Time to bet on America and the Dollar?

[touchring]

3 years makes a big difference. 3 years ago, America was bogged down by the war in Iraq. 3 years ago, Motorola was dying.

Today, America is making a huge come back.

Google Phone, Apple Phone, Google TV and soon Apple TV.

In major cities, half the people are using iPhone, the other half, Google phone. Almost all handhelds are iPads.

Gas is almost free in America, while the rest of the world pays an arm and limb for the commodity.

Food is cheap in America. Food cost more in Shanghai than in New York- real food I mean, not recycled oil, antibiotics and grow hormone laden meats and fruits.

Real estate is cheap in America. Come to China, people pay 30 year's wages for a 800 sq ft 60-years leasehold apartment that starts crumbling apart after 3 years (drywall material). No money for old age healthcare and retirement cos the apartment has no resale value after 30 years.

[solitas777]

Re: Time to bet on America and the Dollar?

I think it's one of those mini-recovery things EJ was talking about. Employment improves and the economy gets better then it pushes the gas prices up, the economy goes to hell, unemployment gets worse then gas gets cheap, rinse repeat. If that's the case this summer should mean a spike in gas prices and the corresponding deflationary pressures on the economy. Also the debt overhang problem hasn't been solved so it's going to be hard for their to be new investments (which we need bring the wealth and jobs to the USA) if all capital is thrown away into the abyss, which is debt service.

[touchring]

Re: Time to bet on America and the Dollar?

I think it's one of those mini-recovery things EJ was talking about. Employment improves and the economy gets better then it pushes the gas prices up, the economy goes to hell, unemployment gets worse then gas gets cheap, rinse repeat. If that's the case this summer should mean a spike in gas prices and the corresponding deflationary pressures on the economy. Also the debt overhang problem hasn't been solved so it's going to be hard for their to be new investments (which we need bring the wealth and jobs to the USA) if all capital is thrown away into the abyss, which is debt service.

I'm looking at it from a different point of view.

An Iranian conflict will jack up oil prices, but a blockade of the Straits of Homuz will hit Emerging Markets and create a deflationary effect on other commodities - I don't have statistics but I believe that China, Japan, India and South East Asia get the bulk of their oil from the Gulf States and Iran. Especially non-oil producer India and Japan.

If war breaks out in the straits, Asian emerging markets and Japan will be rationing oil.

Either way, the USA will going to be better off than the rest of the world.

[c1ue]

Re: Time to bet on America and the Dollar?

An Iranian conflict will jack up oil prices, but a blockade of the Straits of Homuz will hit Emerging Markets and create a deflationary effect on other commodities - I don't have statistics but I believe that China, Japan, India and South East Asia get the bulk of their oil from the Gulf States and Iran. Especially non-oil producer India and Japan.

If war breaks out in the straits, Asian emerging markets and Japan will be rationing oil.

Either way, the USA will going to be better off than the rest of the world.

This view is opposite to what EJ said, something about the US being the only 1st world nation with a 1960s era cheap oil dependent transport system.

As for oil dependency:

http://www.sfgate.com/cgi-bin/articl...#ixzz1oFlxREos

California is growing more and more dependent on imported oil - including crude from the volatile Persian Gulf - even as the rest of the country becomes less.

And if the standoff over Iran's nuclear program breaks into open conflict, that reliance could leave California vulnerable.

The Golden State last year relied on imports for almost 50 percent of its crude oil, according to preliminary figures from the California Energy Commission.

Never before has California, once the largest oil producer in the world, seen that level of dependence. As recently as 1997, half of all the oil used in California was pumped from the ground within the state's borders, or in federal waters just offshore.

Now, the state's oil fields produce 38 percent of the crude used in California refineries. Alaska supplies the rest of the domestic crude - just under 12 percent.

California now gets more oil from the Persian Gulf countries, mostly Saudi Arabia and Iraq, than from Alaska.

According to the Energy Commission, about 21 percent of California's oil supplies in 2010 passed through the Straits of Hormuz, the narrow and strategic shipping lane that Iran has now threatened to close.

