008 19:01 EDT
Market Abuse Is Rife, Just Not in Short Selling: Mark Gilbert
Commentary by Mark Gilbert
June 26 (Bloomberg) -- The Financial Services Authority has been investigating U.K. trading for evidence of what it calls market abuse. The regulator hasn't been able to make the charges stick. That's because it is looking in the wrong direction.
Run a six-month chart of the share price of HBOS Plc, the U.K.'s largest mortgage lender. The FSA wants us to mistrust the decline in the first two weeks of this month to a record low of 249 pence. It alleges dodgy dealing by malicious short sellers, who borrow stock and then spread mendacious gossip to drive a company's share price lower, pocketing profits along the way.
That's nonsense. Anyone who hasn't been living in a cave this year could come up with a laundry list of genuine reasons to short the shares of a mortgage lender -- especially as HBOS is in the middle of trying to raise 4 billion pounds ($7.9 billion) of fresh capital from its shareholders at 275 pence per share.
Want to see market abuse in action? Check out how HBOS popped higher from that June 12 low, when a 27 percent surge in just four trading sessions put clear blue sky between where the company traded and that all-important rights-offer price. All important, that is, for regulators trying to avoid the debacle of a failed fund-raising exercise by a leading British financial institution, and the underwriters on the hook to ensure HBOS gets its money.
Market Manipulation?
So what sparked the rally? Great news about the U.K. housing market? Revelations that the loan book at HBOS was in better- than-expected shape? A mysterious rebound in what John Maynard Keynes dubbed animal spirits?
None of the above. The FSA itself kick-started the revival by announcing on June 13 that short sellers would have to disclose their trades during rights offers, and that it might block the stock lending that enables investors to bet on a drop.
If that's not market manipulation -- coming after HBOS slumped below its offer price, with no investor consultation and no prior notice, and prompting a 14 percent, one-day jump in the beleaguered lender -- I don't know what is. The regulator has since had to issue no less than three so-called clarifications of its new rules, which came into force on June 20.
It isn't the FSA's job to attempt to bolster a faltering share sale by moving the goalposts on a Friday. It is ridiculous to suggest that hedge funds, the usual suspects that the authorities corral into a line-up whenever a market goes the ``wrong'' way, are somehow acting abusively by speculating that HBOS isn't worth as much as its management says it is.
Bearish on Bear
Think back to the collapse of Bear Stearns Cos. earlier this year. Skeptical shareholders proved absolutely justified in dumping the stock, amid regulatory mutterings of wrongdoing and malfeasance by investors. Moreover, its death certificate was signed by its peers, not by short sellers, after the banking community decided it had zero faith in the securities firm.
Why should investors be anything but bearish about U.K. mortgage lenders, which are cranking up their interest rates, demanding higher deposits and trying to shrink their home-loan businesses in a huge vote of no confidence in the outlook for real-estate values? Last week, HBOS almost doubled its prediction for how much U.K. house prices will decline this year, to 9 percent from 5 percent previously.
The backdrop to the difficulties HBOS is having is instructive. It was beaten to market by Bradford & Bingley Plc, Britain's biggest lender to owners of rental properties. In April, the mortgage company said it didn't need fresh capital. In May, it tried to raise 300 million pounds by selling shares at 82 pence, a 48 percent discount to the then-prevailing price.
Slash and Burn
By this month, a 48 percent slump in profit and a collapsing share price forced the company to slash that offer to 55 pence, and to sell a 23 percent stake to U.S. leveraged buyout firm TPG Inc. By June 2, the shares were trading as cheaply as 60 pence, down 75 percent in the year. This week, Bradford & Bingley is the target of a takeover bid by Clive Cowdery's Resolution Ltd.
Bradford & Bingley ended last week with a market value of about 423 million pounds, making its misadventure an embarrassment. HBOS is 25 times bigger, so a lot more is riding on its share sale. And it's not clear that the FSA medicine is even working; the shares closed below the rights-offer price at the end of two trading sessions this week.
The authorities can't keep wrapping the banking industry in cotton wool just because it is the banking industry. Banks, like children, have to be allowed to eat dirt, bruise knees, and fall off the swings occasionally. By propping them up, the authorities are abusing the market.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net
Last Updated: June 25, 2008 19:01 EDT
'The Devil Wears Prada' Author On Books and Looks Lauren Weisberger talks about her style staples
http://online.wsj.com/article/SB121424010461096991.html?mod=hps_us_inside_today
'The Devil Wears Prada' Author On Books and Looks
Lauren Weisberger talks about her style staples
By ELVA RAMIREZ
June 27, 2008 12:00 p.m.
As the author behind "The Devil Wears Prada," Lauren Weisberger knows fashion. Her bestselling book-turned-movie was inspired by her first job as the assistant to Vogue magazine editor-in-chief Anna Wintour. But any sign of stilettos or couture clothing is buried deep within Ms. Weisberger's wardrobe – she much prefers jeans and flip flops.
Now on tour for her third book, "Chasing Harry Winston," Ms. Weisberger, 31, took a break to discuss packing for an extended trip, dressing for power, and how she clothes her characters – and herself.
[Lauren Weisberger]
Simon & Schuster
Lauren Weisberger
The Wall Street Journal: How do you describe your personal style?
Lauren Weisberger: My uniform is jeans all the time, everywhere, with heels to go out and with flip flops during the day. Right now I'm hooked on a brand called Genetic. They fit so well. In the winter, I wear cashmere sweaters all the time. I wear fitted James Perse button-down [shirts] a lot.
The image I try to convey is casual, while still being neat and a little bit stylish. I'm a writer and I don't ever want to get super-dressed up. I never go in for meetings at Simon & Schuster or appearances on TV in business wear.
Does your own style ever filter into how you dress your characters?
Ms. Weisberger: I think so. They are real women living in New York: Sometimes you look cute, most of the time you don't. I'm never going to be one of those people who can walk into a store and put together some outrageous, unique outfit from scratch. I like clean, classic things.
[The exception would be] Adriana in "Chasing Harry Winston," who is super glamorous and high-fashion. She is not me. I think a lot of people assume I'm much more into fashion because of "The Devil Wears Prada," but that's totally not the case.
How do you pack for a book tour?
Ms. Weisberger: The first thing I did was buy one of those suitcase weighers. I packed it to exactly 50 pounds, which is what's allowed [on flights]. I packed probably five different dresses, almost all of them Diane von Furstenberg, because they are so easy. That fabric is good in any climate. I kept rotating the dresses. Thank God for same-day dry cleaning in hotels. I brought a Sharper Image mini-steamer, which was life-saving. I also brought white jeans, regular jeans and a bunch of different tops. I didn't bring heels with me. They are too hard to pack and too hard to wear.
[on book tour]
LaurenWeisberger.com
How do you dress when you want to convey power?
Ms. Weisberger: That is never a thought that enters my mind -- powerful. I think as long as you feel confident, you feel good. [It's] important to put on something that is really comfortable and not some dress that I thought for a second might be too short, too low-cut, or heels that are too high. All of those things make me feel self-conscious. I want to feel confident and comfortable, and for me that would be being neat and classic and fully-covered.
How important is appearance in the work place -- especially at a place like Vogue?
Ms. Weisberger: I think appearance in the workplace is tremendously important, but nowhere more so than a place like Vogue. When the core of your business is showing women how to dress, groom, and present themselves best, it certainly follows that you had better present well yourself.
Have you ever had any work dress mishaps?
Ms. Weisberger: Wearing a full-fledged pantsuit with briefcase to my very first interview at Vogue was definitely not one of my finer apparel moments.
How does one balance comfort with sophistication and style at the office?
Ms. Weisberger: I prefer to keep things simple: not a ton of accessories; classic, well-fitted clothes without a lot of drama; and most importantly, flats, flats, flats!
There are just so many beautiful ballet flats and flat sandals now that there's no need to wear heels to look professional and pulled-together. I wear flats for anything work-related -- book tours, interviews, travel -- and save my foot-killing heels for nights on the town.
Find television listings for The Devil Wears Prada at LocateTV.
Do you have anything that you splurge on?
Ms. Weisberger: I buy one or two really good bags a year. The one that I've been carrying for seven or eight months now is a Goyard hobo bag. I just love it. Its really light. It goes with everything. I don't switch my bags to go out at night, either.
Do you dress differently on the weekends?
Ms. Weisberger: Weekdays and weekends are the same. It's nice that there's no delineation. In my 20s, when I was going out all the time, I used to get dressed up all the time. I had more occasions to wear things to, but now I just really like keeping it simple. I'm fine wearing the same things over and over again.
What's one of your favorite fashion memories?
Ms. Weisberger: It would probably be a dress I wore in ninth or tenth grade to one of our formals. I remember wearing it around the house all the time. It was a really short, black-sequined, halter-neck tie dress. I thought it was the hottest thing on earth.
Write to Elva Ramirez at elva.ramirez@wsj.com
'The Devil Wears Prada' Author On Books and Looks
Lauren Weisberger talks about her style staples
By ELVA RAMIREZ
June 27, 2008 12:00 p.m.
As the author behind "The Devil Wears Prada," Lauren Weisberger knows fashion. Her bestselling book-turned-movie was inspired by her first job as the assistant to Vogue magazine editor-in-chief Anna Wintour. But any sign of stilettos or couture clothing is buried deep within Ms. Weisberger's wardrobe – she much prefers jeans and flip flops.
Now on tour for her third book, "Chasing Harry Winston," Ms. Weisberger, 31, took a break to discuss packing for an extended trip, dressing for power, and how she clothes her characters – and herself.
[Lauren Weisberger]
Simon & Schuster
Lauren Weisberger
The Wall Street Journal: How do you describe your personal style?
Lauren Weisberger: My uniform is jeans all the time, everywhere, with heels to go out and with flip flops during the day. Right now I'm hooked on a brand called Genetic. They fit so well. In the winter, I wear cashmere sweaters all the time. I wear fitted James Perse button-down [shirts] a lot.
The image I try to convey is casual, while still being neat and a little bit stylish. I'm a writer and I don't ever want to get super-dressed up. I never go in for meetings at Simon & Schuster or appearances on TV in business wear.
Does your own style ever filter into how you dress your characters?
Ms. Weisberger: I think so. They are real women living in New York: Sometimes you look cute, most of the time you don't. I'm never going to be one of those people who can walk into a store and put together some outrageous, unique outfit from scratch. I like clean, classic things.
[The exception would be] Adriana in "Chasing Harry Winston," who is super glamorous and high-fashion. She is not me. I think a lot of people assume I'm much more into fashion because of "The Devil Wears Prada," but that's totally not the case.
How do you pack for a book tour?
Ms. Weisberger: The first thing I did was buy one of those suitcase weighers. I packed it to exactly 50 pounds, which is what's allowed [on flights]. I packed probably five different dresses, almost all of them Diane von Furstenberg, because they are so easy. That fabric is good in any climate. I kept rotating the dresses. Thank God for same-day dry cleaning in hotels. I brought a Sharper Image mini-steamer, which was life-saving. I also brought white jeans, regular jeans and a bunch of different tops. I didn't bring heels with me. They are too hard to pack and too hard to wear.
[on book tour]
LaurenWeisberger.com
How do you dress when you want to convey power?
Ms. Weisberger: That is never a thought that enters my mind -- powerful. I think as long as you feel confident, you feel good. [It's] important to put on something that is really comfortable and not some dress that I thought for a second might be too short, too low-cut, or heels that are too high. All of those things make me feel self-conscious. I want to feel confident and comfortable, and for me that would be being neat and classic and fully-covered.
How important is appearance in the work place -- especially at a place like Vogue?
Ms. Weisberger: I think appearance in the workplace is tremendously important, but nowhere more so than a place like Vogue. When the core of your business is showing women how to dress, groom, and present themselves best, it certainly follows that you had better present well yourself.
Have you ever had any work dress mishaps?
Ms. Weisberger: Wearing a full-fledged pantsuit with briefcase to my very first interview at Vogue was definitely not one of my finer apparel moments.
How does one balance comfort with sophistication and style at the office?
Ms. Weisberger: I prefer to keep things simple: not a ton of accessories; classic, well-fitted clothes without a lot of drama; and most importantly, flats, flats, flats!
There are just so many beautiful ballet flats and flat sandals now that there's no need to wear heels to look professional and pulled-together. I wear flats for anything work-related -- book tours, interviews, travel -- and save my foot-killing heels for nights on the town.
Find television listings for The Devil Wears Prada at LocateTV.
Do you have anything that you splurge on?
Ms. Weisberger: I buy one or two really good bags a year. The one that I've been carrying for seven or eight months now is a Goyard hobo bag. I just love it. Its really light. It goes with everything. I don't switch my bags to go out at night, either.
Do you dress differently on the weekends?
Ms. Weisberger: Weekdays and weekends are the same. It's nice that there's no delineation. In my 20s, when I was going out all the time, I used to get dressed up all the time. I had more occasions to wear things to, but now I just really like keeping it simple. I'm fine wearing the same things over and over again.
