Dangerous Assumptions:
Good Morning to all of you bright minds out there; your King of Simple News is on the air.
Today’s post is an updated re-run that I thought was perfect for the current predicament.
As I continually marvel at the promises from our leadership for full recovery of our consumption based economy; it suddenly occurred to me that many people are viewing the possibility of total economic recovery under the misconceived belief that the U.S. will always be top dog in the global consumption department; no matter what.
And, that the U.S. will always have an unfair share of global resources. That we will always be smarter and wealthier than other nations, regardless of our economic policies, our declining manufacturing and agricultural activity, and our political blunders.
If this mini-revelation of mine is true, it certainly explains a lot regarding the lack of urgency in taking personal action to curb the impact of the downturn.
I want to revisit a few pesky facts that tell a very different story.
The U.S. represents 4.8% of the world population, but currently consumes 25% of all energy and 30% of world materials. Our master plan (and only plan) is to substantially grow those numbers! We add about 1.2 Million legal immigrants to our consumption plan each and every year. Thank you Lyndon Johnson.
The Untied States cannot go on without year over year growth. The term for not having that year over year growth is “recession.” Yet, we are maxed out on fresh water in many areas of the country and near gridlock in most large cities. However, every politician promises greater economic growth.
In 1980, the U.S. was the largest creditor nation on earth. Today, we are the largest debtor nation on the planet. To the point in fact, that we borrow money from third world communist nations to pay the interest on the National Debt.
We are currently facing a $1.75 TRILLION annual shortfall. For those who care to understand how we could have gone from 60 to reverse in a few short years, one only needs to comprehend the “exponential function.” Our demise was a mathematical certainty.
The U.S. is totally dependent on borrowing from foreign nations not only to fund our government, but to continue our present personal lifestyles.
Should the phantom equity in their homes not be considered, somewhere around 80% of American households have negative wealth. In other words, 80% of this nation is 30 days from bankruptcy should their income steams cease.
At last count, the real number of unemployed and under-employed Americans is approaching Great Depression levels. “In fact, no bout of unemployment since the last year of the Great Depression in 1941 would have produced an adjusted unemployment rate as high as today’s…” http://www.dollarsandsense.org/archives/2009/0709miller.html
The U.S. has a trade imbalance of about $700 Billion per year. In other words, we buy about $2 Billion more per day from foreigners than we sell to foreigners. Look at it this way; you put two cans of food in your pantry every day and take out three. How can that work?
Should the Chinese manage to raise consumption to the same per-capita rate as Americans, they would require 100% of all current resource production on earth.
If India and China were to collectively consume at just half the rate of Americans, the same result would be obtained; 100% consumption of all global resources now being produced, with the remainder of the world having zero. (We live in that ‘remainder’ of the world). I remind you that India and China, among others, are dead set on achieving parity with the United States.
The U.S. hit peak oil production in 1970. Today we produce 40% less than we did in 1970 and consume 40% more. We purchase the balance of that energy on credit from foreign nations by borrowing against the future. Our second largest supplier, Mexico, is depleting their known reserves; “Mexico had crude-oil reserves of just over 11.047 billion barrels on January 1, 2007, a dip of 6.4% from January 1, 2006, according to state energy group Petroleos Mexicanos (Pemex). This gives the nation a margin of 9.6 years before, as things stand, its oil runs out. …”
Over our lifetimes, we consume some 75% more than that of our European counterparts. And yes, you read that correctly.
I can go on and on for pages with this list.
If anyone can read the points that I have just made and continue to believe that the U.S. will always have the upper hand and that our economy will return to status-quo through growth of debt, population, and consumption; have your doctor check your medications.
As a stark example, I often remind myself that as late as 1921, the English Empire encompassed 25% of all the people on earth and covered 14.3 million square miles. (The land mass of the United States is 3.5 million square miles).
I’m confident that in 1921, when it came to retaining the lion’s share of global resources, the English people felt the same way as Americans do today. How’s that been workin’ out for jolly good England?
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Not only is this dangerous, it is potentially deadly. Every week tens of millions of people play the lottery in spite of astronomical odds against their winning, and they expect to win! Yet the same people take no precautions against the very real threat of our economy melting down. As Mike has suggested, those odds are pretty good.
A good strategy for survival; and perhaps prosperity, is to watch what everybody else is doing and then do the exact opposite.
If an action is foolish, it doesn’t become any less foolish simply because everybody is doing it. Put some distance between yourself and these unthinking people.