"If there was an interdiction in supplies, then yes, prices will all go up," said Gordon Schremp, senior analyst with the Energy Commission. "And those who are receiving oil through the straits will be scrambling to find other sources."

A supply disruption in the gulf would send gasoline prices soaring across the country, not just in California, because oil is priced on a global market.

But in terms of physical supply, the rest of the United States is less dependent on Persian Gulf crude than is California. And the country's dependence on imports in general is shrinking, as domestic oil production rises.

Oil imports nationwide peaked in 2005 at 60 percent of the country's crude supply, according to the U.S. Energy Information Administration. They fell to 49 percent in 2010, the last year for which the administration has complete data.

About 18 percent of the country's imports came from the Persian Gulf in 2010.

One of the reasons for California's increasing import dependence lies in Alaska. Production from the North Slope's aging oil fields has been tailing off for years. In 1989, California received 328 million barrels of crude from Alaska. By 2010, that figure fell to 86 million barrels.

In addition, the oil shale revolution under way in America's Northern Plains has not yet reached California. Not fully, at least.

Improvements in hydraulic fracturing, or "fracking," have allowed oil companies to tap petroleum reserves trapped in tight shale rock formations beneath North Dakota and Montana. As a result, U.S. oil production has increased every year since 2008. That dampens the need for imports.
California has a similar shale formation - the Monterey Shale - that could be the largest in the nation. One recent federal government study estimated that the Monterey formation, which lies beneath parts of the southern San Joaquin Valley and the Central Coast, could hold 15 billion barrels of oil. (The United States uses about 19 million barrels of oil per day.)

Oil companies are eagerly exploring the Monterey Shale. Chevron Corp., based in San Ramon, already produces about 40,000 barrels of oil from the formation daily, according to spokesman Brent Tippen.

Occidental Petroleum Corp. of Los Angeles planned to drill about 195 shale wells in California during 2011 and forecasts another 140 in the first half of 2012.

And yet, production in the Monterey Shale has not exploded, not the way it has in other shale formations.

Other oil shale formations, Schremp said, have more uniform conditions underground, and that allows companies to use the same basic approaches to frack multiple wells. The Monterey Shale, in contrast, is cross-hatched by fault lines and folded rock. It presents oil companies with a challenge.
"As I understand it, no two geologies are created equal," Schremp said. "What we're hearing is, there's no one hydraulic fracturing technique they think they can deploy on a widespread basis. It's a more complex formation, and that means it costs more."

To the oil companies, California's increasing oil dependence is evidence of the need for more drilling. The companies have been blocked for years from expanding their offshore operations here, and they don't want state legislators or regulators to clamp down on fracking.

"We have always felt increasing the amount of energy we produce domestically here in California is a benefit to consumers and the state," said Tupper Hull, spokesman for the Western States Petroleum Association, an industry trade group. "We are energy rich, and we feel it's to our advantage to develop that."

Environmentalists, however, remain leery of fracking and adamantly opposed to more offshore drilling. The state's growing dependence on oil imports, they say, should be a wake-up call for California to develop new fuels, power sources and alternative forms of transportation, such as electric cars.

"Fracking's just another way to keep us addicted to fossil fuels, when we have an opportunity to move to cleaner fuels and forms of energy," said Dan Jacobson, legislative director for the Environment California nonprofit group.

Now 18% of the total US oil supply might not seem like much, but that is nearly 3.5 million barrels of oil per day.

That's more than any nation in the world except China (8.2 million barrels/day) and Japan (4.2 million barrels/day).

Let's not lose sight of the forest for the trees.

[touchring]

Re: Time to bet on America and the Dollar?

Now 18% of the total US oil supply might not seem like much, but that is nearly 3.5 million barrels of oil per day.

That's more than any nation in the world except China (8.2 million barrels/day) and Japan (4.2 million barrels/day).

Let's not lose sight of the forest for the trees.

Nice, but how does it compare with China's 30% of total oil supply from the Middle East.

And besides, if there's really no oil, there is plenty of natural gas. It takes only 1 day to change your car to use LNG instead of gasoline.