What's one of your favorite fashion memories?
Ms. Weisberger: It would probably be a dress I wore in ninth or tenth grade to one of our formals. I remember wearing it around the house all the time. It was a really short, black-sequined, halter-neck tie dress. I thought it was the hottest thing on earth.
Write to Elva Ramirez at elva.ramirez@wsj.com
Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
http://blogs.wsj.com/environmentalcapital/2008/06/26/oil-shock-analyst-predicts-7-gas-mass-exodus-of-us-cars/#comment-17093
June 26, 2008, 11:12 am
Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
Posted by Keith Johnson
Oil at $135? That was just the opening skirmish in the “peak oil” wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least.
That’s the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets, who just a few months ago figured $200 oil would be a thing of the distant future—like 2012.
GasChart_art_200_20080626110012.jpg
Attention-grabber (CIBC)
Mr. Rubin laughs off recent attempts to take the steam out of global oil markets. Saudi production promises of 200,000 barrels a day doesn’t dent the 4 million barrel-per-day decline from aging fields every year, for starters. And it will just be “gobbled up” by increasing domestic consumption in Saudi Arabia, like other oil-producing countries that subsidize fuel.
So what about China’s flirtation with market reality by unwinding some fuel subsidies? No luck in curbing demand or prices, either. Not only does China’s recent move translate into $3.25 a gallon gas—still a steal, relatively speaking—it’s given fresh legs to beleaguered Chinese refiners who’ve been operating in the red, thanks to Chinese price controls. So now they are producing even more gasoline and fueling even more cars than they were before. The upshot?
Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today—a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks.
And who will be parking their cars? The 57 million American households that have both cars and access to something resembling public transit. Gasoline at $7 begins to approach prices Europeans have paid for years, meaning that chunk of America “will start to act more and more like Europeans,” Mr. Rubin says. Not soccer moms in a minivan—soccer fans, searching for tokens:
Our analysis suggests that about half of the number of cars coming off the road in the next four years will be from low income households who have access to public transit. At their current driving habits, filling up the tank will have risen from about 7% of their income to 20%, an increase that will see many start taking the bus.
Gas prices already appear to be reshaping suburbia. But what Mr. Rubin is predicting is a far bigger shock to the American system. Europe has had decades to develop a society based on expensive energy. What will happen if Americans suddenly are forced to shoulder European-style energy prices — but without the European-style society to cope with them?
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Contrary to what US Energy Secretary Samuel Bodman says I don’t think supply and demand are really causing the problem. There are to many other factors at play here. Too many middle men skimming profits. Too much manipulation of supplies and inventories. The price of oil nearly doubled and gas went up a third in just one year and yet figures are coming out that indicate we are using less gas, not more, probably because people are cutting back on gas. That clearly means supply and demand have nothing to do with these prices. Speculation is driving prices !!! Lawmakers blame loopholes in commodities trading like the Swaps loophole or Enron Loophole. Whatever you want to call it, It’s a get rich quick scheme and not much less obvious than a pyramid scheme. There is no way supply is causing this gas crisis. I put the full blame on speculators and commodities traders and I am sick of the smoke and mirrors. The meeting in Saudi Arabia hasn’t achieved any substantial results from what I can see. The price of oil is still going up. There must be something else that’s driving prices up and I think I know what it is. Although il appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. The main thing driving inflation is oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won’t be able to bail them out this time because the cost would be far to great. The CFTC and ICE will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca
Comment by Ted McKeown - June 26, 2008 at 11:24 am
Ted, The US is not the only country that uses oil. You must account for the whole world when determining demand and supply. The US has for many years lived beyond its means; several developing countries beneath theirs. Also, productivity in the developing countries has been increasing rapidly. It is not surprising that, say, China can more competitively bid against us for oil and other commodities.
Comment by Joe - June 26, 2008 at 11:55 am
Any idea how much excess capacity remains in Chinese refineries? One can’t expect China to suddenly drop all subsidies at once. At some point the Chinese refineries will get close to capacity and (if the Chinese government continues to ease subsidies, big if) the consumption increase will slightly level off.
Comment by Chris - June 26, 2008 at 11:55 am
Hate to rain on your parade, but it is more supply/demand than speculation. The USA is no longer the driving force on oil & gasoline pricing. We are truly in a global economy (the world is flat). For every one driver in the US that cuts back there are 20 in India, China, Brazil & Russia that are waiting to take their place as the middle classes in these countries develop. Americans must wake up and realize that the USA does not control the global economy like it has in the past. A bitter pill to swallow but it is the truth. As you can see, I am in the energy business and personally agree that high oil prices are not good for the USA or the energy industry. However, higher taxes are not the answer. More domestic drilling and alternative energy are the only things that will save us. We should have addressed this 25 years ago but Congress was not brave enough to do it. Even though it will take 5-10 years to see significant domestic increase with government encouragement, it is better late than never. Have to start sometime.
Comment by G R Talley - June 26, 2008 at 12:03 pm
Unfortunately, the US is not the only country that uses oil. China and India are rapidly expanding their use of oil which in turn caused the price of oil to increase. The fact that it has happened so recently is due to the fact that crude oil production has remained, for the most part, flat for the past few years. That indicates either a huge conspiracy by all of the oil producing countries (doubtful) or problems in producing more (likely).
Comment by Jerry L Wilkens - June 26, 2008 at 12:06 pm
China dropped their subsidies on oil last week and raised the price on gas and deisel fuel. Demand is already dropping. Don’t worry. I already did my homework
Comment by Ted - June 26, 2008 at 12:08 pm
Personally I don’t see how we can tell if demand has dropped in China in one week after subsidies were changed. We can’t measure that quickly in the US much less a foreign country. Demand may drop in China but we need time to tell. Right now all we have is speculation that it will drop. Even if China demand slows down it is still a huge market to supply. In running an independent energy company, I make a living by staying on top of oil and natural gas prices. While speculation has increased volatility in the oil market it is not the driving force in the overall price of oil. Supply is still the main factor, devaluation of the dollar ranks high and supply disruption in unstable countries is next.
Comment by G R Talley - June 26, 2008 at 12:16 pm
Mr. Talley,
Back in March U.S. crack spreads were negative.
What does that say about demand for distillates vs. crude?
A friend who trades with Sinopec said that in May they were losing money on every bbl. and had told the Chinese government that they would have to cut back on diesel production to contain the losses.
.
Back in August I pointed out that it took .105 oz. of gold to buy a bbl. of WTI.
Today it takes .15125 oz.
What does this 44% increase (as priced in GOLD) say about the weak dollar theory?
Comment by Climateer - June 26, 2008 at 12:53 pm
Whether or not the world has hit or is within a few years of peak oil is subject to some debate. The fact that the United States has hit a peak in consumption is not subject to debate. Consumption IS falling; not only due to high prices, but because the supply of EXPORTED oil is falling. Exported oil fell from (roughly) 46.3 million barrels a day in 2005 to 44.8 million barrels a day in 2007. (EIA data) I would suggest that its really the EXPORTED oil that sets the world oil price, more than total oil produced. Many Exporting countries subsidize their own oil internally.
Buckle up America! It’s gonna be an interesting ride.
Comment by BillR - June 26, 2008 at 12:53 pm
Scenario: After long summer of high gas prices, economy on the brink, Congress okays drilling everywhere, suggests making biodiesel out of reindeer - Iraq announces great strides in improving oil production & security. They predict pumping XX million barrels a day to meet growing world demand in the near future. Dorky Dems who opposed saving the fine Iraqi people look like dimwits. Oil speculators are routed, driven from the Temples. Gas prices come down, GOP wins by a landslide. George and Dick ride off into the sunset. I love a happy ending.
Comment by Fiction Writer - June 26, 2008 at 1:13 pm
I have never heard the President (or anyone else in the gov.) encourage Americans to USE LESS gasoline (or diesel or whatever).
I remember a sign in the railroad station in 1945: “Is this trip necessary?”
Comment by J P Brazel - June 26, 2008 at 1:29 pm
Climateer:
Crack spreads have taken a big hit that is why refining stocks are falling. As to China, they have been subsidizing their gasoline and still are that is why their gasoline price is still much less than the rest of the world.
As to the devaluation of the dollar, plot the value of the dollar versus crude oil for the last year or two and I think you will see a very nice reverse correlation.
Comment by G R Talley - June 26, 2008 at 2:35 pm
All this talk about America beginning to feel more like Europe with high fuel prices consistently fail to mention the reason Europe endured such high energy prices in the past, when America was on cruise control in terms of low fuel prices, and fuel was relatively cheap to produce. It is largely due to the high tax leveraged on fuel in the EU block. This tax revenue is used to build, maintain and promote the HIGHLY efficeint European rail network, amoung other social benfits mostly absent from the American strata of government. While I am not a indulgent fan of exorbitant tax to fund innovation and it definately contradicts our proud and proven history of capatilist development in the private sector in the land of red, white and blue; where is the investment from the vibrant private sector in highly efficient and effective mass transportation connecting our urban centers? I have a hard time believing we will have major improvements in the near term and therfore will be relagated to our highway bound vehicles to keep up an assembalance of our current way of life in most areas. I doubt most regional goverments can produce the nimble operations needed to make up for lost time, but it seems the demand will quickly become great enough to make it a lucrative investment for private firms in a rapidly shrinking time horizon. Even areas with efficient, yet limited, mass transit (New England for example) are already pushing their current systems to the maximum.
Comment by brian backstrom - June 26, 2008 at 3:17 pm
We are simply seeing importers bidding for declining net oil exports. Our model, recent case histories and current data suggest that we are going to continue to see an accelerating net export decline rate.
For more info, do a Google Search for:
Net Oil Exports + Jeffrey Brown.
Comment by Jeffrey J. Brown - June 26, 2008 at 3:21 pm
peak oil. peak oil. peak oil.
now will you listen?
http://theoildrum.com
Comment by Quincy Walters - June 26, 2008 at 3:31 pm
Mr. Talley,
Thanks.
I interpreted the declining (and negative, if only for one day, I think it was 3-17) crack spread to mean that there was less demand for distillates than for crude, which didn’t make sense.
.
I have a fancy chartmaker that can plot any price in any currency. It was the fact that crude was up, not just against fiat currencies but gold that caught my eye.
That 44% is very close to the number I come up with when I try to figure the impact of the index investors on the run-up from $80, i.e. about 25 bucks.
As Frankenstein would say regarding futures: “Speculators good, Investors bad”.
I know some NYMEX types who won’t take the other side of an index long’s order anymore, the index longs just keep bidding and bidding…
Comment by Climateer - June 26, 2008 at 4:11 pm
So let’s play it all out according to these assumptions. $7 a barrel translates to 10 million fewer cars on the road which leads to more people taking mass transit and moving to urban areas, where transit makes sense. I see the affect of this migration being extremely contractionary for consumer spending and therefore the overall US economy.
Today it’s easy to fill your car up with unneeded consumer products when out running errands. What will happen when people start taking the bus and train? I would think pure logistics of carrying your typical Costco load onto a bus will limit daily spending to pure necessities. Even the smaller urban space you would now be forced to live in will constrict what you fill it with, right? What about diminished tourism as a result of high oil? Won’t that decrease overall consumption?
My point is that higher oil can only shrink our consumption and therefore our GDP…at least for the near term. This contraction WILL have a ripple affect on the rest of the world. Unlike Europe (which he tries to draw parallels with) we are the world’s consumers.
A bad assumption would be to assume that China will continue to grow and develop at the same rate (and thus demand the same amount of oil) despite a giant decrease in what they produce—spurred of course by a decrease in American consumption. This decrease in Chinese oil demand will invariably ease oil prices or at the very minimum find equilibrium.
Comment by Joe Ballard - June 26, 2008 at 4:26 pm
We are witnessing the end of the American Republic.
Comment by Ted Harwood - June 26, 2008 at 4:32 pm
Re: Price Equilibrium, “Worst Case”
The problem is that we are probably decades away from the net oil export decline stabilizing, and as noted above, I expect to see the decline rate continue to accelerate. Demand has to fall, as declining net oil exports are allocated to the high bidders.
Comment by Jeffrey J. Brown - June 26, 2008 at 4:58 pm
Hey Keith, any thoughts on this as a solution to our oil problems.
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A $3300 dollar retrofit to turn any car into a plugin hybrid.
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It’d be perhaps the quickest/cheapest way to shift Americans to driving primarily on electricity.
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http://orangehues.com/blog/2008/05/our-inefficient-cars-poulsen-hybrid.html
Comment by David Ahlport - June 26, 2008 at 5:29 pm
And for those who quibble about “Supply and Demand not explaining everything”.
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You can blame a large part of that on the “Demand” for something different entirely.
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US Dollars.
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Thanks due to Deficit Spending, the Trade Deficit, and Irresponsible Market Regulation of issues like the Mortgage/Loan Crisis, the value of the US dollar is plunging.
