Old Wizard

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, I believe the reason the fed was and is buying treasuries is because banks were buying them rather than lending the money to home buyers and businesses. You need to research this yourself. A reference can be found by googling"federal reserves buying treasuries and then clicking on "economic essays Why the Federal Reserve Is Buying Treasuries" The buy was 300b! On the China Control, I was using another SA article as the source and you are probably right that China doesn't control 95% of the supply. I think that article may have used the rare earth supply as important to the battery manufacture of high powered electric cars, but since I can't find the article I'll concede the error. That said I still believe that China will dominate the market and the long term effect will be to keep us dependent on not necessarily friendly countries for our transportation energy and keep our country's current account significantly negative.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, Is it your position that the larger banking world which now includes integrated financial institutions are not buying any treasuries? I said controlled by, not existing reserves ,for a reason. China and Chile are producers, while Bolivia has reserves but its ability to produce large amounts is still in development. Since China has made resource agreements with some of the other countries which are producing , have have large reserves of their own and relatively no environmental restrictions they are in a strong position. Further, they are a big lithium battery supplier now and are entering the electric car market. Compare that with the US's position. Our mine are shut, we have relatively small reserves, have adopted electric plug-in vehicles as a cog of our future transportation, energy and environmental strategy and will have to import much of the lithium to support the national policy we have adopted. Meanwhile we are borrowing large amounts of money from China, while we try to juice up a domestic battery industry. The 2.5b set of grants announced to facilitate this, was sent to a host of companies, but if one looks at where more than 50% of the money really goes one finds that it went to S. Korean, Chinese and Japanese companies.
The spread between savings account interest and treasuries interest, home mortgages interest to qualified buyers and the more risky loans represents a bonanza for the banks.This bonanza winds up being paid for in part by those folks who put their money in savings accounts and CDs, if th real inflation rate plus the decreasing value of the dollar is more than the 1% the savings accounts are yielding. BTW I don't think my comment stated that lithium was a rare earth element.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Fitz, The value of the dollar is an interesting issue. No one in the current administration wants a strong dollar. Let's look at what is the real policy. Our monetary policy is to keep the fed rate at 0, ostensibly to spur economic development, lower interest rates and create jobs. We also are insisting that stimulus is necessary and are borrowing record amounts from anyone who will lend it to us. At the same time, the treasury secretary and others are urging the public to save more. Let's look at the real policy. Banks are giving their depositors around 1% for their savings, while buying treasuries at 3.5 to 4 % and lending it to qualified home buyers at 5 to 6% and to others at higher rates. Meanwhile the Gov. piublishes reports that the underlying inflation rate is near zero or even negative. Of course this figure excludes food and energy, both of which everyone must use to live. When we look at the cost of living, which includes food,energy, increased local sales taxes and hidden taxes like tolls, etc., the real inflation rate to those who save money is 3% or more. The net result is that the savers are paying for getting the banks well and in large part for the Government's spending spree. Meanwhile, our government invests much of this borrowed money in lithium battery technology in the far east, in petrobras[through thr ex-im bank] for oil-drilling off the brazillian coast while limiting investment for new oil drilling off our coasts and keeping our lithium mines closed for environmental reasons. Given that 95% of the supply of lithium for electric car batteries is currently controlled by China our forced march to electric cars is destined to trade dependency on the mid-east to dependency on China for our transportation energy. Allowing our dollar to decrease in value further hurts the savers because their purchasing power decreases and of course allows debts incurred now to be paid back with cheaper dollars. No wonder the smart financial opportuistic people are so quick to take highly leveraged risks, especially with other people's money. For the income redistribution crowd our policy is also consistant, take real money from the savers and give it to those who either can't or won't.save. A real problem-solving energy solution which is in the economic and strategic interests of our citizens is not and, I have come to believe, never was the intent of this administration.

Why Is Congress Agnostic About Natural Gas?

