Oracle 1990, vs Sunpower 2009, history repeating

[gobears]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Western, 1st world industry consumes huge amounts of energy per $GDP generated. As energy prices rise, the most impact therefore falls on the shoulders of the 1st world economies. They in turn, respond by alternative energy, energy efficiency improvements, etc. but these changes are expensive in capital as well as $/unit energy consumed.

In the 3rd world however, they produce using different techniques, usually with a significantly lower energy overhead, and sometimes wih a lower energy used per unit of product produced. As they have a lower energy/$GDP ratio, they are less affected directly, and secondly, become a better deal when compared to the 1st world markets, and therefore pick up an additional share of the world's market share (1st world loses market share, 3rd world gains it).

If that is not what you are trying to say, please explain more fully. I must have missed your point and linkages.

My opinion is a little different. It is based on the following:

(1) At any given point in time, the world GDP is constrained by the existing technologies, political structures, financial structures, and resources.
(2) The pie is split very unevenly, as some regions have enjoyed financial/economic/technological advantages that let them dominate world consumption.
(3) If some region has an outsized share of GDP, and the conditions that allowed it to maintain that outsized share deteriorate, and other regions make improvements, then the relative share will migrate. It might mean the rich country becomes richer much slower, or the richer country might actually become poorer (which has happened to the USA dramatically the past several years). For the USA, a reduction in growth projections from 4% to 1% is devastating to long term pension planning, tax receipt planning, etc...
(4) The developing world has learned alot the past 30 years. With the virtual death of communism, you have a relative increase in the "economic viability" of the developing world, especially in China. The improved political/economic climate together with the speed of advancement allowed in the digital age creates a potent combination for aspiring 2nd/3rd world countries.
(5) At the same time, the G7 have tilted more towards socialism, financial shenanigans, aging populations, etc... and are ripe for a drop.
(6) The competitiveness of the labor force, infrastructure, education, etc... I think are most important for migration of wealth, more important than energy efficiency. Due to these factors, business will migrate to lower cost centers. Eventually, the wages will rise enough in the 2nd/3rd world and fall enough in the 1st world, that there will be a new equilibrium.
(7) Due to the faster growing economies in the developing world, energy pricees will rise due to increased competition for resources. I think has a bigger direct impact than relative energy efficiency.
(8) Improved energy efficiency will cushion some of the blow to the standard of living in the west. Just give an example. Suppose oil goes to $300 in 5 years. Gas will go to $10 per gallon, or more due to inflation. At the same time, suppose wages stagnate. Now, a 100 MPG plug-in hybrid and solar panels on your roof begins to look pretty good. Its not a cheap investment, but instead of having a Chevy Suburban, a BMW 550i, and a motor boat in the driveway, you have a single efficient car instead. At least you still have mobility....!

[Glenn Black]

Re: Oracle 1990, vs Sunpower 2009, history repeating

I have seen some economic studies that show the % spent on food, clothing, energy, etc. tend to stay fixed rather than fluctuate. If energy is suddenly cheaper due to world event, people will tend to be less inhibited in that sphere of their lives, maintaining restraint in other areas that haven't changed. No longer restrained in energy consumption, they tend to consume more (eg. go out for Sunday drives, commute further, longer vacation destinations, etc.) so that the total dollars spend is about equal.

[c1ue]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Western, 1st world industry consumes huge amounts of energy per $GDP generated. As energy prices rise, the most impact therefore falls on the shoulders of the 1st world economies. They in turn, respond by alternative energy, energy efficiency improvements, etc. but these changes are expensive in capital as well as $/unit energy consumed.

In the 3rd world however, they produce using different techniques, usually with a significantly lower energy overhead, and sometimes wih a lower energy used per unit of product produced. As they have a lower energy/$GDP ratio, they are less affected directly, and secondly, become a better deal when compared to the 1st world markets, and therefore pick up an additional share of the world's market share (1st world loses market share, 3rd world gains it).

As energy prices rise, both 1st world and 3rd world countries suffer.

The dynamic is as follows: The 1st world can cut more energy use because it uses more per person, but has less incentive to cut because energy use is a smaller part of the average budget.