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As the value of the US dollar goes down, the perceived cost of a barrel of oil rises.
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That’s where that large “unaccounted” price increase for us Americans is coming from.
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http://seekingalpha.com/article/72651-oil-would-be-65-if-the-dollar-had-stayed-strong-agi
Comment by David Ahlport - June 26, 2008 at 5:42 pm
And no, I don’t want to hear any whining about electricity supply, and “What if it comes from coal.
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Since those excuses aren’t substantiated by the facts.
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There’s plenty of electricity.
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And even if we exclusively used the dirtiest coal plants to power our cars, it would still have less emissions than a conventional car using oil.
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http://greyfalcon.net/plugins7
Comment by David Ahlport - June 26, 2008 at 5:47 pm
We will be just fine - it is only a blip, oil prices will come down.
I love the optimism based on macro economic hand waving. What I find amazing is how OPEC and other oil producing countries and the speculators never thought of this ingenious plot to inflate the price of oil a decade ago - hmm…. It just can’t be that supply is not meeting demand - just can’t be!
Eric
blog.pickuppal.com
Comment by Eric Dewhirst - June 26, 2008 at 6:26 pm
Those singletons making less than 30K or a two car family of 4 taking home less than 60K per year are going to be in a world of pooh @ $7.00 per gal. Others aren’t giving up the wheels just yet but when they do, they’ll simply switch to more efficient (foreign) models because they won’t tolerate public transportation given the madness that comes with it. Wall Street had better get its crap in order and in quick freaking fashion or they stand to lose BIG!! We continue to forget that without that 70% (the consumer); we have NOTHING!!! I was filling up the other day when a guy on the opposite isle from started screaming. I was startled as I looked over to ask if he was ok. He then yelled; “someone call the police, I’m watching a robbery in progress”. He stopped the pump at $20.00 (5 gallons) stating he simply can’t take it anymore. Funny thing is, he was driving a Honda.
Comment by Heath - June 26, 2008 at 6:37 pm
Although it will hurt many folks in the near term, having high gasoline prices will force both local, state, and federal governments to provide better and more efficient public transportation. It will also accelerate alternatives such as electric cars. This will be positive in the long term. I am personally very happy that gasoline prices are as high as they are, and hope that they continue to rise to about $10/gallon. Society will eventually adapt, and we’ll all be better off for it.
Comment by shadow - June 26, 2008 at 7:02 pm
As the ostriches of the media and the political classes continue to choose to ignore the realities of finite oil in a finite world, there is now a growing ” cargo cult ” phenomena, where media and politicos are claiming, in effect, ” if ONLY WE DID THIS”,or ” if ONLY WE DID THAT” , we could solve the problem, independent of the realities of global supplies (shrinking ), and global population (booming ), and global use and demand ( burgeoning ).
In short, your media witch doctor cannot solve this problem, by constantly running stories that ” talk down ” oil, by limiting media interviews only to oil bears, and by claiming ” national trends ” of ” mass” exodus from the suburbs, and ” mass ”
rejection of anything with an internal combustion engine.
@@@@@@@@@@@@@@@@@@@@@@@
For more information about the
religious movements known as the cargo cults, see the
wikipedia article.
http://en.wikipedia.org/wiki/Cargo_cult
@@@@@@@@@@@@@@@@@@@@@@@@
Comment by ENERGY -the new Cargo Cult - June 26, 2008 at 8:25 pm
The environmentalists share a lot of blame here … they’ve blocked offshore drilling for years, are preventing the building of coal plants, want to heavily tax carbon emissions, want to tax oil companies … its very unfortunate that there is so much mis-information out there. All of these initiatives, which are spearheaded by liberals and democrats INCREASE our cost of energy and our energy dependance. Let’s face it — solar power is not economical, hybrids require electricity supply which will soon be in shortage in this country, taxing the oil companies will increase the cost curve, biofuels are further fueling inflation, carbon regulation will increase electric bills by 30% or more … Obama, if elected, thinks the easy solution is to raise tax rates on the top earners to their highest levels since the Carter days … if that happens recession will become depression … We need to wake up and realize that we are the Saudia Arabia of coal and we need to start expanding our coal infrastructure and coal power capacity … coal is cheap, plentiful, and practical … you simply cannot have your cake and eat it too here … being the greenest environmentalists and having cheap and available energy are in direct contradiction with one another.
Comment by Dan - June 26, 2008 at 11:47 pm
Before the U.S. decided to attack Iraq, Iraq produced 4 million barrels a day, Now at its peak it’s producing 2 million barrels a day. Hey Mr. Rubin, you think maybe that’s why the 200 k the Saudis are putting up dosn’t make a dent. Our government is responsible for knocking off the world market 2 MILLION BARRRELS of supply a day and no pundit on any network says anything about that. Are you kidding me? That is your smoking gun. Their is a world price for oil. So when the policy that drives the military to create an imbalance in supply which excarebates inflation because of the high price oil, and add to that a state of protracted war, which is what’s going on in Iraq and Afghnistan that also fuels inflation, SOMEBODY MUST SAY SOMETHING ABOUT THAT. So in essence the first domino was flicked over by our current administration. With of course the amubulance chasing stylE speculators (code name for the big investment banks that have their hands tied to every administration) chomping at the bit to get theirs. So that is where you are America and the world. Thank you and see you when this adminstration is done screwing up domestic and foreign policy.
Comment by Bill - June 27, 2008 at 12:13 am
re: Dan
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Coal can’t be both cheap and clean at the same time.
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Coal in China is about $1000/kW
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Coal in US/DevelopedWorld is atleast $3500/kW.
greyfalcon.net/costlycoal
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Chuck in Carbon Sequestration on Coal, and you’re looking at $6500/kW atleast.
greyfalcon.net/costlycoal2
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Solar Thermal with Thermal Heat Storage on the other hand is already at $3900/kW
energy.ca.gov/2007_energypolicy/documents/2007-06-12_workshop/presentations/2007-06-12_NAVIGANT_CONSULTING.PDF
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And it’s falling rapidly.
Infact, I don’t see how it’s possible for coal to even try to keep pace with solarthermal.
greyfalcon.net/energy.png
greyfalcon.net/solarthermal
gristmill.grist.org/story/2008/6/20/143633/019
gristmill.grist.org/story/2008/6/10/03431/0012
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Consider that just a third of the land currently used for Corn Ethanol would be plenty to power the entire United States by solar thermal. Day and night.
_________________________
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Nuclear? $8000/kW and climbing. Nuclear ain’t cheap.
nirs.org/images/fplturkeypointcostchart.jpg
Comment by David Ahlport - June 27, 2008 at 1:05 am
Fossil fuel depletion.
There`s definitely a change in the air. I think quite a few people are getting tired of playing “The emperor`s new clothes”.
Comment by James - June 27, 2008 at 3:01 am
Here’s a link to an excellent report on Alaska oil.
http://www.theworldlink.com/articles/2006/08/09/news/news90080906.txt
Comment by Al - June 27, 2008 at 10:35 am
The cure seems to be simple: ride your bike. Not only will this not use gas, it’ll burn off that fat that we’re using good oil to haul around. Get up a half-hour earlier and ride your bike. Quit eating out-of-season produce that uses oil to transport from other parts of the world.
But, more than anything, limit institutions from buying oil contracts when they have no intention of taking delivery. Forbid institutions who own all the oil contracts from announcing price expectations. It’s really easy to buy all the contracts with practically zero margin then say that the price will climb out of control. Of course it will! You own all the contracts!
Plug-in cars aren’t the answer. The answer is to walk or bike to work. If you can’t then get a job closer to home. I used to drive my Jeep 52 miles per day for work. I estimated that I’d save $5,000 per year by working closer to home. Guess what? I found a job really close to home.
Imagine the gas savings if we all lost 10-20 pounds. If 1 million Americans could lose that weight we could save the gas we’re currently wasting to haul 10 to 20 million pounds of manblubber.
Comment by robb - June 27, 2008 at 11:28 am
Nobody is talking about the effect it is having on our economy. Thousands of jobs are going away every day, specially in the automotive business. Gas goes to $7 per gallon, we won’t have to worry about buying gas, because nobody will be able to. This happened way to fast for our economy and I can’t believe we are that stupid ! Old saying “pigs get fat, hogs get slaughtered”
Well guys, their are alot of hogs out there right now !! Its going to be a very bumpy ride for the next couple of years, unless something is done NOW !!
Comment by dan - June 27, 2008 at 11:59 am
I am sick of all you false intellectual types pointing out that our gas is now at European prices. We are a different and larger country. Entire Countries in Europe are smaller than some states.
Comment by Rathburn - June 27, 2008 at 12:32 pm
I’m with robb as far as riding bikes and eating smarter (and line drying). I rode my bike to work this morning. Our leaders, from Reagan pulling the solar panels off the white house in 1980 to the present administration declaring that the american way of life is “non-negotiable” have fallen down on the job of preparing the country for peak oil.
As far as oil contracts, I’m trying to figure out why so-called conservatives are suddenly against market forces.
This is just to sort it out for myself: Oil is pumped out of the ground. The producer needs a guaranteed buyer.
When refineries are ready to buy, they need a guaranteed seller. The market keeps both parties happy and supplied with money and oil. In exchange, the market can profit (or lose) from the differences in prices at the times in takes and releases its positions. The alternative, removing the middle-men, leads to much wilder price and supply fluctuations as wells and refineries go on and off line depending on the specific needs of the parties they have contracts with. In other words, a one to one relationship between producer and consumer is less efficient.
Right now, the market absorbs these variations quite well, and manages to reflect global oil supply and demand.
So, when the price takes off like this, it is a reflection of global conditions, not the actions of specific, imaginary “speculators”
Comment by Tim - June 27, 2008 at 12:40 pm
We’re all experts. Lots of talk about the auto industry, gas prices at the pump and so on. Many sides to this story for sure. Who is right? It may be some time before we know.
I’d just like to add a few things to think about. While its great the we as individuals are thinking about biking, walking and in general driving less, think about the airlines and the shippers. Does there really need to be 17 departures a day from Chicago to Miami? Could that be reduced to just one or two, flights? Perhaps even some destinations only get one flight per week. What about having all those items delivered to your door? Mail ordered, internet ordered, as seen on tv ordered, items that need to be fedex, overnighted or airmailed.
Not to mention that the air traffic alone in ONE DAY in the U.S. puts out as much Carbon Emmissions, in ONE DAY, as all the ground transportation, in the U.S., in One Year! So, while you think you are being a do-gooder by not driving to work, or the park, or your kids recital, it may feel good inside, but has very, very, very, little effect.
Good day!
Comment by Richard Cunningham - June 27, 2008 at 12:59 pm
The problem is that our implementation of the free market is fundamentally flawed, we believe that infinite economic growth is possible. Yet, without infinite resources, such growth is not possible.
This translates to a “readjustment” of the American way of life. If the rest of the world aspires to a middle class life style with a car, a house, a good job, and yearly vacations, we will not be able to pump oil fast enough to satisfy everyone. The reason why the US has been able to offer its citizens such a high standard of living is because for most of the past century, most of the oil was consumed by Western Europe and the U.S., the rest of the world was not sufficiently developed to consume oil in any significant amount.
To make matters worse, the U.S. Oil production peaked in the 1970’s, the U.S. Used to produce more oil than any other country on earth, until 1970. After 1970 production began to fall and kept falling no matter how much technology we used or how much we explored for oil.
I could go on and on, but I believe the following links can explain things much better than I can, doing a little research can greatly improve our understanding of the problem:
Population and Energy: (great introduction to the problem)
globalpublicmedia.com/lectures/461
Peak Oil: (A factor in rising oil prices)
en.wikipedia.org/wiki/Peak_oil
World Energy Resources and Consumption:
en.wikipedia.org/wiki/World_energy_resources_and_consumption
Petroleum:(Great introduction to oil exploration, drilling techniques, and consumption)
en.wikipedia.org/wiki/Petroleum
Good luck
Comment by John Gonzo - June 27, 2008 at 1:21 pm
In talking about demand, also remember inflation in India runs at about 25%. Prices are going up every week. Most Indians can’t afford to buy a car, and if they have one, it’s cheaper to use a bike or train and save their money to afford food.
Look, Saudi Arabia agreed to increase production by 2%. Did prices go down? No, they went up. All this talk about worldwide demand is a smokescreen so speculators can continue driving up prices.
Comment by jw - June 27, 2008 at 1:31 pm
1. Peak oil seems to be real, after reading peak oil sites last year. Looking at their claims, it would seem to be real. I figured if gas went to $4 a gallon peak was probably real because $3 a gallon gas or less is competitive with Ethynol, but corn ethynol is more affordable if gas is over $3 a gallon. So if it’s a conspiracy of oil barons, why would they slit their own throat.
2. We lost the trade war to China. Using them for wage slaves making them most favored nation trading status (thanks to Congress and Clinton), 60,000 factories moving to China, everything closing down here. We owe China 1.8 trillion. They have a eco-nuke button called T-bills and can collapse our society at will. We are living on the good will of the life support system that travels to the communist party headquarters in China.