Adding to the above, I believe statements like it would take 9 years to build the Alaskan natural gas pipeline is subject to discussion. There are estimates that it coiuld be done in as little as three years, if it were to be made a national priority. This statement reminds me of the 8 year statement that it would take to get oil from new off-shore rigs. People located on off-shore rigs wrote on seeking alpha that it could be done in 2 to 3 years. It took between 1 and 2 years to build the empire state building and we are 8 years out from 9/11 and we haven't built the new tower. The limiting factor is not the project time, but more the political priority,perceived need and the public's knowledge of the consequences of delay that drive the required time. The Cape Wind project has been 5 years in the cycle and 50m spent and has made very questionable progress due to political/environmental opposition. It would replace about 80% of the output of a polluting oil-fired generation plant. This in spite of a significant majority approval from Cape Cod voters. I can sight other such stumbling blocks for wind and solar projects,
I am indenting so that you realize I am changing the discussion. You are aware that the port of long beach, which is a transfer point for about 60%+ of our shipments to and fro the far east has legislated that trucks coming to the port will be natural gas-driven due to the air pollution at the port. You also must be aware that IRAN is converting their automobiles and vehicles to natural gas because stategically they have to rely on overseas refineries. AT&T has announced a 600m investment for converting their trucks to natural gas. I also believe that getting natural gas from the oil sands in the US and Canada will continue for the foreeable future and the recent drop in natural gas prices has been due to a glut of this commodity here. The price approached the lowest in memory and only started to rise as producers cut back drastically. On the other side of the issue of clean coal generated diesel the time to convert or translate half of our vehicles to this fuel is not estimated by anyone and the country is not putting its investment into this fuel but rather into phevs, batteries etc. Hawaii just announced a 100m program to create electrical charging stations. In conjunction with this annoucement, a joint venture of Nissan/ Renault committed to provide automobiles consistent with these facilities. This leads me to the final point I have harped on: our investment as a country, should not be driven only by a desire to be the ideal environmentalists, but to insure that we don't perish economically by making investments in strategies that benefit other countries more than our own. When the administration talks about clean coal, can you garner from their actions or investment strategy, what timetable they are on for reducing our dependency on oil and that they see a future in hydrogen fuel. While we cancelled the fuel cell work at GM this year as impractical, Toyota launched an ad campaign that brags about its work in this area.I see no felt urency on the part of our Gov. to solve our underlying economic problem and no focus on the near term that matches that urgency except the scare tactic that global warming will bring imminent doom to the world and we the USA are the bad guys. I believe that if we don't solve our fundamental economic problems we as a country might be able to use the famous self-pitying words of Richard Nixon,'' you won't have the USA to kick around any more".

Why Is Congress Agnostic About Natural Gas?

Freya and one-eye, I thought I did answer your points with my last posts, so let me try again. First, I am not against using multiple sources of fuel for transportation. Second I am aware of the Brazilian approach and much of the claims and progress using deisel fuel, not as much on ramifications of the conversion from clean coal and indicated so in my last post. Third, I stated that if this process can as reduce our foreign oil dependency and reverse our negative operating cash flow as quickly as concentrating on the natural gas strategy, I'm all for it. Fourth, I said I believed that the clean coal strategy would face more environtmental hurdles and therefore[ not said] more regulatory obstacles. My view is that a single energy source will not yield a comprehensive energy policy. I also have indicated that the one the country is following neglects the 5 and 10 year horizon and concentrates on 15 and 20 years, a time horizon which I believe we can't wait for

Why Is Congress Agnostic About Natural Gas?

Look one eye, I don't have any axe to grind. You may very well be right about clean coal. Your own post, hoever,cites the lead other countries have in this area. While the administration talks about clean coal, I am not aware of a focused program with stretch goals and near in milestones, that its stimulus program or budget has fostered. As you have read on Seeking alpha, there are many forces in the US that think clean coal is self contradictory. I don't want to engage in this debate, because I think it deflects us from addressing the country's real problems; we are not producing enough goods and services to be economically solvent and our dependency on foreign energy is doing us in. I want to see a comprehensive energy plan with the implementation and funding details that are consistent with a sense of urgency. It should be required to produce significant impact on jobs,our economic viability and our domestic fulfilling of energy production. I am aware of our reserves of coal and don't see us abandoning it to create electricity in any scenario. I also believe that we have to address our use of oil for transportation and electric cars don't get us there soon enough nor will they help the balance of trade given where the germans,japanese and chinese are in this progression. I believe natural gas driven transportation can reduce our oil importation by 4 to 5 million barrels of oil per day in 5 years and up to 10mb in 10 years. We have manufactured buses and trucks domestically, we have 2.5 million miles of pipeline, an abundant domestic supply of natural gas to jump start this activity and the technology to convert existing vehicles. If deisel converted from coal can impact the economics, domestic production and energy dependency, quicker and as significantly then I'm for it. I think I don't have enough facts at the moment to quantify the comparison of the two approaches. I think, however, the measures of performance should be the effect on the current account, the production of american jobs for equivalent investment in 5 and 10 years.