The 3rd world is actually less efficient than the 1st world - generally due to poorer equipment. But needs less energy per person and uses less energy per person. Note this Wikipedia graph shows high energy use density in China, but note that China's per capita is fractions of the US'.

http://en.wikipedia.org/wiki/File:Energy_Intensity.png

As prices rise, the 1st world will invest to increase its own efficiency - in the process dumping its old equipment to the 3rd world which in turn also increases 3rd world efficiency.

Some 3rd world nations that are more visionary will invest to increase their inherently more wasteful energy use, but overall the dynamic is not going to be changed because it is a money=efficiency dynamic.

What does this all mean?

I'm still attempting to understand the relative weights, but some early conclusions are:

1) The 1st world must be the driver for overall system efficiency gains.
The 3rd world doesn't have the money to invest into the scale of higher energy efficiency technologies needed.

2) The 3rd world will serve to sop up 'excess' energy from 1st world efficiency gains
Because the 3rd world is where untapped demand lies (in the form of future growth). But similarly will be the most affected by economic dislocation due to high energy prices and thus their demand will fall faster in that situation - exactly as 3rd world demand grew faster in a positive world economic growth scenario.

3) High energy prices will periodically occur, but will occur cyclically.
Whether the highs/lows are roughly at the same points or not is the question.

[nero3]

Re: Oracle 1990, vs Sunpower 2009, history repeating

I have said time and time again - gold may preserve your capital, but it won't increase it. I do hold gold - both physical and paper - but it is a base rather than the engine of my portfolio.

What I look for is where the growth will be. Clearly not in the US in general, but possibly in some parts. So far it is not clear what those parts might be.



Certainly at some point in the future, energy from oil/natural gas will become scarce. But my view is that this point is decades away. The feedback mechanism is already working: the spendthrift ways of the 1st world and the inefficient ways of the 2nd world (Russia, Eastern Europe, other oil producing nations) are all winding down as general economic conditions worsen worldwide. The worsening of economic conditions is itself slowing the rise of the BRIC middle classes.



The US DID do what you postulated...starting in 1924. This was the basis behind the 'economic miracle' in Germany. However by 1932, the US had it own problems and could no longer afford to do so - neither the government nor the private sector.

The US should had managed monetary policy different, so they had avoided the depression. I think it could had been a minor recession, had they done it right.

I live in an oil producer, I have seen how production, have declined for around a decade, in 10 years, production will be down 60-70 % more more. It's the same story in most most of the oil nations. Peak oil is going to hit in less than 6 years. When that happens I think oil will go to levels nobody currently can currently imagine.

[Guest]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Score another point for Nero3 (this one was an easy slam dunk shot). C1ue is digging his heels in here. (grumbling to himself: there is no peak oil, what's this idiot talking about?! Peak oil? What a crock!? There is no peak oil! there is no ... oh forget it. )

The US should had managed monetary policy different, so they had avoided the depression. I think it could had been a minor recession, had they done it right.

I live in an oil producer, I have seen how production, have declined for around a decade, in 10 years, production will be down 60-70 % more more. It's the same story in most most of the oil nations. Peak oil is going to hit in less than 6 years. When that happens I think oil will go to levels nobody currently can currently imagine.

[Sharky]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Peak oil is going to hit in less than 6 years.

Just curious why you say "6 years"?

[Guest]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Sharky - what's the big deal here on this question?

The six to ten years is the confluence of the predictions of a whole slew of the world's most senior oilmen. Also, we've got a ton of threads here in the archives that went over this and practically pounded the question into the ground a year ago or more. Charley Maxwell, Sadad Husseinin (Saudi Aramco ex head exploration), Henry Groppe, IEA, Petroleos Mexico, Kuwait's oil minister, Russian production beginning to flatline, ex-OPEC production fully peaked per copious GRG55 posted comments. There are a ton of others reiterating all this now. What's the big deal with this prediction? It's old hat by now.

Shorn of the window dressing, this single post below is from the world's largest producer admitting flatly that they need to crank out a massive amount of new drilling just to maintain their production. They use the euphemism "production growth" when they really mean "current production". Ditto Russia.

I also highly recommend the articles by Andrew McKillop on this topic's tangle of ramifications. He's not a petroleum analyst of the rank of Henry Groppe or Maxwell, but he's been a strategic resources advisor to the European Union, and he knows his stuff. Very interesting reading from that one too.