3. As demand for oil in the world increases and China and India rise, US will fall. We cannot rise GNP without energy. Dreams of energy from crops are just that. 300 million acres to replace gasoline with crops and we have only 200 million for food, so that’s a dream.
4. You cannot keep a car and be sustainable. Big Three don’t realize it. Most posters don’t realize it. My previous Civic had 110 Hp but probably used 70hp on average. That’s the equivalent to 700 slaves pulling me around 1/10th hp per person. My Prius has a 41 hp motor electric and a 59 hp engine, for 110 total. My Prius is a gas hog as well even at 45mpg average.
5. What we can have an sustain. Look at a wind generator 10kw is a big one for a home. Meets about half the needs of a home, they are to big also. My Prius has a 50kw motor and that’s not even half the power needed to run the vehicle. My Prius weights 3000 lbs. It’s too big.
6. Sustainable, is more like 300 to 500lbs three seater. It’s fully electric. It has a 5hp to 20 hp electric motor. 5hp is much more sustainable. It’s an enclosed three wheel, half motorcycle half velomobile. The electrical power would drive it to 45 miles an hour. Have enough batteries for 100 mile range. You can almost charge it with a wind generator or the grid.
7. Ford, GM and Chrysler and the rest of the mainstream press and most normal people don’t get it. Peak oil changes everything and “forever”.
8. The alternate theory, oil manipulation. Having tons of oil in Alaska, having enough Natural Gas in Alaska to heat USA for 100 years, etc. Are all interesting and good, but if this is conspiracy it’s even worse than peak oil, because we have the resources but morons from both left and right wings profit from stopping it or for their own agendas.
9. The big three don’t get it and can’t react quick enough. I figured $5 or $6 a gallon would come in two years, and that might cause the Big 3 to crash. Now people are talking about $5 a gallon this year and they will go under this year. I can’t even calculate or plan for that fast a decline. It’s probably game over.
10. People think it’s only about oil. No it’s about the entire industrial production. Buying crap from Walmart and having traitors/traders in Congress and their friends make quick money and sell the USA down the tubes. The free trade with slave states and low wages and quick profit economically ruined this country and we are just starting to see the results.
11. It’s like a big ship going under, only all the ships are going down and there’s only a few small islands for way to many people. Probably means resource wars are coming.
12. You think Bible preachers with end time prophesy talk about battles of Armegeddon are bad, read some peak oil sites. It looks worse from an energy perspective.
10.
Comment by Greg K - June 27, 2008 at 2:10 pm
Dan your comment saying “solar power is not economical” is not entirely accurate. Solar power is free. Life as we know it DEPENDS on solar power whether or not you want to acknowledge it.
What allows us to live? Food. Where does our food come from? Plants and animals. Where do the animals get food from? The plants or other animals that eat plants. Where do the plants get food? The sun, dead animals, microbes and other plants. If we could only choose 3 things we need to live they would be food, water and air.
The problem is that we have formed this system where instead of utilizing solar power for the basic necessity of food (the earth is pretty efficient with all of natural systems put together), we are using non-renewable finite sources derived from oil. Instead of letting plants go through their normal cycles and utilizing plants, microbes and animals to fertilize plants, we are supplementing them with Nitrogen fertilizers. These fertilizers are created using oil energy. Instead of having animals that wander around and eat the plants that grew in the sun and fertilize the fields with their waste, we shove them into buildings and pens where we must deliver food to them. The animal food is also transported and processed (using more oil energy). It takes more than one calorie of oil to produce 1 calorie of corn when you factor in fertilizers and oil-powered farm equipment! Since cows, chickens and pigs eat a bunch of this food and produce not just meat, but also bones, skin, fur and waste, we aren’t even turning all of those plant calories into edible animal calories. This chain continues on with losses and inefficiencies of oil usage distributed along the way.
This same process and idea is mirrored over and over again in our lives from things like transportation to lighting in our homes. We have ended up at a system that is so inefficient, very dependent on oil and yet so integrated that it will take either a lot of effort or many things happening out of our control for us to change our ways. If we can manage to untangle ourselves from this situation, it won’t matter that oil is $2 or $45 a gallon. It will hurt in the short term because we don’t really know how to undo what we’ve done. We see this extravagant life we’ve generated for ourselves based on the assumption that these oil inefficients don’t matter because there are infinite resources to pull from. The problem is that there aren’t infinite oil resources. This is where the nature-solar system has the upper hand. When the commercials on tv are still advertising the latest and greatest items for purchase as if nothing is breaking down, it is really easy to dig your head into the sand and say something other than your own actions, thoughts and desires need to be adjusted. It’s hard because advertisers do a very good job of selling you what they have to offer - not what you need or really want.
Comment by M - June 27, 2008 at 2:16 pm
Revision note: Ideal vehicle at low end would be enclosed 500 lb 3 wheeler (not three seater) with 5hp or less electric motor. It would have peak hp of 4 times motor rating for up to 10 or 15 seconds for bursts to cruise speed. (As all motors do). Motors are 80% efficient vs. Gasoline engines being usually under 40%.
A higher end three wheeled vehicle (one or two person) would weigh 700 or 800lbs. It would be an inline vehicle and have up to 20hp electric drive. Why 45mph target speed? We only need highway speed, not freeway speed.
Would these be safe? Well not as safe as cars, but cars won’t be on the road anyway.
And keep in mind for every hp you have in the electric drive you need energy 650 watt hours to drive it. So if you have a 5kw motor, a 10kw wind generator might produce enough power at home to drive it for 4 hours a day. So it’s “sustainable to have a vehicle more like a bike and an electric motor on it. Electricity and the grid are better because:
1. The government will keep the grid up the longest.
2. Electricity can do a number of things.
Also we need to make houses more efficient. Meaning smaller (core) living quarters (like one room) and the rest are unheated. Superinsulate. USe stuff like earth berming and straw bale.
This is the future as we become more “Sustainable” energy. But with that a drop in energy use, means a drop in production. Steal and concrete take a lot of energy. And with that all GNP declines and with that we find we cannot afford our social debts and repaying them. So say goodbye to social promises like Social Security, high priced government jobs go as well. And retirement. It’s probably not going to be there, because much of the economy is not sustainable as we become more like India. Meanwhile the Indians and Chinese become “more like us” as they try to emulate unsustainable practices. As they rise they hit the same problem. As our economy fails it causes the rest of the world to decline. There will be ripple effect depressions happening. Not just “recessions”. Probably resource wars as well.
This is all the certain future if early “peak oil” theorists are correct. It’s held out of the press and denied as a “oil price fixing” conspiracy. But all the pieces of all the negative stories keep coming back to energy.
Competition, energy use and economic sustainability are three legs of modern society. With the decline of one the others start to fall and tip. You cannot keep economically sustainable with energy going down. Dreamers hope for a miracle invention or some huge oil field.
We MUST HAVE Iraqi oil to slow the fall of oil. That’s why we are there. There is a counter thought that Bush wanted to keep Iraqi oil off the market to keep prices up. Without the war it’s possible that Iraq might have flooded the market with oil and kept peak oil at bay. There’s also the arguement I hear from many that we are swimming in oil, it’s created by tectonic plate movement and often capped and governments are controlled by conspiracies to keep the price up. That’s all great and good as a counter argument, but the results are the same, we run out of energy.
Comment by Greg K - June 27, 2008 at 2:27 pm
This is all a plan to get citizens to live in urban bubbles. The Bilderberger Conference just met last week. It’s easy to control 200 million people if they all live in controlled urban centers. Haven’t you seen the increase in “mixed-used” shopping/residential/manufacturing centers? I’m sick of these people telling us to ride a bike or fight with the homeless for a seat on the bus. Where is the government going to get all that tax money when 10 Million cars are no longer driving around? They will increase the fees/taxes/tolls on the people who still drive. The majority of US metro public transportation system are a joke. And the way developers and zoning boards in this country laid out our cities is ridiculous. No one can live near their work any more. Go ahead and ride a bike to work, give your government a reason to tax bike chains at %50. I can see the $4000 bike now (and it’s not a Titus or Lightspeed).
Comment by Jack - June 27, 2008 at 2:33 pm
Solar power may not be efficient because of economy of scale needed to produce it. There’s a limit to the amount of energy and raw materials you can use to create wafers. The price and energy and pollution of fresh water to create them may make them not a viable solution.
Solar power is a harvesting of power, which is okay. But if it takes as much energy and price to create the cells as we get back in value, it’s a zero sum gain and not an energy solution. Calculations vary on that. If there’s little gain from solar cells to electric, then it’s just a rich mans battery.
The second thing about solar cells and even wind generators is, they only “harvest” energy that is out there. This is getting a flow of energy, but they don’t “store the energy” as a battery would without batteries. We are an ON DEMAND society and want power when we want it at the flick of a switch, so you have to have a storage location for energy.
Hydrogen is to inefficient as a storage media, it is less efficient than batteries. Batteries require nickel, or other rare earth metals. Some great electric motors require rare earth magnets, and 90% of the rare earth magnetic material is in China.
Even if you could afford to create all the photovoltiac cells and had the energy to create them, you’d still have to store and transmit the power. It’s a tough thing to scale and figure out. The small solution doesn’t scale very well.
If it takes so much fresh water to create them for say 50 million people, that 100 or 200 million others don’t have drinking water is it worth it?
The most obvious answer is you can create much more energy and savings by NOT USING IT in the first place. That means conserving and designing our homes and lives to use less. For example by not driving to lunch and packing it, I can save as much gas in a year as buying a hybrid car. If I live in a one room house that is heated and cooled with other rooms designed to be heated by solar and superinsulated. In other words keep the stuff in the other rooms and use that as weather permits. I save a ton of energy. But we don’t think this way. We think we can plaster some solar cells on the roof of our car and drive around like we currently do and chow down hamburgers from a local drive through. We are in for a real energy wake up call.
Biggest problem with cutting back on energy is it cuts back on GNP and that’s economic power. That means we go down economically and militarily. The strong are usually more high tech and waste more energy to suppress the weak and efficient.
American indians were in tents, pretty efficient. Camel riders in Arabia didn’t use any oil at all with their camels and tents. But “stronger” nations with engines, rail and higher technology took over those places and use the oil resources to drive our modern society. So the highly efficient and closer to the earth person is controlled by the “high tech” more efficient warrior nation. This is simply not sustainable over long periods of time, because we have to many people. I used to be depressed in thinking about this, now I figure it just a part of the natural world that we are seeing unfold before us.
Comment by Greg K - June 27, 2008 at 2:39 pm
HEY, WAS IT OVER WHEN THE GERMANS BOMBED PEARL HARBOR? HELL NO!!!
Comment by Tribeca Ted - June 27, 2008 at 2:42 pm
Greg K must be from Austin or Seattle, maybe San Fran? Stop smoking so much weed, you burned a whole in your ozone, Greg.
Comment by Jack - June 27, 2008 at 2:51 pm
It’s not that these guys are all conspiring to control you. They already do control you. Government has fees for everything and taxes and plans for all the social safety nets that strain. You are already taxed up to 50 % or more with “representation”.
It’s not a conspiracy, it’s just everyone is money grubbing and stupid. They can hardly plan for a simple thing, don’t look for government to save you on this one. The stuff you hear from many high up is a laugh and mostly “green” pr stuff. There’s a lot of conspiracies going on, no doubt. Probably at least one per billionare or per rich person trying to get ahead. Treat that all as a given and noise. It’s nothing compared to peak oil.
Everyone just want’s to bark and blame the others or their favorite villian. The dems blame Bush and Big oil. The Republicans blame environmentalists. It’s just a big blame game, but it’s all ignoring the real nature of the problem. It’s like fighting for deck chairs on the Titanic.
Griping won’t help. And everyone else wants to yell and scream about having to have their toys. I showed a guy at lunch my Prius. He said I have to have an F150 to pull all my toys. I looked at him and thought about a little kid throwing a tantrum saying “I have to have my toys mammy, I have to have my toys”. I have an F150 also, I leave it parked. It’s worthless or almost that. You need to leave the thinking of “darn I’m paying $250 a month for gas” and “who can I blame”. I used to think Al Gore was a joke when he said the Internal combustion engine was the worst thing ever invented. It wasn’t the worst, it was something great and is something great. The problem is, it’s to good, and it was used to much. It’s like having a fire and you all want more and more of it, so you burn down all the farms with it and wonder who can we blame.
As an American, I have to look in the mirror and say, we have to blame ourselves. Our love to excel, which is natural, our competitive nature which is natural. Everyone does it, but we didn’t show constraint. Now the greens, communists, One worlders, vegitarians, and technocrats can all argue and offer a weird solution. But the fact remains, we are running out of energy, that is usable “stored” energy, be it fossil fuel based or “ambiotic oil” based. And that energy as it decreases will cause ripple depressions.