Why Is Congress Agnostic About Natural Gas?

One eye, if you check my comment stream, you will find my comment pointing out that mercedes is about to introduce a volt-like automobile which gets almost 100miles on a battery charge. The vision of this introduction, I alluded to, was that its engine and drive components were engineered in such a way that they could quickly be converted to hydogen powered. In the same post, I indicated that the energy secretary just discontinued our domestic support for hydrogen powered cars as impractical. You also seem not to want to look at what I continue to stress which is the considerable and potentially fatal threat to our economy which is the mounting negative operating cash flow the country has had since1991. With China and the mid east as our major lenders and our domestic mounting deficits, our economic well being and our ability to execute foreign policy in our enlightened self-interest are in grave jeopardy. Hence my backing of the use of natural gas for transportation. It is our resource, it will create american jobs, is and probably will remain competitive with the price of gasoline and should have a significant effect in reducing the country's negative operating cash flow in 5 and 10 years. If we need more infrastructure for distribution so be it. At least that infrastructure will be built here by our workers. All of this year I have listened to our politicians talk about shovel ready projects and that real stimulus would happen if the money was spent on infrastructure. If clean coal can make a significant impact as above, I'm all for it. And oh by the way less co2 would be put in yhe atmosphere with this natural gas use. I believe that clean coal faces more environmental opposition and will have a longer time horizon for the equivalent impact, but would certainly welcome an objective analysis of an investment vs. time to reduce oil importation by 6m. barrels per day vs. impact on the environment. If anyone has done one, I would certainly think it would go a long way toward focusing a comprehensive energy plan. I think that Mike has tried and so has John peterson contributed analysis on Phev. It seems that our gov. should produce this analysis as part of the reason for the path it is following.

Why Is Congress Agnostic About Natural Gas?

One Eye,I don't think you start with the city dwellers. You start with buses, ups, fedex and the post office,taxi fleets federal and state fleet vehicles and other centrally garaged fleets. How does it make any sense to spend 120m to buy 3000 post office PHEV vehicles to evaluate their operating costs when the post office already owns 7000 natural gas -powered vehicles? Each vehicle averages about 17m/day. I believe we need solutions to our energy dependece and worsening economic dependence problem quickly and policies that don't come to fruition until 15 to 20 years from now with significant impact can't be the answer. I believe in wind and solar and my plan is in the Cogressional record in1992. It includes wind, solar, and mass transportation . We've not acted and now the situation is critical for the country. Trivial goals like doubling wind and solar generation in three years and 15% by 2020 is too little and I'm afraid too late. Now we should act as if our country's survival depends on it, with significant goals for 5 and 10 years for oil importation reduction and the reversal of the trend in our current account. Our drive to bring alternate energy resources on -line should be more focused and continue, especially in the area of eliminating the tremendous political and legal barriers that many of the same pressure groups that want a cleaner planet place in the way. You should look at the Cape Wind project as a case in point. The solution to our country's most pressing problems requires real analysis, a sense of urgency and a focus by our government that is independent of pressure groups whether they be well-intentioned of nefarious, because the single issue well -intentioned create a grid-locked tower of babel that make the nefarious easy winners.

Why Is Congress Agnostic About Natural Gas?

One eye, I have a hard time understanding your point. Currently, it is estimated that we can continue to provide natural gas for its present uses and still convert 25 to 50% of our vehicles to natural gas-powered , more if they are prius-type hybrids and still have enough natural gas for 60 years. That is using current reserves. I stand for what I believe is right for our country. We can't continue to operate with an increasingly negative current account and still be whole. China is now our major lender and the middle east our other major lender is certainly neither stable or relaiable. Should China and the middle east team up against us, where would we be? Your taxes are going up because of the strategies we are currently following and China is using its economic surplus to make energy deals all over the world. Even first solar has just signed up to build the largest solar electic generation facility in the world in China and allowed as it would not be possible in the US because of the difficulty of puting the transmission infra-structure in place. Economic independence for this country going forward and energy independence are highly correlated and actions that make a significant beneficial impact in 5 and 10 years are not forthcoming with our current policy.