Saudi warns of 'catastrophic' energy crunch

Reuters via Kuwait Times

Saudi Arabia's oil minister warned of a possible "catastrophic" energy supply crunch without prompt investment. "In years to come, if traditional energy supplies should prove inadequate because capital expenditure was curtailed due to unsustainable prices, unreliable indication of future demand or hopes for a substitute that oil cannot deliver, such a supply crunch would be catastrophic," Ali Al-Naimi said yesterday.

The painful result would be felt sooner rather than later. It would effectively take the wheels off an already derailed economy." The world risked disaster by placing too much hope on untested alternative energy sources, Naimi told an OPEC conference of energy leaders. "We frankly court disaster if these supplemental resources on which such high hopes for energy security and sustainability are pinned do not fulfill their high expectations," he said.

Naimi said the world should not use low oil prices as a reason not to investment in the sources of future production, as to do so would only guarantee further shortages and soaring prices.
(19 March 2009)

http://www.energybulletin.net/taxonomy/term/1

[Sharky]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Sharky - what's the big deal here on this question?

It's not a big deal. I was just curious where such a specific number came from. I don't dispute that peak oil is here. To the contrary, 6 years seems optimistic to me.

[Guest]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Now THAT is a big deal. Six years seems too long to you? If so, we are in deeper shit even. The cross currents running as we cross into the 2010's are astonishing. The largest deflationary collapse in commodities in history, when counted by degree and time compression, the largest coordinated global financial collapse in history (it's getting there), the very cusp of peak oil cranking in, the collapse of the world's first global experiment with a global 100% fiat senior currency. What other "firsts" can we throw into this stew? Peak minerals - some of the most critical minerals to industrial society scheduled to go into critical depletion starting now and running through the next 20 years. Oh, forgot the global population explosion, due to hit it's steepest climb in the next decade too. Forgot water depletion also. Nuclear proliferation? Yeesh. Has history ever seen such a confluence of major tsunamis all coverging into one decade? Of all of them, the petroleum peak production is arguably the clincher. If petroleum continued in abundance, we could figure out ways to conquer everything else. With the petroleum shortage looming, we are doubly vulnerable to all the others.

It's not a big deal. I was just curious where such a specific number came from. I don't dispute that peak oil is here. To the contrary, 6 years seems optimistic to me.

[Sharky]

Re: Oracle 1990, vs Sunpower 2009, history repeating

Now THAT is a big deal. Six years seems too long to you? If so, we are in deeper shit even. The cross currents running as we cross into the 2010's are astonishing. The largest deflationary collapse in commodities in history, when counted by degree and time compression, the largest coordinated global financial collapse in history (it's getting there), the very cusp of peak oil cranking in, the collapse of the world's first global experiment with a global 100% fiat senior currency. What other "firsts" can we throw into this stew? Peak minerals - some of the most critical minerals to industrial society scheduled to go into critical depletion starting now and running through the next 20 years. Oh, forgot the global population explosion, due to hit it's steepest climb in the next decade too. Forgot water depletion also. Nuclear proliferation? Yeesh. Has history ever seen such a confluence of major tsunamis all coverging into one decade? Of all of them, the petroleum peak production is arguably the clincher. If petroleum continued in abundance, we could figure out ways to conquer everything else. With the petroleum shortage looming, we are doubly vulnerable to all the others.

Totally agree.

Supply destruction is the other wildcard here -- not just in oil, but for all commodities.

Oh, and not just water depletion, but many of the world's key food-producing countries are experiencing the worst droughts in a century or more.

"Tsunamis" may very well end up being an understatement.

[Guest]

Re: Oracle 1990, vs Sunpower 2009, history repeating

It's enough to make you want to turn to the Bible in search of solace. I was brought up agnostic so that's not an easy option for me, but "crikey" as Outback would say. This pile of mishaps looks like too much of a handicap for the world to have any kind of shot at success frankly. How's your transplanted American's New Zealand accent coming along there? Any hope for it?

Totally agree.

Supply destruction is the other wildcard here -- not just in oil, but for all commodities.

Oh, and not just water depletion, but many of the world's key food-producing countries are experiencing the worst droughts in a century or more.