Big oil states we have used 1 trillion barrels in the past 130 years. And will use that much in the next 30. The next 30. Where will it be used? In emerging nations, India and China. We’ll use our share also. Peak Oil therists say we have about 1 trillion left. We reached peak. Big oil says we have 2 trillion left. We’re almost at peak. It’s just a 30 year argument. Better to get ready sooner rather than later.
Some Ambiotic oil theorists say oil is renewable. They dream of it being produced by the earth and plate movement. But that has to come from some carbon source to be pressed into hydrocarbons or natural gas which distills into a hydrocarbon mass of oil. In either case, there’s a limited amount of material in the earth.
Why waste it?
Comment by Greg K - June 27, 2008 at 2:53 pm
I see none of you have suggested the most logical solution: mass transit. And if used in large numbers and new technology (like maglev, check out american maglev’s website) and the government only subsidized some of the labor costs (due to the high wages demanded by unions) it would be profitable and companies would see great incentive to expand mass transit infrastructure. Also, the government needs to deregulate zoning codes wich allows for only low density development. This will allow a large enough people to live around the transit to make it effective, and would allow for lower densities outside the zone which mass transit serves.
Its pretty simple. Our country flourished before we had cars, and rebuilding infrastructure to serve our cities is a simple and extremely beneficial solution to not just high gas prices, but the overall economy in general. Its pretty simple fundamentals of city development that nobody seems to understand.
Comment by Jackson Strong - June 27, 2008 at 2:55 pm
I guess, once again, people are dancing around the issue.
Hello, my name is The United States of America, and I’m an addict.
Years of cheap fuel, and lack of foresight, has left of with an automobile infrastructure. That infrastructure works fine when fuel is inexpensive. Now, Fuel will continue to be a problem for us, and the rest of the world. We have a couple of choices.
1, wait and see. I’m not particularly fond of this one. We’ll continue to build suburbs, that are automobile based, and watch them turn into the slums of the future. Our Lincoln Navigator will make a nice planter in our driveway, with 36 months left on the loan.
2. Go electric. what a nice thought. now we’ve just moved the energy problem to coal, and continue to make terrible suburban places. Oh, also, be ready to get new batteries every three to five years, at $5k a pop. The batteries will make fine additions to our landfills. Perhaps your Escalade will be a driveway ornament, because you still owe money on that also.
3. face reality, and change the American way of life. build cities that are car-free, use rail, for all inter-city transportation, and commuter rail for getting between neighborhoods. This actually works, with technology that exists now. With all the money that has disappeared into Iraq, we could have replaced the rail infrastructure a few times over. This is a no brainer issue. We can’t coddle the auto industry, the product that they’re selling has no real place in our future. The byproduct of this change, would be pleasant and livable cities, and preserved farmland. Suburbia needs to be erased, and returned to either productive farmland, or natural areas.
Now, to the people that read this. What would you do, having the money back in your pocket that has been lost on your automobile? the money for insurance, fuel, car payments, maintenance? perhaps go to a shorter workweek? take an eight week vacation a year (like they do in europe)? Turn your garage into something really useful? Perhaps you could find a place in town, that is nice, and comfortable.
Walk, Bicycle, Ride the rails, those are the only real hope for America to continue to be an excellent place to live, and fight for.
Comment by Denn - June 27, 2008 at 2:59 pm
Jack,
Get ready for a surprise. I’m a Reagan Republican from the Midwest. I live in Michigan. I’m not a vegitarian, don’t smoke, attended churches. Believe in Creation, not evolution. Vote pro life and I pro NRA.
I just have a brain and the ability to surf the web and analyze. I post often from a peak oil perspective, but realize it may be wrong. If it’s wrong, no big harm, but if there’s a 20 or 30% of it being correct, then your the one who needs to smoke some dope, because your obviously out of touch with reality.
The reality is:
1. Major foreclosures and big 3 going under or stories of that happening.
2. Continous trade deficit with China and others.
3. We’re in Iraq, and Bush said in one radio address I heard when we were going in, “don’t worry we won’t drop the price of oil when we take over Iraq”. I thought immediately maybe we aren’t going to war for cheap oil, but maybe for expensive oil.
4. Iraq and other countries were propped up by our own government and the CIA. Rumsfield was Sadams handler when we loved him.
5. Other Europeon countries would not go to war with Iraq because of favors, for example Germany was bailed out by major sales of autos to Iraq who ordered them in the past.
6. Yes Oil companies are profiting, but their profit is not producing more oil that is anywhere near what the world needs.
7. China may be buying extra oil to stockpile and driving the price up as well.
8. China can buy any resource or dump T-bills to crash our economy at will.
9. Biggest US debtor, is Social Security fund $4 trillion dollars. I get a note from them every year saying the fund may grow broke. Well where’s the $4 trillion the Congress and government borrowed from us. Twice the Chinese debt? If it’s broke how could that be? Don’t worry they will tax you in the future to pay you back.
10. Abortion kill the kids attitude when they are not useful, will probably work well as we deal with the aged. This society being corrupt and money based. Most people don’t care much about others. Will just retire the Social Security debt rather than repay it. We even see weird posts by young brain dead kids about “Baby boomers needing to die” to make room for them and others. That’s the solution we’ll probably see.
12. We see from past history Americas response to need. We create a cause and say we must go to war to free the country. We needed to free them to get a trade for their resources.
13. Some say we are in Iraq for oil, others for terrorism. I say both. We are there because oil is there and we must have it and those who deny that right are automatically labelled terrorists.
14. In a chess game the first piece in a location doesn’t always win the game. We are in Iraq now. China needs oil and must expand. That’s motive to move to the middle east. Hence Peak Oil folds conveniently into “end time” theories of China going into the Middle East.
15. Competitive nature of man is a fact of nature, not a statement based on a left wing belief system. That’s both nature and a problem. I’m not saying it’s something that can be “solved” by communism or any other systematic solution. But it’s a fact that drives our greed and the greed and drive of any group.
Am I off base or are you just whining. Read it and judge for yourself.
Comment by Greg K - June 27, 2008 at 3:09 pm
Let’s assume speculators are causing the rise in oil prices. If the US acts to regulate speculators in some fashion, I don’t understand why speculators in the U.K., in Russia, in India, etc. can’t just keep running things up by their speculation. Is there some world-wide plan proposed to regulate all speculation? Maybe I’m missing something. (I don’t think speculation is the main cause, by the way).
Comment by Ed K. - June 27, 2008 at 3:22 pm
Is Phil Gramm’s Enron Loophole causing this problem?
http://www.youtube.com/watch?v=RAPhfDRts60
Comment by Ann - June 27, 2008 at 3:23 pm
June 26, 2008, 11:12 am
Oil Shock: Analyst Predicts $7 Gas, “Mass Exodus” of U.S. Cars
Posted by Keith Johnson
Oil at $135? That was just the opening skirmish in the “peak oil” wars. The latest smart money? $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least.
That’s the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets, who just a few months ago figured $200 oil would be a thing of the distant future—like 2012.
GasChart_art_200_20080626110012.jpg
Attention-grabber (CIBC)
Mr. Rubin laughs off recent attempts to take the steam out of global oil markets. Saudi production promises of 200,000 barrels a day doesn’t dent the 4 million barrel-per-day decline from aging fields every year, for starters. And it will just be “gobbled up” by increasing domestic consumption in Saudi Arabia, like other oil-producing countries that subsidize fuel.
So what about China’s flirtation with market reality by unwinding some fuel subsidies? No luck in curbing demand or prices, either. Not only does China’s recent move translate into $3.25 a gallon gas—still a steal, relatively speaking—it’s given fresh legs to beleaguered Chinese refiners who’ve been operating in the red, thanks to Chinese price controls. So now they are producing even more gasoline and fueling even more cars than they were before. The upshot?
Over the next four years, we are likely to witness the greatest mass exodus of vehicles off America’s highways in history. By 2012, there should be some 10 million fewer vehicles on American roadways than there are today—a decline that dwarfs all previous adjustments including those during the two OPEC oil shocks.
And who will be parking their cars? The 57 million American households that have both cars and access to something resembling public transit. Gasoline at $7 begins to approach prices Europeans have paid for years, meaning that chunk of America “will start to act more and more like Europeans,” Mr. Rubin says. Not soccer moms in a minivan—soccer fans, searching for tokens:
Our analysis suggests that about half of the number of cars coming off the road in the next four years will be from low income households who have access to public transit. At their current driving habits, filling up the tank will have risen from about 7% of their income to 20%, an increase that will see many start taking the bus.
Gas prices already appear to be reshaping suburbia. But what Mr. Rubin is predicting is a far bigger shock to the American system. Europe has had decades to develop a society based on expensive energy. What will happen if Americans suddenly are forced to shoulder European-style energy prices — but without the European-style society to cope with them?
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Contrary to what US Energy Secretary Samuel Bodman says I don’t think supply and demand are really causing the problem. There are to many other factors at play here. Too many middle men skimming profits. Too much manipulation of supplies and inventories. The price of oil nearly doubled and gas went up a third in just one year and yet figures are coming out that indicate we are using less gas, not more, probably because people are cutting back on gas. That clearly means supply and demand have nothing to do with these prices. Speculation is driving prices !!! Lawmakers blame loopholes in commodities trading like the Swaps loophole or Enron Loophole. Whatever you want to call it, It’s a get rich quick scheme and not much less obvious than a pyramid scheme. There is no way supply is causing this gas crisis. I put the full blame on speculators and commodities traders and I am sick of the smoke and mirrors. The meeting in Saudi Arabia hasn’t achieved any substantial results from what I can see. The price of oil is still going up. There must be something else that’s driving prices up and I think I know what it is. Although il appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. The main thing driving inflation is oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won’t be able to bail them out this time because the cost would be far to great. The CFTC and ICE will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late. www.nbtv.ca
Comment by Ted McKeown - June 26, 2008 at 11:24 am
Ted, The US is not the only country that uses oil. You must account for the whole world when determining demand and supply. The US has for many years lived beyond its means; several developing countries beneath theirs. Also, productivity in the developing countries has been increasing rapidly. It is not surprising that, say, China can more competitively bid against us for oil and other commodities.
Comment by Joe - June 26, 2008 at 11:55 am
Any idea how much excess capacity remains in Chinese refineries? One can’t expect China to suddenly drop all subsidies at once. At some point the Chinese refineries will get close to capacity and (if the Chinese government continues to ease subsidies, big if) the consumption increase will slightly level off.
Comment by Chris - June 26, 2008 at 11:55 am
Hate to rain on your parade, but it is more supply/demand than speculation. The USA is no longer the driving force on oil & gasoline pricing. We are truly in a global economy (the world is flat). For every one driver in the US that cuts back there are 20 in India, China, Brazil & Russia that are waiting to take their place as the middle classes in these countries develop. Americans must wake up and realize that the USA does not control the global economy like it has in the past. A bitter pill to swallow but it is the truth. As you can see, I am in the energy business and personally agree that high oil prices are not good for the USA or the energy industry. However, higher taxes are not the answer. More domestic drilling and alternative energy are the only things that will save us. We should have addressed this 25 years ago but Congress was not brave enough to do it. Even though it will take 5-10 years to see significant domestic increase with government encouragement, it is better late than never. Have to start sometime.
Comment by G R Talley - June 26, 2008 at 12:03 pm
Unfortunately, the US is not the only country that uses oil. China and India are rapidly expanding their use of oil which in turn caused the price of oil to increase. The fact that it has happened so recently is due to the fact that crude oil production has remained, for the most part, flat for the past few years. That indicates either a huge conspiracy by all of the oil producing countries (doubtful) or problems in producing more (likely).
Comment by Jerry L Wilkens - June 26, 2008 at 12:06 pm
China dropped their subsidies on oil last week and raised the price on gas and deisel fuel. Demand is already dropping. Don’t worry. I already did my homework
Comment by Ted - June 26, 2008 at 12:08 pm
Personally I don’t see how we can tell if demand has dropped in China in one week after subsidies were changed. We can’t measure that quickly in the US much less a foreign country. Demand may drop in China but we need time to tell. Right now all we have is speculation that it will drop. Even if China demand slows down it is still a huge market to supply. In running an independent energy company, I make a living by staying on top of oil and natural gas prices. While speculation has increased volatility in the oil market it is not the driving force in the overall price of oil. Supply is still the main factor, devaluation of the dollar ranks high and supply disruption in unstable countries is next.
Comment by G R Talley - June 26, 2008 at 12:16 pm
Mr. Talley,
Back in March U.S. crack spreads were negative.
What does that say about demand for distillates vs. crude?
A friend who trades with Sinopec said that in May they were losing money on every bbl. and had told the Chinese government that they would have to cut back on diesel production to contain the losses.
.
Back in August I pointed out that it took .105 oz. of gold to buy a bbl. of WTI.
Today it takes .15125 oz.
What does this 44% increase (as priced in GOLD) say about the weak dollar theory?