[llanlad2]

Re: Time to bet on America and the Dollar?

Nice, but how does it compare with China's 30% of total oil supply from the Middle East.

And besides, if there's really no oil, there is plenty of natural gas. It takes only 1 day to change your car to use LNG instead of gasoline.

Yeah- and ten years queuing at the only LNG station that is in the vicinity!

[touchring]

Re: Time to bet on America and the Dollar?

Yeah- and ten years queuing at the only LNG station that is in the vicinity!

You know in many countries, people queue for gasoline because price controls make gas companies produce less. They do that in China, they do that in Indonesia.

Life is too good in America.

[aaron]

Re: Time to bet on America and the Dollar?

I would add that there is a huge amount of oil/gas that is wasted in this country. One might take the bus when gas costs $10 dollars a gallon. Yeah, it'll be inconvenient... you might even miss Dancing with the Stars on t.v. a couple nights a week... but work will still go on. Carpooling may take off. The SUV may sit in the garage more often.

The U.S. uses a lot of oil, but I think a far larger portion of that oil is used for entertainment and convenience than in China. They NEED most of the ME oil. We just like to drive our huge trucks around because we are entitled to the good life.

Personally, I would like to see oil prices go up. It will force positive changes. As clue pointed out in another thread, just by lowering the speed limit & changing driving habits, we can save a ton of gas. Also, fewer cars on the road (because people cannot afford to drive them) will lower gas use by itself. Improved highway traveling times will further reduce waste. Cheap natural gas can be used to maintain food production. Food stamps will thrive. Prices for everything will go up, of course. But that was going to happen anyway.

China will be fine for some time; treasuries will be sold to subsidize oil prices. But, China's economy is really dependent on oil imports from ME. Our economy is not. It is almost like it was planned. Export all the high energy intensive production to China prior to peak cheap oil, then they have a far less competitive economy with high energy costs (which are still priced in U.S. dollars). They will continue to make everything for the U.S. while buying oil from the U.S. (in reality, that is what they do when they pay U.S. dollars to buy oil from Saudi Arabia, Iraq, Kuwait, etc. ).

[c1ue]

Re: Time to bet on America and the Dollar?

The U.S. uses a lot of oil, but I think a far larger portion of that oil is used for entertainment and convenience than in China.

I'd say that is true, but I'd also say that the amount of consumption that can be cut off at a drop of a hat is far less than you think, and that the effects of a sudden cutoff are as mild as you say.

Let's not forget that the 1973 oil embargo - a period where the US was literally non-dependent on Middle Eastern oil - had massive economic effects on the US (and the rest of the world).

The amount the US imported in 1973? About 3 million barrels/day of which the majority was from Canada.

Contrast that with today where the overall levels of imports are 3x higher with Middle Eastern impact greater than overall oil imports in 1973...

An interesting graphical look at historical oil flows...

http://move.rmi.org/features/oilmap.html

As for China - do you really think all of that 8.2 million barrels is just for China's internal use? That none of it goes towards fuel for the freighters shipping goods to/from China's assembly plants, towards diesel fuel transshipping between the Foxconns and the docks, towards feedstock for the plastics and chemicals used anywhere from food to batteries to paint, and so on and so forth?

[aaron]

Re: Time to bet on America and the Dollar?

It is all relative, yes. Of course America would suffer with high oil prices. However, because China uses most of its imported oil for their real, productive economy, they will be hurt a lot more. The people who will be most hurt in the United States are the poor, and they do not matter. They will not protest. They will not vote intelligently. They do not produce. China is hugely dependent on ME oil just to function. The U.S. is dependent on ME oil for reserve currency status and to keep people driving around in big cars, by themselves. The reserve currency status will continue. China's production/pollution based economy will suffer serious problems. You are correct, iPad sales will suffer. That, I suppose, hurts the banks that store up the billions Apple makes.

If everybody crashes in the world, but the U.S. crashes "less", I think a lot of the competition will be out of the game.

[c1ue]

Re: Time to bet on America and the Dollar?

