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?

China Repeats U.S. Energy Policy Mistakes

Freya, I don't know enough about what Brazil is doing with flex fuel other than they use sugar cane derived ethenol. It is curious, however, that their state-owned oil company wants to deep drill for oil. If they are that successful with alternate fuels and if the USA's energy policy will materially impact oil usage, why are they doing so. Could it be that 1] our energy policy won't materially impact oil usage here and 2] the Brazilian government understands that having their country's operating cash flow be 0 or greater is in the best interests of the country's well being? In a previous comment you said that the ex-im bank's investment in Petrobras was misunderstood. You didn't respond to my reference to the ex-im bank official's statement. Can you elaborate? A short term energy plan that drives our current account toward 0 is ,I believe, sorely required if the USA is going to solve our economic problem. It should be addressed with a sense of urgency and can't wait to 2020 or2030. If flex fueled cars can solve the problem, I'm all for it. I only require that we make significant progress in 5 years and constrain the solution to reducing the current account balance at least 220b in 5 years and approach a current account yearly balance of 0 or greater in ten.

China Repeats U.S. Energy Policy Mistakes

Freya, The local paper carried a letter from an ex-im bank official, yesterday, that stated it was an investment in Ameican jobs because Petrobras would buy American equipment and services. He also asserted that it would cost the taxpayer nothing, since the investment would be covered with interest. I have a problem with the logic of our making an investment in a very profitable company to help them do deep drilling in the ocean for oil, while our government continues to have a stated policy not to do so here for environmental reasons. The simple fact is that more oil from Brazil will only provide more oil for everyone including China which has also invested in this company and to the extent the US imports it, will contribute negatively to our operating cash flow when compared to our drilling for oil off our own coasts. Relative to the use of natural gas, We certainly could start converting all bus,truck and pooled vehicles and providing natural gas drops to their home garages and terminals, followed by gas stations in major cities, etc. An assertion that we can solve the electrical refueling and the electric grid control problem faster needs some facts to back it up. Natural gas buses are already in operation in some of our cities and companies like AT@T have announced plans to convert their fleet to natural gas. The solution to reducing our negative current account has to include reducing our importation of oil. Electric cars do this but unfortunately the countries with the leading battery candidates and lower labor rates do not include the US. It would be refreshing to embark on an energy solution that uses our resources, our labor force and our brain power and know how to solve our economic problems. What ever happened to enlighted self interest?

China Repeats U.S. Energy Policy Mistakes

Freya, The investment in the Brazilian Oil Company was discussed in the Wall Street Journal,this week. I don't remember which day and was carried by some of the media yesterday. The administration is the current one, since it was just announced. Technically, I believe it is through the import export bank and is money the US government guarantees, when it is borrowed or provided by that agency, which is an agency of the federal GOV. The Soros investment is also discussed in the same article and has been covered by some media channels. The press secretary was apparently asked about the gov. investment at a press conference this week and the official response is that the gov. is looking into it. The UAV announcement is contained in excerpts from the submarine league's newsletter and probably can be found by googling NRL. If not,if you give me an address,I will forward the newsletter to you. I still would like you to respond to the challenge of delineating a comprehensive energy plan, that achieves measureable and significant results in 5 years and provides positive progress on all four problems, I discussed, simultaneously. Some of us have tried to put forth such a plan and have inevitably been led to the natural gas-driven option as the most viable for the next 5 to 10 years, while the more promising other techniques mature and are implemented. I, personally believe that the switch to wind and solar is underwhelmed by the stated investment and the drive to force electric car production so quickly will only increase the trade imbalance with China. The investment strategy we are following as a nation seems not to be coherent as the investment in Brazil implies and since it comes by borrowing massive amounts of money from folks who don't necessarily like us, is a dangerous situation for our country's future well being. A constructive discussion where we attempt to be as objectively analytical as possible should be not only our aim on seeking alpha, but what we should demand from our Government decision makers. I'd like to see the coherent plan with actual milestones as a function of time and with the measures of performance being less imported oil, less co2, and the number of US jobs created. My suggestion is 5million barrels of oil less imports in 5 years and 10 less in ten years, 10% less co2 emissions in 5 years and 25% less in 10 years, 1 million new american jobs in 5 years and 3 million in 10 due to our energy plan. Anyone who says they have a solution should put it up for discussion in these terms so that we can carry on a meaningful and constructive dialougue.

China Repeats U.S. Energy Policy Mistakes

Fitz, I believe I have read just about all of your posts and it is obvious that you have clearly made the distinction between less co2 emmissions between natural gas and coal and natural gas and gasoline as you have stated above. Any one who really looks at the total problem of the country's increasingly negative operating cash flow, the need to create real and lasting jobs, the strategic shortcomings created by our dependency on imported oil and our desire to decrease air pollutants couldn't help but want to create a solution that materially solves each of the above with a comprehensive energy policy that led to significant and measurable results, simultaneously, to all of the above in the near future. A sense of urgency borne of our economic dependency on China and other friendly? country's requires such results to occur in 5 years and each year thereafter. Rather than argue about specific technologies and alternate energy approaches, I challenge all of those descenters to your articles to put forth an energy plan that produces significant progress in 5 years which does not include natural-gas deriven transportation. As I have commented in the past, realistically, ev's won't do it, alternate energy sources per the president's own stated goals will provide 15% of current electric generation by 2020 and that assumes a doubling of such sources every 3 years and given what is happening in nuclear power plants, we will be fortunate to maintain the capacity we have now in 5 years. By the way,Fitz, just to reinforce your thinking, the administration just authorized a 2b+ investment in Petrobas to drill off the Brazilian coast for OIL! Of course, I won't read too much into this with regard to policy, but it is roughly the equivalent to the announced battery investment. As another aside the US Naval research center unveiled a new unmanned aerial vehicle[UAV] that is powered by a fuel cell made by an american company in Ma.. The announcement stated that battery power was discarded because it did not afford suffient pay load. Keep up the fight for natural gas-driven transportation, because it's the right near and intermediate term solution for our country's well being. By the way if you want an investment tip invest in Petrobas. George Soros invested over 8oom in it just before our Government made its investment.

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.