Comment by Climateer - June 26, 2008 at 12:53 pm
Whether or not the world has hit or is within a few years of peak oil is subject to some debate. The fact that the United States has hit a peak in consumption is not subject to debate. Consumption IS falling; not only due to high prices, but because the supply of EXPORTED oil is falling. Exported oil fell from (roughly) 46.3 million barrels a day in 2005 to 44.8 million barrels a day in 2007. (EIA data) I would suggest that its really the EXPORTED oil that sets the world oil price, more than total oil produced. Many Exporting countries subsidize their own oil internally.
Buckle up America! It’s gonna be an interesting ride.
Comment by BillR - June 26, 2008 at 12:53 pm
Scenario: After long summer of high gas prices, economy on the brink, Congress okays drilling everywhere, suggests making biodiesel out of reindeer - Iraq announces great strides in improving oil production & security. They predict pumping XX million barrels a day to meet growing world demand in the near future. Dorky Dems who opposed saving the fine Iraqi people look like dimwits. Oil speculators are routed, driven from the Temples. Gas prices come down, GOP wins by a landslide. George and Dick ride off into the sunset. I love a happy ending.
Comment by Fiction Writer - June 26, 2008 at 1:13 pm
I have never heard the President (or anyone else in the gov.) encourage Americans to USE LESS gasoline (or diesel or whatever).
I remember a sign in the railroad station in 1945: “Is this trip necessary?”
Comment by J P Brazel - June 26, 2008 at 1:29 pm
Climateer:
Crack spreads have taken a big hit that is why refining stocks are falling. As to China, they have been subsidizing their gasoline and still are that is why their gasoline price is still much less than the rest of the world.
As to the devaluation of the dollar, plot the value of the dollar versus crude oil for the last year or two and I think you will see a very nice reverse correlation.
Comment by G R Talley - June 26, 2008 at 2:35 pm
All this talk about America beginning to feel more like Europe with high fuel prices consistently fail to mention the reason Europe endured such high energy prices in the past, when America was on cruise control in terms of low fuel prices, and fuel was relatively cheap to produce. It is largely due to the high tax leveraged on fuel in the EU block. This tax revenue is used to build, maintain and promote the HIGHLY efficeint European rail network, amoung other social benfits mostly absent from the American strata of government. While I am not a indulgent fan of exorbitant tax to fund innovation and it definately contradicts our proud and proven history of capatilist development in the private sector in the land of red, white and blue; where is the investment from the vibrant private sector in highly efficient and effective mass transportation connecting our urban centers? I have a hard time believing we will have major improvements in the near term and therfore will be relagated to our highway bound vehicles to keep up an assembalance of our current way of life in most areas. I doubt most regional goverments can produce the nimble operations needed to make up for lost time, but it seems the demand will quickly become great enough to make it a lucrative investment for private firms in a rapidly shrinking time horizon. Even areas with efficient, yet limited, mass transit (New England for example) are already pushing their current systems to the maximum.
Comment by brian backstrom - June 26, 2008 at 3:17 pm
We are simply seeing importers bidding for declining net oil exports. Our model, recent case histories and current data suggest that we are going to continue to see an accelerating net export decline rate.
For more info, do a Google Search for:
Net Oil Exports + Jeffrey Brown.
Comment by Jeffrey J. Brown - June 26, 2008 at 3:21 pm
peak oil. peak oil. peak oil.
now will you listen?
http://theoildrum.com
Comment by Quincy Walters - June 26, 2008 at 3:31 pm
Mr. Talley,
Thanks.
I interpreted the declining (and negative, if only for one day, I think it was 3-17) crack spread to mean that there was less demand for distillates than for crude, which didn’t make sense.
.
I have a fancy chartmaker that can plot any price in any currency. It was the fact that crude was up, not just against fiat currencies but gold that caught my eye.
That 44% is very close to the number I come up with when I try to figure the impact of the index investors on the run-up from $80, i.e. about 25 bucks.
As Frankenstein would say regarding futures: “Speculators good, Investors bad”.
I know some NYMEX types who won’t take the other side of an index long’s order anymore, the index longs just keep bidding and bidding…
Comment by Climateer - June 26, 2008 at 4:11 pm
So let’s play it all out according to these assumptions. $7 a barrel translates to 10 million fewer cars on the road which leads to more people taking mass transit and moving to urban areas, where transit makes sense. I see the affect of this migration being extremely contractionary for consumer spending and therefore the overall US economy.
Today it’s easy to fill your car up with unneeded consumer products when out running errands. What will happen when people start taking the bus and train? I would think pure logistics of carrying your typical Costco load onto a bus will limit daily spending to pure necessities. Even the smaller urban space you would now be forced to live in will constrict what you fill it with, right? What about diminished tourism as a result of high oil? Won’t that decrease overall consumption?
My point is that higher oil can only shrink our consumption and therefore our GDP…at least for the near term. This contraction WILL have a ripple affect on the rest of the world. Unlike Europe (which he tries to draw parallels with) we are the world’s consumers.
A bad assumption would be to assume that China will continue to grow and develop at the same rate (and thus demand the same amount of oil) despite a giant decrease in what they produce—spurred of course by a decrease in American consumption. This decrease in Chinese oil demand will invariably ease oil prices or at the very minimum find equilibrium.
Comment by Joe Ballard - June 26, 2008 at 4:26 pm
We are witnessing the end of the American Republic.
Comment by Ted Harwood - June 26, 2008 at 4:32 pm
Re: Price Equilibrium, “Worst Case”
The problem is that we are probably decades away from the net oil export decline stabilizing, and as noted above, I expect to see the decline rate continue to accelerate. Demand has to fall, as declining net oil exports are allocated to the high bidders.
Comment by Jeffrey J. Brown - June 26, 2008 at 4:58 pm
Hey Keith, any thoughts on this as a solution to our oil problems.
-
A $3300 dollar retrofit to turn any car into a plugin hybrid.
-
It’d be perhaps the quickest/cheapest way to shift Americans to driving primarily on electricity.
-
http://orangehues.com/blog/2008/05/our-inefficient-cars-poulsen-hybrid.html
Comment by David Ahlport - June 26, 2008 at 5:29 pm
And for those who quibble about “Supply and Demand not explaining everything”.
-
You can blame a large part of that on the “Demand” for something different entirely.
-
US Dollars.
-
Thanks due to Deficit Spending, the Trade Deficit, and Irresponsible Market Regulation of issues like the Mortgage/Loan Crisis, the value of the US dollar is plunging.
-
As the value of the US dollar goes down, the perceived cost of a barrel of oil rises.
-
That’s where that large “unaccounted” price increase for us Americans is coming from.
-
http://seekingalpha.com/article/72651-oil-would-be-65-if-the-dollar-had-stayed-strong-agi
Comment by David Ahlport - June 26, 2008 at 5:42 pm
And no, I don’t want to hear any whining about electricity supply, and “What if it comes from coal.
-
Since those excuses aren’t substantiated by the facts.
-
There’s plenty of electricity.
-
And even if we exclusively used the dirtiest coal plants to power our cars, it would still have less emissions than a conventional car using oil.
-
http://greyfalcon.net/plugins7
Comment by David Ahlport - June 26, 2008 at 5:47 pm
We will be just fine - it is only a blip, oil prices will come down.
I love the optimism based on macro economic hand waving. What I find amazing is how OPEC and other oil producing countries and the speculators never thought of this ingenious plot to inflate the price of oil a decade ago - hmm…. It just can’t be that supply is not meeting demand - just can’t be!
Eric
blog.pickuppal.com
Comment by Eric Dewhirst - June 26, 2008 at 6:26 pm
Those singletons making less than 30K or a two car family of 4 taking home less than 60K per year are going to be in a world of pooh @ $7.00 per gal. Others aren’t giving up the wheels just yet but when they do, they’ll simply switch to more efficient (foreign) models because they won’t tolerate public transportation given the madness that comes with it. Wall Street had better get its crap in order and in quick freaking fashion or they stand to lose BIG!! We continue to forget that without that 70% (the consumer); we have NOTHING!!! I was filling up the other day when a guy on the opposite isle from started screaming. I was startled as I looked over to ask if he was ok. He then yelled; “someone call the police, I’m watching a robbery in progress”. He stopped the pump at $20.00 (5 gallons) stating he simply can’t take it anymore. Funny thing is, he was driving a Honda.
Comment by Heath - June 26, 2008 at 6:37 pm
Although it will hurt many folks in the near term, having high gasoline prices will force both local, state, and federal governments to provide better and more efficient public transportation. It will also accelerate alternatives such as electric cars. This will be positive in the long term. I am personally very happy that gasoline prices are as high as they are, and hope that they continue to rise to about $10/gallon. Society will eventually adapt, and we’ll all be better off for it.
Comment by shadow - June 26, 2008 at 7:02 pm
As the ostriches of the media and the political classes continue to choose to ignore the realities of finite oil in a finite world, there is now a growing ” cargo cult ” phenomena, where media and politicos are claiming, in effect, ” if ONLY WE DID THIS”,or ” if ONLY WE DID THAT” , we could solve the problem, independent of the realities of global supplies (shrinking ), and global population (booming ), and global use and demand ( burgeoning ).
In short, your media witch doctor cannot solve this problem, by constantly running stories that ” talk down ” oil, by limiting media interviews only to oil bears, and by claiming ” national trends ” of ” mass” exodus from the suburbs, and ” mass ”
rejection of anything with an internal combustion engine.
@@@@@@@@@@@@@@@@@@@@@@@
For more information about the
religious movements known as the cargo cults, see the
wikipedia article.
http://en.wikipedia.org/wiki/Cargo_cult
@@@@@@@@@@@@@@@@@@@@@@@@
Comment by ENERGY -the new Cargo Cult - June 26, 2008 at 8:25 pm
The environmentalists share a lot of blame here … they’ve blocked offshore drilling for years, are preventing the building of coal plants, want to heavily tax carbon emissions, want to tax oil companies … its very unfortunate that there is so much mis-information out there. All of these initiatives, which are spearheaded by liberals and democrats INCREASE our cost of energy and our energy dependance. Let’s face it — solar power is not economical, hybrids require electricity supply which will soon be in shortage in this country, taxing the oil companies will increase the cost curve, biofuels are further fueling inflation, carbon regulation will increase electric bills by 30% or more … Obama, if elected, thinks the easy solution is to raise tax rates on the top earners to their highest levels since the Carter days … if that happens recession will become depression … We need to wake up and realize that we are the Saudia Arabia of coal and we need to start expanding our coal infrastructure and coal power capacity … coal is cheap, plentiful, and practical … you simply cannot have your cake and eat it too here … being the greenest environmentalists and having cheap and available energy are in direct contradiction with one another.
Comment by Dan - June 26, 2008 at 11:47 pm
Before the U.S. decided to attack Iraq, Iraq produced 4 million barrels a day, Now at its peak it’s producing 2 million barrels a day. Hey Mr. Rubin, you think maybe that’s why the 200 k the Saudis are putting up dosn’t make a dent. Our government is responsible for knocking off the world market 2 MILLION BARRRELS of supply a day and no pundit on any network says anything about that. Are you kidding me? That is your smoking gun. Their is a world price for oil. So when the policy that drives the military to create an imbalance in supply which excarebates inflation because of the high price oil, and add to that a state of protracted war, which is what’s going on in Iraq and Afghnistan that also fuels inflation, SOMEBODY MUST SAY SOMETHING ABOUT THAT. So in essence the first domino was flicked over by our current administration. With of course the amubulance chasing stylE speculators (code name for the big investment banks that have their hands tied to every administration) chomping at the bit to get theirs. So that is where you are America and the world. Thank you and see you when this adminstration is done screwing up domestic and foreign policy.
Comment by Bill - June 27, 2008 at 12:13 am
re: Dan
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Coal can’t be both cheap and clean at the same time.
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Coal in China is about $1000/kW
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Coal in US/DevelopedWorld is atleast $3500/kW.
greyfalcon.net/costlycoal
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Chuck in Carbon Sequestration on Coal, and you’re looking at $6500/kW atleast.
greyfalcon.net/costlycoal2
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Solar Thermal with Thermal Heat Storage on the other hand is already at $3900/kW
energy.ca.gov/2007_energypolicy/documents/2007-06-12_workshop/presentations/2007-06-12_NAVIGANT_CONSULTING.PDF
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And it’s falling rapidly.
Infact, I don’t see how it’s possible for coal to even try to keep pace with solarthermal.
greyfalcon.net/energy.png
greyfalcon.net/solarthermal
gristmill.grist.org/story/2008/6/20/143633/019
gristmill.grist.org/story/2008/6/10/03431/0012
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Consider that just a third of the land currently used for Corn Ethanol would be plenty to power the entire United States by solar thermal. Day and night.
_________________________
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Nuclear? $8000/kW and climbing. Nuclear ain’t cheap.
nirs.org/images/fplturkeypointcostchart.jpg
Comment by David Ahlport - June 27, 2008 at 1:05 am
Fossil fuel depletion.