Mike, you stated:
“Mexico had crude-oil reserves of just over 11.047 billion barrels on January 1, 2007, a dip of 6.4% from January 1, 2006, according to state energy group Petroleos Mexicanos (Pemex). This gives the nation a margin of 9.6 years before, as things stand, its oil runs out. …”
That seems to imply that Mexico’s oil will last until about the 2016/2017 time frame. But, according to the Export Land Model, even 9.6 years is too long. As Mexico’s oil production declines even further, they will eventually have use all their production just to meet their own domestic needs. Which, of course, implies that they won’t be exporting any oil to any other countries.
And who is the 3rd largest oil exporter to the U.S.? If you guessed Mexico, you win the prize!
I can’t remember the exact calculations, but I believe that Mexico will not be selling the U.S. any oil by about the end of 2011 or so.
Any ideas on where we’ll get that oil? Now you know why Obama isn’t getting us out of Iraq all that quickly and why the Establishment is still so interested in stirring things up with Iran.
Strange times, isn’t it?
Sweaterman,
You are correct. The Mexican oil minister stated nearly a year ago, that Mexico had approximately 5 years of export oil remaining.
It is also important to note that nearly all government funding in Mexico comes from the state owned oil sales.
Why are we in Iraq? To save those poor folks and deliver democracy is not the answer. To preserve the illusion that we can grow population and thus our consumption and GDP is the correct answer…as you alluded to.
Why did we build new naval ships to fight the pirates in Somalia rather than the bordering countries who have BILLIONS AND BILLIONS of $$$$$ in oil revenue? Oil, plain and simple.
Yes, it’s strange times and getting stranger every day.
Thanks for your input.
Greg said, “If an action is foolish, it doesn’t become any less foolish simply because everybody is doing it.”
In a gang rape of a 15 year old girl that occurred recently at a California school, as many as 20 bystanders made no attempt to call the police or to intervene. Some sent text messages and pictures during the rape as if it were a sporting event.
Why did not someone try and help? Because no one else was trying to help. Everyone else was doing nothing and everyone else was foolish.
I wonder if there will be some deal making with Mexico about us leaving our borders open in return for some of that oil.
15 out of the 19 hijackers on 9-11 were from Saudi Arabia. Why did we invade Iraq? Oh yeah… the Saudi’s play ball, Iraq didn’t.
The most disturbing graph I’ve ever seen was a plot of oil and population vs time. As soon as oil was discovered world population really took off. If oil really does become scarce what happens to the population of the planet. scary.
Wars are fought for control of resources. Land, water, gold, oil, etc. Not that humans can live in peace but it would be nice to be told the truth.
I think most Americans would be surprised to see where our oil imports come from. The following list is from The Oil Drum. The numbers are old, but they are revealing.
For 2007, our Top 10 exporters of crude oil to the U.S. in million barrels were:
1. Canada 680.533 million barrels (total for the year)
2. Saudi Arabia 530.245
3. Mexico 514.48
4. Venezuela 419.841
5. Nigeria 394.856
6. Angola 181.215
7. Iraq 177.009
8. Algeria 161.755
9. Ecuador 72.138
10. Kuwait 64.306
Recent numbers I that have seen are slightly different:
1. Canada
2. Mexico
3. Venezuela
4. Saudi Arabia
If you want to understand our foreign policy, follow the oil. Also, keep in mind that more and more of the oil we import is Heavy, not Light. The cost of extraction and refining is higher with the lower quality crude.
Most of what comes from Venezuela and all of the oil shale finds in Canada are Heavy. Expect to pay more, possibly a lot more. Add this to the Export Land Model that Sweaterman alluded to and you can see why are oil prices are set to go higher - again.
Greg -
Once upon a time I actually created a chart using those numbers to scare some folks who thought this whole peak oil thing was a scam.
Basically, I laid out the numbers as a representation of our oil use across an entire year.
For example, the US supplies about one-third of our own oil, and we import two-thirds. Thus, the US could run (roughly) on its own oil from January 1 through April 30 of a calendar year. From approximately May 1st, June and part of July we run on the oil we get from Canada. For the rest of July, August, and the first week of September we run on the oil we import from the Kingdom of Saudi Arabia. For the last 3 weeks of September and about 6 days of October we run on the oil we import from Mexico. And so on, and so on for all the other countries on that list.
Then I ask non-believers to name the other countries on the list (or anywhere in the world, really) what we are supposed to run on for those last 3 weeks of September and the first 6 days of October when Mexico stops selling us oil in 2012?
