gashouse gorilla

What China's Stock Market Implosion Means for Oil

>> China is very inefficient in converting energy use into GDP, the USA being 4x and Japan being 9x as efficient.

Recent implosions in structured finance should be a lesson to be skeptical about accounting and what it does or doesn't hide.

For instance, do those calculations back out the fictitious contributions from the USA's FIRE sector? If most US revenue (and profits) come from manufacturing that's been outsourced to China, how "efficient" are we really?

Sorry, but each time I read figures like these, I hear "we're #1" and visualize foam fingers on the people doing the calculations.

Windfall Profits for Big Food: Where's The Outrage?

You guys blaming "liberal Dems" are overlooking GOP involvement. Dems don't "want America to fail". If you say nonsense like that, you're as bad as any liberal who makes dumb statement about Republican motivations.

The political divide does not stem from motivations. With the exception of 1% outliers, everybody's motivations (at least in the constituency) are pretty good. The differences in policy recommendations stems from different perceptions. Or, in the case of government, special interests lobby them for handouts. Members of both parties sign up for this, too often for *anyone's* tastes.

Let's not presume the worst of each other over the failings of some of our "leaders". Let's not be assh*les to each other.

More germane to the post, this myopia over "Big Food" and -- my personal favorite -- "Big Water" profit margins has nothing to do with "Dem" or "Rep". For example, I'm a liberal and I think oil company margins are just fine. Indeed, I don't like the constant tinkering with the tax codes, because a shifting regulatory/tax framework makes it more difficult to raise capital to invest.

$200 Oil - Who's Going to Pay For It?

>> Oil at $200 is still not enough to get the Democrats to support drilling in ANWR.

Please answer the following questions:
- How many barrels are in ANWR?
- Since oil is fungible and the market is global, how many barrels does the world use a year?

Mind you, I'm entirely in favor of drilling * off the coasts of California and North Carolina and everywhere else (provided we tax hydrocarbon use to encourage transition to alternative energy). But, ANWR is a drop in the bucket for our energy needs. 9 billion people on the planet by 2050 need long-term solutions. Those people are depending on the choices you and I make.

Also, think of ANWR and our coasts as our "super" SPR. A foreigner once said to me "America is using all the world's resources and saving its own for itself; it's as clear as the nose on my face". It's clear to me, too. The day will come when your children will thank you for not drilling in ANWR.

(* Does that mean I'm not an environmentalist? No. I want us to eliminate coal and -- like it or not -- we're going to need more oil and gas short-term to cover the deficit. ALSO, "spills" from oil rigs and pipelines are trivial. Big spills come from shipping it in tankers.)

$200 Oil - Who's Going to Pay For It?

Doh! You're right. I left out the effects of taxation!

Assuming I pay a 50% tax on the inflated gains, then my real return is wiped out! (50% tax on $1B fake gains = $500M.) I only managed to keep my "real wealth" intact, like the Red Queen Race (hat tip to Mish).

Of course, if I'm a successful supply-sider and can talk the public to lower my tax rate, I can still come out ahead. (They, of course, will not.)

$200 Oil - Who's Going to Pay For It?

Phil,

You might be correct. But, here are a couple of counterarguments:

>> but let’s keep in mind that the rest of the world has to fork over $3Bn a day as well in order to support $200 a barrel oil

Measured in dollars. What's the cost to the rest of the world measured in their OWN currencies?

>> This is the dream of starry-eyed energy traders who are too bad at math to realize that if they do successfully drive oil prices up to $200 a barrel and double their money, that the money they have will only be worth 1/4 of what it was when they started.

Not if they're using borrowed money (e.g., from the Fed). If I:
- start with $0,
- borrow $1B,
- ride it up to $2B, and
- pay back my $1B principal (with 10% interest),
then:
- my nominal profit is $1B

Let's say the dollar loses 50% during that time. In real terms, I still net $500M, because:
- My real gross is $1B.
- My real principal repayment is $500M.

Me and the rest of the amateurs probably won't play it right. Nor will many pros. But, like they say about Lotto: "you gotta be in it to win it" and "somebody's gotta win".

$200 Oil - Who's Going to Pay For It?

HA! I love it, Phil! Great way to set up the discussion. File this one in "tragicomedy".

I still wonder: WHO are the remaining "19%" and why can't we ship them to Iran, where they'll fit in better??