Why Is Congress Agnostic About Natural Gas?

Hi again fitz. I am glad to see that you haven't given up the fight. What people like wisdom vs. don't seem to get is that the country's operating cash flow is increasingly negative since 1991 and if oil goes to $145/ barrel again, it will approach a negative trillion/yr. Even if the equivalent energy cost of natural gas approached that of oil[ gasoline], it would be the US's resource and its usage would drive our cash flow significantly the other way. Economic bankruptcy is a more imminent threat to the country's security than anything else. The muddled energy plan[ and I am being charitable in the 'plan" reference] doesn't show significant progress in this direction for at least 20 years. The administration through the ex-im bank invests in deep oil wells for Petrobras, but is agnostic about natural gas, invests in battery technology much of which is made off-shore and is willing to spend 120m to fund 3000 postal trucks for Phed's, but won't expand that organization's ownership of its7000 natural gas-powered delivery trucks and sets baby step goals for alternate solar and wind energy. Can it be so oblivious to the fact that our investment strategy should concentrate on solving our underlying economic problem-we are not producing enough of the goods and services that our citizens and the world wants to buy from us. We increasingly hear about the possibility of a jobless recovery. Could it be that we just don't need as many paper shufflers and actually need to use our own resources to produce goods and services that people all over the world starting with our own citizens want to and will buy from our domestic suppliers? Is there anything more obvious than our own source of energy? When something is so fundamentally logical and also urgently needed, one can only conclude that the reasons for not proceeding are either political, greed or incompetance. The Congress and the media should do some self-examination here and ask, Are we really serving the public and deserve to still be employed?

My Thoughts on Oil

Fitz, After reading the immediate above comments, I thought I'd bring the discussion back to energy policy rather than diverting the discussion on the trade-offs of buying domestic as opposed to foreign oil companies in the event of predicted dollar value decline. The discussion is interesting, but I wonder how many purely domestic oil companies there are. Frontier oil comes to mind, but relative to the total value of so called domestic oil companies they are miniscule. The question I'd like to put on the table is what would have happened to our domestic car companies had we embarked on a crash program to convert existingvehicles and those being produced to natural gas driven vehicles. Further what would have been the impact on the existent dealer, parts supply and maintenance facilities and the unemployment picture? What if the country spent 50b starting in Jan.09 implementing this policy, would GM or Chrysler still have gone into Bankruptcy and would this not have served as a better transition to the car of the future than to artificially force a premature transition to plug-in electric vehicles? Even if these companies had to go to chapter 11, is it not still a better way to go than to spend billions more to convert existing plants to electric car manufacture and ,as Ford is already singaling, buy their required batteries from China in order to gain total price parity and time to market with Japanese already unerway competition. I'd be interested in your take, fitz, and the rest of the folks.