There`s definitely a change in the air. I think quite a few people are getting tired of playing “The emperor`s new clothes”.
Comment by James - June 27, 2008 at 3:01 am
Here’s a link to an excellent report on Alaska oil.
http://www.theworldlink.com/articles/2006/08/09/news/news90080906.txt
Comment by Al - June 27, 2008 at 10:35 am
The cure seems to be simple: ride your bike. Not only will this not use gas, it’ll burn off that fat that we’re using good oil to haul around. Get up a half-hour earlier and ride your bike. Quit eating out-of-season produce that uses oil to transport from other parts of the world.
But, more than anything, limit institutions from buying oil contracts when they have no intention of taking delivery. Forbid institutions who own all the oil contracts from announcing price expectations. It’s really easy to buy all the contracts with practically zero margin then say that the price will climb out of control. Of course it will! You own all the contracts!
Plug-in cars aren’t the answer. The answer is to walk or bike to work. If you can’t then get a job closer to home. I used to drive my Jeep 52 miles per day for work. I estimated that I’d save $5,000 per year by working closer to home. Guess what? I found a job really close to home.
Imagine the gas savings if we all lost 10-20 pounds. If 1 million Americans could lose that weight we could save the gas we’re currently wasting to haul 10 to 20 million pounds of manblubber.
Comment by robb - June 27, 2008 at 11:28 am
Nobody is talking about the effect it is having on our economy. Thousands of jobs are going away every day, specially in the automotive business. Gas goes to $7 per gallon, we won’t have to worry about buying gas, because nobody will be able to. This happened way to fast for our economy and I can’t believe we are that stupid ! Old saying “pigs get fat, hogs get slaughtered”
Well guys, their are alot of hogs out there right now !! Its going to be a very bumpy ride for the next couple of years, unless something is done NOW !!
Comment by dan - June 27, 2008 at 11:59 am
I am sick of all you false intellectual types pointing out that our gas is now at European prices. We are a different and larger country. Entire Countries in Europe are smaller than some states.
Comment by Rathburn - June 27, 2008 at 12:32 pm
I’m with robb as far as riding bikes and eating smarter (and line drying). I rode my bike to work this morning. Our leaders, from Reagan pulling the solar panels off the white house in 1980 to the present administration declaring that the american way of life is “non-negotiable” have fallen down on the job of preparing the country for peak oil.
As far as oil contracts, I’m trying to figure out why so-called conservatives are suddenly against market forces.
This is just to sort it out for myself: Oil is pumped out of the ground. The producer needs a guaranteed buyer.
When refineries are ready to buy, they need a guaranteed seller. The market keeps both parties happy and supplied with money and oil. In exchange, the market can profit (or lose) from the differences in prices at the times in takes and releases its positions. The alternative, removing the middle-men, leads to much wilder price and supply fluctuations as wells and refineries go on and off line depending on the specific needs of the parties they have contracts with. In other words, a one to one relationship between producer and consumer is less efficient.
Right now, the market absorbs these variations quite well, and manages to reflect global oil supply and demand.
So, when the price takes off like this, it is a reflection of global conditions, not the actions of specific, imaginary “speculators”
Comment by Tim - June 27, 2008 at 12:40 pm
We’re all experts. Lots of talk about the auto industry, gas prices at the pump and so on. Many sides to this story for sure. Who is right? It may be some time before we know.
I’d just like to add a few things to think about. While its great the we as individuals are thinking about biking, walking and in general driving less, think about the airlines and the shippers. Does there really need to be 17 departures a day from Chicago to Miami? Could that be reduced to just one or two, flights? Perhaps even some destinations only get one flight per week. What about having all those items delivered to your door? Mail ordered, internet ordered, as seen on tv ordered, items that need to be fedex, overnighted or airmailed.
Not to mention that the air traffic alone in ONE DAY in the U.S. puts out as much Carbon Emmissions, in ONE DAY, as all the ground transportation, in the U.S., in One Year! So, while you think you are being a do-gooder by not driving to work, or the park, or your kids recital, it may feel good inside, but has very, very, very, little effect.
Good day!
Comment by Richard Cunningham - June 27, 2008 at 12:59 pm
The problem is that our implementation of the free market is fundamentally flawed, we believe that infinite economic growth is possible. Yet, without infinite resources, such growth is not possible.
This translates to a “readjustment” of the American way of life. If the rest of the world aspires to a middle class life style with a car, a house, a good job, and yearly vacations, we will not be able to pump oil fast enough to satisfy everyone. The reason why the US has been able to offer its citizens such a high standard of living is because for most of the past century, most of the oil was consumed by Western Europe and the U.S., the rest of the world was not sufficiently developed to consume oil in any significant amount.
To make matters worse, the U.S. Oil production peaked in the 1970’s, the U.S. Used to produce more oil than any other country on earth, until 1970. After 1970 production began to fall and kept falling no matter how much technology we used or how much we explored for oil.
I could go on and on, but I believe the following links can explain things much better than I can, doing a little research can greatly improve our understanding of the problem:
Population and Energy: (great introduction to the problem)
globalpublicmedia.com/lectures/461
Peak Oil: (A factor in rising oil prices)
en.wikipedia.org/wiki/Peak_oil
World Energy Resources and Consumption:
en.wikipedia.org/wiki/World_energy_resources_and_consumption
Petroleum:(Great introduction to oil exploration, drilling techniques, and consumption)
en.wikipedia.org/wiki/Petroleum
Good luck
Comment by John Gonzo - June 27, 2008 at 1:21 pm
In talking about demand, also remember inflation in India runs at about 25%. Prices are going up every week. Most Indians can’t afford to buy a car, and if they have one, it’s cheaper to use a bike or train and save their money to afford food.
Look, Saudi Arabia agreed to increase production by 2%. Did prices go down? No, they went up. All this talk about worldwide demand is a smokescreen so speculators can continue driving up prices.
Comment by jw - June 27, 2008 at 1:31 pm
1. Peak oil seems to be real, after reading peak oil sites last year. Looking at their claims, it would seem to be real. I figured if gas went to $4 a gallon peak was probably real because $3 a gallon gas or less is competitive with Ethynol, but corn ethynol is more affordable if gas is over $3 a gallon. So if it’s a conspiracy of oil barons, why would they slit their own throat.
2. We lost the trade war to China. Using them for wage slaves making them most favored nation trading status (thanks to Congress and Clinton), 60,000 factories moving to China, everything closing down here. We owe China 1.8 trillion. They have a eco-nuke button called T-bills and can collapse our society at will. We are living on the good will of the life support system that travels to the communist party headquarters in China.
3. As demand for oil in the world increases and China and India rise, US will fall. We cannot rise GNP without energy. Dreams of energy from crops are just that. 300 million acres to replace gasoline with crops and we have only 200 million for food, so that’s a dream.
4. You cannot keep a car and be sustainable. Big Three don’t realize it. Most posters don’t realize it. My previous Civic had 110 Hp but probably used 70hp on average. That’s the equivalent to 700 slaves pulling me around 1/10th hp per person. My Prius has a 41 hp motor electric and a 59 hp engine, for 110 total. My Prius is a gas hog as well even at 45mpg average.
5. What we can have an sustain. Look at a wind generator 10kw is a big one for a home. Meets about half the needs of a home, they are to big also. My Prius has a 50kw motor and that’s not even half the power needed to run the vehicle. My Prius weights 3000 lbs. It’s too big.
6. Sustainable, is more like 300 to 500lbs three seater. It’s fully electric. It has a 5hp to 20 hp electric motor. 5hp is much more sustainable. It’s an enclosed three wheel, half motorcycle half velomobile. The electrical power would drive it to 45 miles an hour. Have enough batteries for 100 mile range. You can almost charge it with a wind generator or the grid.
7. Ford, GM and Chrysler and the rest of the mainstream press and most normal people don’t get it. Peak oil changes everything and “forever”.
8. The alternate theory, oil manipulation. Having tons of oil in Alaska, having enough Natural Gas in Alaska to heat USA for 100 years, etc. Are all interesting and good, but if this is conspiracy it’s even worse than peak oil, because we have the resources but morons from both left and right wings profit from stopping it or for their own agendas.
9. The big three don’t get it and can’t react quick enough. I figured $5 or $6 a gallon would come in two years, and that might cause the Big 3 to crash. Now people are talking about $5 a gallon this year and they will go under this year. I can’t even calculate or plan for that fast a decline. It’s probably game over.
10. People think it’s only about oil. No it’s about the entire industrial production. Buying crap from Walmart and having traitors/traders in Congress and their friends make quick money and sell the USA down the tubes. The free trade with slave states and low wages and quick profit economically ruined this country and we are just starting to see the results.
11. It’s like a big ship going under, only all the ships are going down and there’s only a few small islands for way to many people. Probably means resource wars are coming.
12. You think Bible preachers with end time prophesy talk about battles of Armegeddon are bad, read some peak oil sites. It looks worse from an energy perspective.
10.
Comment by Greg K - June 27, 2008 at 2:10 pm
Dan your comment saying “solar power is not economical” is not entirely accurate. Solar power is free. Life as we know it DEPENDS on solar power whether or not you want to acknowledge it.
What allows us to live? Food. Where does our food come from? Plants and animals. Where do the animals get food from? The plants or other animals that eat plants. Where do the plants get food? The sun, dead animals, microbes and other plants. If we could only choose 3 things we need to live they would be food, water and air.
The problem is that we have formed this system where instead of utilizing solar power for the basic necessity of food (the earth is pretty efficient with all of natural systems put together), we are using non-renewable finite sources derived from oil. Instead of letting plants go through their normal cycles and utilizing plants, microbes and animals to fertilize plants, we are supplementing them with Nitrogen fertilizers. These fertilizers are created using oil energy. Instead of having animals that wander around and eat the plants that grew in the sun and fertilize the fields with their waste, we shove them into buildings and pens where we must deliver food to them. The animal food is also transported and processed (using more oil energy). It takes more than one calorie of oil to produce 1 calorie of corn when you factor in fertilizers and oil-powered farm equipment! Since cows, chickens and pigs eat a bunch of this food and produce not just meat, but also bones, skin, fur and waste, we aren’t even turning all of those plant calories into edible animal calories. This chain continues on with losses and inefficiencies of oil usage distributed along the way.
This same process and idea is mirrored over and over again in our lives from things like transportation to lighting in our homes. We have ended up at a system that is so inefficient, very dependent on oil and yet so integrated that it will take either a lot of effort or many things happening out of our control for us to change our ways. If we can manage to untangle ourselves from this situation, it won’t matter that oil is $2 or $45 a gallon. It will hurt in the short term because we don’t really know how to undo what we’ve done. We see this extravagant life we’ve generated for ourselves based on the assumption that these oil inefficients don’t matter because there are infinite resources to pull from. The problem is that there aren’t infinite oil resources. This is where the nature-solar system has the upper hand. When the commercials on tv are still advertising the latest and greatest items for purchase as if nothing is breaking down, it is really easy to dig your head into the sand and say something other than your own actions, thoughts and desires need to be adjusted. It’s hard because advertisers do a very good job of selling you what they have to offer - not what you need or really want.
Comment by M - June 27, 2008 at 2:16 pm
Revision note: Ideal vehicle at low end would be enclosed 500 lb 3 wheeler (not three seater) with 5hp or less electric motor. It would have peak hp of 4 times motor rating for up to 10 or 15 seconds for bursts to cruise speed. (As all motors do). Motors are 80% efficient vs. Gasoline engines being usually under 40%.
A higher end three wheeled vehicle (one or two person) would weigh 700 or 800lbs. It would be an inline vehicle and have up to 20hp electric drive. Why 45mph target speed? We only need highway speed, not freeway speed.
Would these be safe? Well not as safe as cars, but cars won’t be on the road anyway.
And keep in mind for every hp you have in the electric drive you need energy 650 watt hours to drive it. So if you have a 5kw motor, a 10kw wind generator might produce enough power at home to drive it for 4 hours a day. So it’s “sustainable to have a vehicle more like a bike and an electric motor on it. Electricity and the grid are better because:
1. The government will keep the grid up the longest.
2. Electricity can do a number of things.
Also we need to make houses more efficient. Meaning smaller (core) living quarters (like one room) and the rest are unheated. Superinsulate. USe stuff like earth berming and straw bale.
This is the future as we become more “Sustainable” energy. But with that a drop in energy use, means a drop in production. Steal and concrete take a lot of energy. And with that all GNP declines and with that we find we cannot afford our social debts and repaying them. So say goodbye to social promises like Social Security, high priced government jobs go as well. And retirement. It’s probably not going to be there, because much of the economy is not sustainable as we become more like India. Meanwhile the Indians and Chinese become “more like us” as they try to emulate unsustainable practices. As they rise they hit the same problem. As our economy fails it causes the rest of the world to decline. There will be ripple effect depressions happening. Not just “recessions”. Probably resource wars as well.