I realize that this explanation is highly unrealistic in that we don’t actually use oil in this way, but it does get people thinking about the total overall supply and the fact that about a month’s worth of supply to the US is about to vanish pretty soon.
So glad I keep my bicycles tuned up and take good care of repairing my shoes, as I think they are going to prove a lot more valuable in the years ahead.
Sweaterman - that is really creative. Did anyone change their mind?
I have found that most people get defensive when presented with compelling evidence that the world is different than the picture in their head. When confronted with the necessity of revising their world view, or continuing to be delusional and ignorant, it seems that delusional and ignorant is easier and usually wins out.
If you have a chart or graph of any kind, I would like to see it. If nothing else, it would be fun to watch the reaction when some belligerent, ignorant, know-it-all realizes his position is indefensible. I don’t recommend this unless the person you are debating is unarmed and you can outrun them.
Not so long ago, the last president went to Saudi Arabia to ask them to turn up the spigot. As it turns out, the Saudi’s can’t turn it up, they’re wide open.
However, most people would reply to Sweatermans chart by saying, “There is plenty of oil right here in the U.S. All we have to do is drill for it and mine the oil shale. The whole oil shortage thing is a hoax.”
There was a hint today that the economy was turning around. GDP is up in the 3rd quarter.
This news caused a great spike in oil, gas and mining stocks. Why? Because those stocks represent the ability to grow and they are finite in nature.
If we really did get the economic show back on the road, hyper-stagflation would meet us at the first intersection.
“GDP is up in the 3rd quarter”
Current-dollar personal income decreased $15.5 billion (0.5 percent) in the third quarter, incontrast to an increase of $19.1 billion (0.6 percent) in the second. …(break)…
Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrastto an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.html
Mathematical games make Magic
The problem of denial is perplexing in the general population. Among those at the reins of power it’s dangerous. I find it hard to beleive that they are unaware of the problems we’re facing, problems that their misguided policies are making worse. I think that they’re buying time. They have to keep the misery index below the threshold of popular intolerance. but it’s a very tricky thing to do. In case they fail, they have elaborate plans to quell the unrest. The internet is rife with chatter about Fema internment camps, presidential directives, homeland security plans for martial law, militarizaton of local police departments, fusion centers, unconstitutional surveilance of innocent citizens, etc.
Survival preparations are the easy part. Avoiding brown shirts is a bit more problematical.
Greg -
Change their mind? No.
Change the subject? Yes. And quickly,too.
I’ll see what I can do about recreating the chart; I’m always happy to pass on info, especially when it (might) change or impress somebody’s mind.
And in regards to Mike’s comment (#9) he is absolutely correct as far as anyone can discern from available public information.
The Saudi’s say they can pump an additional two to six more million barrels a day. However, they sure haven’t, even when prices were sky-high and those extra barrels would have brought them some serious cash. Because of that action (or lack of it) I say they can’t, and so far, nobody over here in America wants to hear about it.
As regards the shale idea, I would ask this of Mike, and Utahns, or folks in the northern end of my state (AZ): do you really want all those shale formations scraped down to the ground just so you can drive your car? Have you never been out hiking in, on, or around them? What about on horseback - a great ride, BTW.
And even if you are willing to sacrifice those shale mountain(s), like folks have done for coal in the Appallachians, where are you going to get the water?
As I recall, the Colorado River Compact was signed way back when (1917-1920?) when the river was in a glut of water that it has never regained since that time. Water is a precious, precious commodity out west, and guess what that shale mining takes a boatload of?
Water.
So, (1) If’n you’ve got a fancy scheme to float down some icebergs from Alaska to melt for your shale-to-gasoline conversion, and (2) You can do this without the resultant fuel costing more than $7.50 a gallon, and (3) You’ve got a way to deal with the environmental destruction and pollution, then folks might want to talk to you. But realistically I don’t think you can meet even one of those criteria, although god knows, the powers that be will surely try each and every hare-brained scheme to keep (or try to keep) the whole calliope spinning around….
Hutch # 11,
“Torture numbers and they’ll confess to anything.”
Sweaterman,
The oil shale play has been with us since I was a young man. My former father-in-law was a scientist at Anvil Points shale research center, Rifle, Colorado. He told me the process would never work on an energy expended to an energy extracted basis. (EROEI).
We must also remember that Colorado shale oil is synthetic and cannot be reduced to quality gasoline. Diesel yes, gas no.
Shell is trying to perfect a freeze-wall technology that does not require massive amounts of water…but does require huge energy inputs. Don’t hold your breath.
Is water important in the west? “Whiskey’s for drinking and water’s for fighting.” — Mark Twain