My Thoughts on Oil

Fitz, Glad to see you still working for some logical approach to our energy problem contrary to what is coming out of our government officials. Dr. Chu continues to be almost ludicrous in his approach. You are probably familiar with his recent remarks concerning energy saving strategies. He advanced the thought that if we painted all our roofs white and our roads a light color we could save almost 11 years worth of oil. Maybe this is the start of a comprehesive energy strategy and if we gave our unemployed folks a year's worth of paint and brushes and paid them to paint roof and roads ,we would have a real stimulus plan. Like so many things coming out of Congress and the administration there is no cohesive plan for any of our major problems and only vague and confusing solution details and time horizons. I checked again my original data concerning wind and solar generating capacity. As of the last official gov. statistics, the electrical generating capacity of the US today is app 1 trillion megawatts. That emenating from wind and solar is about one fifth of 1%. Doubling this in 3 years, as is the president's goal, is insignificant. Projections on that site state that electrical generation from coal will increase from 51% to 56% in 20 years, while staying constant for natural gas electricity generation. Since electrical generation capacity is also projected to increase over this time period,carbon emissions should also increase; hence the arm waving statements concerning clean coal. I don't believe that environmental purists understand that these are official gov numbers. Further, the amount of existing electrical generation from wind and solar is many times smaller than that obtained by burning wood and wood proucts. All investers should understand that even if we increase electrical generation from wind and solar by a 1000 times what it is today in 10 years it would still provide only 2% of today's capacity. An exoponential expansion like doubling every 3 years will result in less than 50 times more. The numbers don't close with a meaningful solution and either require a much bigger investment now or another strategy. For one of the above commentors, the amount of oil we import from the mid east, Venezuela and to a small amout Russia is somewhere between 5 and 6 million barrels a day. We could eliminate all or most of this amount, if we converted approximately half of our gasoline -driven vehicles to natural gas. This could be achieved in 5 to 7 years and would be a solution that would create american jobs using a commodity that is domestically provided, reduce co2 emmisions and would decrease our negative current account balance by over $200b a year, assuming an oil price of $100/ barrel over that period. Should that price average $150/barrel, the reduction would be well over $300b a year. This solution is clean, understandable on its face and is accomplishable. Electric and plug in cars are not easily connected to a comprehensive solution, nor a timetable that solves the energy, polution and the country's negative operating cash flow, the latter being at the heart of our structural economic problem. Our place in the world and our whole way of life is hanging in the balance and the current approaches to our problems are more political and unconnected solutions rather than aimed at real problem solving. We need better leadership than we have had over the last 20 years at all levels who are motivated by service,rather than the maintenence of power and the ability to be reelected. If the media was competent and objective, maybe they could truly inform the public and reelection would be tied to real problem solving, but listening to multiple outlets and reading major newspapers is not reassuring.

Making Natural Gas Transportation a Reality

Fitz, As you have been predicting, the price of oil is going up. This combined with a new impetus on ethenol by the Gov and the printing of money by the treasury will lead to a commodity and food price upward spiral like we experienced early last year. For a highly leveraged economy this spells bad news. The deleveraging the country has experienced to date is only half way to where it has to go and a price upward spiral on basic commodities at this point is double trouble. We are on the verge of being at the same place as this time last year and lost a valuable year without the definition of coherent and urgently needed and articulated process for correction. In the interest of satisfying his single issue constituencies the president has not applied the necessary time constraints and consequently, not focused his programs[funding] and his political speak on the first bullet aimed at the country's economic head.

Making Natural Gas Transportation a Reality

Fitz and pragmatist. I think the three of us agree on the path forward, but the announcement this morning that GE, a company in which I labored for a long time and hold too much stock, just announced plans to build a new battery manufacturing plant in the US is another disturbing sign. The CEO is one of Presidents economic advisors. This coming from a company which is still cash strapped and wants to sell its appliance business. Given that many US battery makers are struggling and the existing imposing foreign competition, this announcement portends a greater Gov push on electric vehicles, does it not? On the plus sign, AT&T has gone public with ads, featuring their natural gas-driven truck program that highlights the positive effects on the environment.

Making Natural Gas Transportation a Reality

Maybe the Obama administration has gone for the bifuel compromise, but there seems to be some counter evidence in recent events and announcements. 1] Ford, which might be the only US viable American automobile company left standing, just announced a massive investment to convert a truck plant to ev automobile production by 2011. Would Ford make a commitment like this if they thought that CNG was in the Administration's plans? 2] None of the stimulus money is directed toward supporting technology or implementation of natural gas conversion. 3] None of the discussions surrounding GM's future are centering on a thrust to natural gas driven vehicles which GM already can produce. If the administration has any intention of implementing a bi-fuel solution, where is the tangible evidence? It is not surprising that Senator Obama would support the natural gas thrust and President Obama has yielded to the purist environmental constituency. As all the pundits continuosly remind us, 'that's politics". Too bad we can't have real problem solving for a change. The announcement that one can now rent a mini cooper pure ev for $862/ month and 462 people have already signed up, just reported by local radio, is another testimony that articulation by a charismatic figure will induce some people to act regardless of the wisdom or economic implications of the act. That is why the national leadership should be more thorough in its analysis and articulate more well thought out solutions to the country's problems.