jerry p

Crude: Where's the Demand Destruction?

The question is how much longer can these governments continue to subsidize fuel prices?

The Real Solution to the Energy Problem

Three questions:

What happens to the battery packs at end of life? What is the cost and effect on the environment to dispose or recycle them? There will be hundreds of millions of these batteries.

Wouldn't there be a massive shortage of raw materials needed to create hundreds of millions of those battery packs? Raw materials supply-demand problems could make widescale use of electric vehicles impractical.

Can the current infrastrucutre support adding tens of millions of cars to the power grid? How many decades will it take to upgrade the system? Power plants and nuclear reactors aren't put up overnight.

The Real Solution to the Energy Problem

People can still immediately trade into USD positions when needed. The FX markets are bigger than the bond and stock markets combined. They can always hold their currency in Euros and trade the required amount into USD when needed. There is no need for anyone to hold dollars if they don't want to. The issue of taking payment in USD, Yen, or Euros is all smoke and mirrors when the real-time currency translation is available 24x7.

If the Japanese want to buy $1M of oil from Iran, and the current rate is 100Y:1USD then what difference does it make what the currency for the transaction is? If the Iranians want Yen, then the Japanese transfer $100M Yen. If they want USD, then the Japanese trade $100M Yen for $1M USD and transfer $1M USD. The Iranians can take that $1M USD and trade into Yen or Euro in 5 seconds. If the Iranians want to use that money to buy an airplane from Brazil, they can immediately trade into USD or Brazilian Real in the FX markets. It's nothing more than a few keystrokes. That Iraq-USD theory would be more believable 50 years ago when crates of cash were being sent back and forth.

The 517 trillion in derivatives is a deceptive number. The true number is closer to $120 trillion in CDS, CDO, CLO etc. Many of the derivatives in that 517 number are futures contracts, options etc. It's still a huge number and they should have been regulated.

The Real Solution to the Energy Problem

The Iraq-USD theory holds no water because those countries can immediately trade out of the USD into another currency through the FX markets. They can use their USD holdings to buy American assets and dump those USD back on us. If we lost that 20% of oil from the Middle East, what happens to our economy?

Comparing oil and gold prices makes little sense. Once oil is taken out of the ground and refined/used, it is gone forever. Gold taken out of the ground is here forever. Expanding economies require more oil, not gold. If gold prices soared to $10,000/oz, it would not affect the economy. Rising oil prices hurt the economy.

Conservation can start immediately, costs no money, and keeps hundreds of billions of dollars in our economy. Is it realistic to mandate that every car has a super battery installed and be a hybrid? Maybe if you are a dictator. Even then, it would take at least a decade and cost over $1 trillion to have those 150 million super batteries produced and installed just for autos in the US alone. These super batteries use barium nitrate, NiMH or lithium, so wouldn't there be a huge shortage of those materials? Prices would be driven so high that it would no longer be practical.

Biodiesel is being studied by hundreds of scientists and institutions across the world. If it works, it will be part of the solution. If/when it gains widespread acceptance, it will still take a decade to produce/convert cars to use biodiesel.

The Real Solution to the Energy Problem

kimc, you are right. Alternatives are the future. However, we need to do something for today too.

If this technology has been around and is more efficient than fossil fuels, what is holding it back?

The Real Solution to the Energy Problem

We are not in the Middle East for oil? Do you really believe we went to war in 1991 to defend Kuwaiti freedom? Don't tell me you're that gullible. Why aren't there US troops in Myanmar or Sudan to defend their freedom and bring Democracy there? I've heard of the USD-Iraq theory before and it doesn't hold water. Besides, what does that have to do with conserving energy in order to redirect that money to other industries? If OPEC wants to get off the USD, then it will do so whether we conserve energy or not.

Yes, there are plenty of oil reserves out there. It's costing us $400 billion in net outflow each year to get that oil. Alaska would only be a drop in the bucket. Once we drill Alaska, and we still have a huge net outflow, where do we go next?

From what I am reading, there is strong resistance to voluntary conservation, even though it would save this country billions of dollars, reduce pollution, and produce no harmful effects on the economy. Is that right?

The Real Solution to the Energy Problem

Folks, I'm calling for tax breaks, not bigger government. Nobody will be forced to do this, but they will be rewarded for good behavior. It's a kick-start to get the economy moving in the right direction. I agree that we also need to drill for more oil, but that alone will not solve our problems. We need a combination of approaches. Smart use of alternative energies, more drilling of oil, and conservation will be the best way to lower our energy costs. Think about this: $400 billion is leaving this country every year because we use more oil than we produce. Nearly 40% of our trade deficit is due to importing more oil than we produce.

Electric vehicles will be part of the solution, not the entire solution. How long will it take to put the infrastructure into place to support 100 million electric cars? Can our current infrastructure support it? Besides, electric isn't completely green when you have to burn coal and NG to produce it.

No, we are not running out of oil. Yes, we are running out of cheap oil and it is hurting our economy. What if we could keep that $400 billion in our economy each year instead of sending it overseas? The $600 tax rebate stimulus came at a $106 billion cost to the US Treasury (aka taxpayers). We could have 4 times that amount each and every year.