This is all the certain future if early “peak oil” theorists are correct. It’s held out of the press and denied as a “oil price fixing” conspiracy. But all the pieces of all the negative stories keep coming back to energy.
Competition, energy use and economic sustainability are three legs of modern society. With the decline of one the others start to fall and tip. You cannot keep economically sustainable with energy going down. Dreamers hope for a miracle invention or some huge oil field.
We MUST HAVE Iraqi oil to slow the fall of oil. That’s why we are there. There is a counter thought that Bush wanted to keep Iraqi oil off the market to keep prices up. Without the war it’s possible that Iraq might have flooded the market with oil and kept peak oil at bay. There’s also the arguement I hear from many that we are swimming in oil, it’s created by tectonic plate movement and often capped and governments are controlled by conspiracies to keep the price up. That’s all great and good as a counter argument, but the results are the same, we run out of energy.
Comment by Greg K - June 27, 2008 at 2:27 pm
This is all a plan to get citizens to live in urban bubbles. The Bilderberger Conference just met last week. It’s easy to control 200 million people if they all live in controlled urban centers. Haven’t you seen the increase in “mixed-used” shopping/residential/manufacturing centers? I’m sick of these people telling us to ride a bike or fight with the homeless for a seat on the bus. Where is the government going to get all that tax money when 10 Million cars are no longer driving around? They will increase the fees/taxes/tolls on the people who still drive. The majority of US metro public transportation system are a joke. And the way developers and zoning boards in this country laid out our cities is ridiculous. No one can live near their work any more. Go ahead and ride a bike to work, give your government a reason to tax bike chains at %50. I can see the $4000 bike now (and it’s not a Titus or Lightspeed).
Comment by Jack - June 27, 2008 at 2:33 pm
Solar power may not be efficient because of economy of scale needed to produce it. There’s a limit to the amount of energy and raw materials you can use to create wafers. The price and energy and pollution of fresh water to create them may make them not a viable solution.
Solar power is a harvesting of power, which is okay. But if it takes as much energy and price to create the cells as we get back in value, it’s a zero sum gain and not an energy solution. Calculations vary on that. If there’s little gain from solar cells to electric, then it’s just a rich mans battery.
The second thing about solar cells and even wind generators is, they only “harvest” energy that is out there. This is getting a flow of energy, but they don’t “store the energy” as a battery would without batteries. We are an ON DEMAND society and want power when we want it at the flick of a switch, so you have to have a storage location for energy.
Hydrogen is to inefficient as a storage media, it is less efficient than batteries. Batteries require nickel, or other rare earth metals. Some great electric motors require rare earth magnets, and 90% of the rare earth magnetic material is in China.
Even if you could afford to create all the photovoltiac cells and had the energy to create them, you’d still have to store and transmit the power. It’s a tough thing to scale and figure out. The small solution doesn’t scale very well.
If it takes so much fresh water to create them for say 50 million people, that 100 or 200 million others don’t have drinking water is it worth it?
The most obvious answer is you can create much more energy and savings by NOT USING IT in the first place. That means conserving and designing our homes and lives to use less. For example by not driving to lunch and packing it, I can save as much gas in a year as buying a hybrid car. If I live in a one room house that is heated and cooled with other rooms designed to be heated by solar and superinsulated. In other words keep the stuff in the other rooms and use that as weather permits. I save a ton of energy. But we don’t think this way. We think we can plaster some solar cells on the roof of our car and drive around like we currently do and chow down hamburgers from a local drive through. We are in for a real energy wake up call.
Biggest problem with cutting back on energy is it cuts back on GNP and that’s economic power. That means we go down economically and militarily. The strong are usually more high tech and waste more energy to suppress the weak and efficient.
American indians were in tents, pretty efficient. Camel riders in Arabia didn’t use any oil at all with their camels and tents. But “stronger” nations with engines, rail and higher technology took over those places and use the oil resources to drive our modern society. So the highly efficient and closer to the earth person is controlled by the “high tech” more efficient warrior nation. This is simply not sustainable over long periods of time, because we have to many people. I used to be depressed in thinking about this, now I figure it just a part of the natural world that we are seeing unfold before us.
Comment by Greg K - June 27, 2008 at 2:39 pm
HEY, WAS IT OVER WHEN THE GERMANS BOMBED PEARL HARBOR? HELL NO!!!
Comment by Tribeca Ted - June 27, 2008 at 2:42 pm
Greg K must be from Austin or Seattle, maybe San Fran? Stop smoking so much weed, you burned a whole in your ozone, Greg.
Comment by Jack - June 27, 2008 at 2:51 pm
It’s not that these guys are all conspiring to control you. They already do control you. Government has fees for everything and taxes and plans for all the social safety nets that strain. You are already taxed up to 50 % or more with “representation”.
It’s not a conspiracy, it’s just everyone is money grubbing and stupid. They can hardly plan for a simple thing, don’t look for government to save you on this one. The stuff you hear from many high up is a laugh and mostly “green” pr stuff. There’s a lot of conspiracies going on, no doubt. Probably at least one per billionare or per rich person trying to get ahead. Treat that all as a given and noise. It’s nothing compared to peak oil.
Everyone just want’s to bark and blame the others or their favorite villian. The dems blame Bush and Big oil. The Republicans blame environmentalists. It’s just a big blame game, but it’s all ignoring the real nature of the problem. It’s like fighting for deck chairs on the Titanic.
Griping won’t help. And everyone else wants to yell and scream about having to have their toys. I showed a guy at lunch my Prius. He said I have to have an F150 to pull all my toys. I looked at him and thought about a little kid throwing a tantrum saying “I have to have my toys mammy, I have to have my toys”. I have an F150 also, I leave it parked. It’s worthless or almost that. You need to leave the thinking of “darn I’m paying $250 a month for gas” and “who can I blame”. I used to think Al Gore was a joke when he said the Internal combustion engine was the worst thing ever invented. It wasn’t the worst, it was something great and is something great. The problem is, it’s to good, and it was used to much. It’s like having a fire and you all want more and more of it, so you burn down all the farms with it and wonder who can we blame.
As an American, I have to look in the mirror and say, we have to blame ourselves. Our love to excel, which is natural, our competitive nature which is natural. Everyone does it, but we didn’t show constraint. Now the greens, communists, One worlders, vegitarians, and technocrats can all argue and offer a weird solution. But the fact remains, we are running out of energy, that is usable “stored” energy, be it fossil fuel based or “ambiotic oil” based. And that energy as it decreases will cause ripple depressions.
Big oil states we have used 1 trillion barrels in the past 130 years. And will use that much in the next 30. The next 30. Where will it be used? In emerging nations, India and China. We’ll use our share also. Peak Oil therists say we have about 1 trillion left. We reached peak. Big oil says we have 2 trillion left. We’re almost at peak. It’s just a 30 year argument. Better to get ready sooner rather than later.
Some Ambiotic oil theorists say oil is renewable. They dream of it being produced by the earth and plate movement. But that has to come from some carbon source to be pressed into hydrocarbons or natural gas which distills into a hydrocarbon mass of oil. In either case, there’s a limited amount of material in the earth.
Why waste it?
Comment by Greg K - June 27, 2008 at 2:53 pm
I see none of you have suggested the most logical solution: mass transit. And if used in large numbers and new technology (like maglev, check out american maglev’s website) and the government only subsidized some of the labor costs (due to the high wages demanded by unions) it would be profitable and companies would see great incentive to expand mass transit infrastructure. Also, the government needs to deregulate zoning codes wich allows for only low density development. This will allow a large enough people to live around the transit to make it effective, and would allow for lower densities outside the zone which mass transit serves.
Its pretty simple. Our country flourished before we had cars, and rebuilding infrastructure to serve our cities is a simple and extremely beneficial solution to not just high gas prices, but the overall economy in general. Its pretty simple fundamentals of city development that nobody seems to understand.
Comment by Jackson Strong - June 27, 2008 at 2:55 pm
I guess, once again, people are dancing around the issue.
Hello, my name is The United States of America, and I’m an addict.
Years of cheap fuel, and lack of foresight, has left of with an automobile infrastructure. That infrastructure works fine when fuel is inexpensive. Now, Fuel will continue to be a problem for us, and the rest of the world. We have a couple of choices.
1, wait and see. I’m not particularly fond of this one. We’ll continue to build suburbs, that are automobile based, and watch them turn into the slums of the future. Our Lincoln Navigator will make a nice planter in our driveway, with 36 months left on the loan.
2. Go electric. what a nice thought. now we’ve just moved the energy problem to coal, and continue to make terrible suburban places. Oh, also, be ready to get new batteries every three to five years, at $5k a pop. The batteries will make fine additions to our landfills. Perhaps your Escalade will be a driveway ornament, because you still owe money on that also.
3. face reality, and change the American way of life. build cities that are car-free, use rail, for all inter-city transportation, and commuter rail for getting between neighborhoods. This actually works, with technology that exists now. With all the money that has disappeared into Iraq, we could have replaced the rail infrastructure a few times over. This is a no brainer issue. We can’t coddle the auto industry, the product that they’re selling has no real place in our future. The byproduct of this change, would be pleasant and livable cities, and preserved farmland. Suburbia needs to be erased, and returned to either productive farmland, or natural areas.
Now, to the people that read this. What would you do, having the money back in your pocket that has been lost on your automobile? the money for insurance, fuel, car payments, maintenance? perhaps go to a shorter workweek? take an eight week vacation a year (like they do in europe)? Turn your garage into something really useful? Perhaps you could find a place in town, that is nice, and comfortable.
Walk, Bicycle, Ride the rails, those are the only real hope for America to continue to be an excellent place to live, and fight for.
Comment by Denn - June 27, 2008 at 2:59 pm
Jack,
Get ready for a surprise. I’m a Reagan Republican from the Midwest. I live in Michigan. I’m not a vegitarian, don’t smoke, attended churches. Believe in Creation, not evolution. Vote pro life and I pro NRA.
I just have a brain and the ability to surf the web and analyze. I post often from a peak oil perspective, but realize it may be wrong. If it’s wrong, no big harm, but if there’s a 20 or 30% of it being correct, then your the one who needs to smoke some dope, because your obviously out of touch with reality.
The reality is:
1. Major foreclosures and big 3 going under or stories of that happening.
2. Continous trade deficit with China and others.
3. We’re in Iraq, and Bush said in one radio address I heard when we were going in, “don’t worry we won’t drop the price of oil when we take over Iraq”. I thought immediately maybe we aren’t going to war for cheap oil, but maybe for expensive oil.
4. Iraq and other countries were propped up by our own government and the CIA. Rumsfield was Sadams handler when we loved him.
5. Other Europeon countries would not go to war with Iraq because of favors, for example Germany was bailed out by major sales of autos to Iraq who ordered them in the past.
6. Yes Oil companies are profiting, but their profit is not producing more oil that is anywhere near what the world needs.
7. China may be buying extra oil to stockpile and driving the price up as well.
8. China can buy any resource or dump T-bills to crash our economy at will.
9. Biggest US debtor, is Social Security fund $4 trillion dollars. I get a note from them every year saying the fund may grow broke. Well where’s the $4 trillion the Congress and government borrowed from us. Twice the Chinese debt? If it’s broke how could that be? Don’t worry they will tax you in the future to pay you back.
10. Abortion kill the kids attitude when they are not useful, will probably work well as we deal with the aged. This society being corrupt and money based. Most people don’t care much about others. Will just retire the Social Security debt rather than repay it. We even see weird posts by young brain dead kids about “Baby boomers needing to die” to make room for them and others. That’s the solution we’ll probably see.
12. We see from past history Americas response to need. We create a cause and say we must go to war to free the country. We needed to free them to get a trade for their resources.
13. Some say we are in Iraq for oil, others for terrorism. I say both. We are there because oil is there and we must have it and those who deny that right are automatically labelled terrorists.
14. In a chess game the first piece in a location doesn’t always win the game. We are in Iraq now. China needs oil and must expand. That’s motive to move to the middle east. Hence Peak Oil folds conveniently into “end time” theories of China going into the Middle East.
15. Competitive nature of man is a fact of nature, not a statement based on a left wing belief system. That’s both nature and a problem. I’m not saying it’s something that can be “solved” by communism or any other systematic solution. But it’s a fact that drives our greed and the greed and drive of any group.
Am I off base or are you just whining. Read it and judge for yourself.
Comment by Greg K - June 27, 2008 at 3:09 pm
Let’s assume speculators are causing the rise in oil prices. If the US acts to regulate speculators in some fashion, I don’t understand why speculators in the U.K., in Russia, in India, etc. can’t just keep running things up by their speculation. Is there some world-wide plan proposed to regulate all speculation? Maybe I’m missing something. (I don’t think speculation is the main cause, by the way).
Comment by Ed K. - June 27, 2008 at 3:22 pm
Is Phil Gramm’s Enron Loophole causing this problem?
http://www.youtube.com/watch?v=RAPhfDRts60
Comment by Ann - June 27, 2008 at 3:23 pm
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