"Tsunamis" may very well end up being an understatement.

[Sharky]

Re: Oracle 1990, vs Sunpower 2009, history repeating

This pile of mishaps looks like too much of a handicap for the world to have any kind of shot at success frankly.

I came to a similar conclusion in 2005. I felt strongly enough about it that I sold everything I owned in the US and moved to NZ in late 2006.

How's your transplanted American's New Zealand accent coming along there? Any hope for it?

Hah! Definitely no hope. After 2+ years I can finally pretty much understand a fast-talked with a strong kiwi accent, but I don't even try to speak that way. In fact, making fun of the accent is a never-ending source of entertainment for my wife and me. The one change I have noticed in myself is the use of particular words -- otherwise, the locals have no idea what you're saying. Things like "panel beater" instead of "auto body shop."

[Guest]

Re: Oracle 1990, vs Sunpower 2009, history repeating

I envy you your new life out there. Sounds like a very peaceful, civilized place to live.

I came to a similar conclusion in 2005. I felt strongly enough about it that I sold everything I owned in the US and moved to NZ in late 2006.



Hah! Definitely no hope. After 2+ years I can finally pretty much understand a fast-talked with a strong kiwi accent, but I don't even try to speak that way. In fact, making fun of the accent is a never-ending source of entertainment for my wife and me. The one change I have noticed in myself is the use of particular words -- otherwise, the locals have no idea what you're saying. Things like "panel beater" instead of "auto body shop."

[ThePythonicCow]

Re: Oracle 1990, vs Sunpower 2009, history repeating

I came to a similar conclusion in 2005. I felt strongly enough about it that I sold everything I owned in the US and moved to NZ in late 2006.

I'm impressed.

I reached similar conclusions, and also moved. But I was a year later, and a move too short, just from California to Texas.

Sometimes I wish now I had moved sooner, and further ... say to New Zealand.

Or perhaps to some country less infiltrated by the Anglo-American Banksters. They have funded both sides of the worlds biggest conflicts, both in war and industry, for the last few centuries, with their provision of debt to governments and corporations on all sides. They have increasingly controlled the media, universities, foundations parliaments, heads of state and titans of industry. Bush, Clinton, Bush and Obama all strike me as puppets; the Secretary of the Treasury remains in Goldman Sachs control.

I wonder if the Roman Empire of two millenia ago had a similar critical foundation in financial alchemy.

I can't predict whether the currently unfolding world-wide depression and multiple years of world-wide economic and financial fireworks are unfolding according to their "master plan" for world domination, or alternatively whether things have finally gotten out of hand, even for these most powerful Masters of the Universe. Actually, which is the case matters little more to me than whether the pounding of elephant feet that threatens to trample a mouse is a love dance or a death match matters to that mouse. I will not live long enough to determine whether there are two dead elephants or a new born baby elephant as the result of that drama.

[ThePythonicCow]

Re: Oracle 1990, vs Sunpower 2009, history repeating

I actually think the emerging market's will be stronger, in some kind of carry trade based on the weaker dollar, and that will drive energy ,agriculture, that in turn will drive the alternative energy boom in the US, that said I have a lot of money invested in US stocks, even bank shares I'm a big bull on the US going forward, it's as simple as the fact that you have a printing press in the US. No other country have that, as long as the dollar is the reserve currency. That virtually ensures that the US will emerge out of this in much better shape than many other countries.

Just as a major stock market decline is not over until all who can be driven from the market have been so driven, similarly this world wide economic collapse will not be over until all of us here on iTulip who are debating whether inflation or deflation of this or that currency denominated asset class will prevail have been driven from iTulip, in poverty or terror or death.

Recessions are a rotation of asset classes, the changing of the guard, game changers.

Major depressions are game enders.

This one may be a bigger one than the so called Great Depression. Know your neighbors, know where you can find more local alternative food supplies, and avoid hostile contact with property repossessors, real estate foreclosers, tax collectors, government agents, uncivil rioters, drug gangs or desperate criminals. Well, in the case of that last category, criminals, avoid or win conflict.

I can't tell whether this is the last gasp, or there might be one more gasp. It seems impossible to time such matters in such a turbulent environment, where so little is known, and so much that is known is propaganda, deception, or confusion.