So if I understand your thesis correctly: the US uses and wastes more oil, therefore if there is less oil available due to a Middle East conflict, the US would be hurt less than anyone else.

The actual fact that China's overall energy consumption from oil is both half of the US', and a much smaller percentage of overall consumption: 14% vs. 30%, just illustrates your point.

Furthermore the idea that the governments in Europe and Japan have been conditioning their economies for 4 decades to handle high energy prices, this too is irrelevant.

Because after all we use much of that imported oil just for welfare families to drive to Wal-Mart to spend their monthly government checks. All we have to do is force them all to take the bus instead and the problem is solved!

http://contraryinvesting.com/commodi...0-with-charts/

[aaron]

Re: Time to bet on America and the Dollar?

Japan has gone anti-nuclear. They need oil in order to power their economy going forward. And, yes, they are already conditioned to use less oil. Where can they cut back?
Europe is already as efficient as possible; they have a lot less space to cut back as well. In other words, they already ride the bus.
Americans? I am sure it depends on where you live, but all I see around me is waste. At $10 /gallon of gas, I imagine a lot more people will cut back. Yes, they will take the bus.

China? My impression was most of the driving was for fun (no woman will want you unless you have a car; it does not necessarily need to be driven). The public transport system was quite extensive and cheap and well-used. It seems to me that they use oil for industrial use more than the U.S. Plus, they get their oil from the Middle East, which is even more expensive without the whole conflict aspect. Simply put, they too already ride the bus.

Moreover, the biggest use for oil is probably the U.S. military. That is also "easy" to cut down. Think drones instead of F18 "practice", tank simulators instead driving around, faster troop withdrawal in Iraq & Afghan. Hell, the budget could be sliced in half and it would still be the biggest in the world.

Plus, as the price of oil goes up in $USD, the demand for dollars must necessarily increase, no? Perhaps that stack of $US dollars that China has accrued will actually turn out to be useful; perhaps they even have scientists and thinking individuals that predicted oil would go up in price?

So, while it may seem counter-intuitive, being the most efficient user of oil at this point of time is not really an advantage going forward. Where do you cut back?

Again, this is not to say it will not be extremely hard going. There will be lots of suffering, including those of us who might have learn to do groceries AND pick up the kids in one trip. We might, god forbid, even have to slow down to 60 miles per hour on the highways.

[touchring]

Re: Time to bet on America and the Dollar?

Again, this is not to say it will not be extremely hard going. There will be lots of suffering, including those of us who might have learn to do groceries AND pick up the kids in one trip. We might, god forbid, even have to slow down to 60 miles per hour on the highways.

I think the trick is to use car pooling. With the availability of gps based smart phones, car pooling might be feasible today.

If everyone has to queue 2 hours for gasoline, it might be easier to carpool with your neighbors and co-workers.

[c1ue]

Re: Time to bet on America and the Dollar?

So, while it may seem counter-intuitive, being the most efficient user of oil at this point of time is not really an advantage going forward. Where do you cut back?

The problem with your argument is that the dilemma isn't about cutting back.

It is about generating as much as you can with what you have.

Your viewpoint is that if one person drives a 7000 pound Toyota Tundra to work everyday, that there is more 'savings' available because this same person could switch to a Ford Fiesta.

The problem, of course, is that this is an incorrect analogy.

A more correct analogy is the US economy is a 400 pound couch potato used to watching TV and munching cheap gasoline chips, while Japanese and European economies are lean and mean on their diet of rock hard, expensive gasoline hardtack.

Sure, the couch potato can avoid cheap gasoline chips for a (short) period of time by living off stored fat. But sooner or later, said couch potato is going to have to not just adjust its lifestyle to rock hard, expensive gasoline hardtack, but have to do so with competitors already having been at it for a full generation.

I'd also note that the same situation - high inefficiency - didn't seem to help the US car industry as it went from the world leader in the 1960s to where it is today.

[touchring]

Re: Time to bet on America and the Dollar?

Japan has gone anti-nuclear. They need oil in order to power their economy going forward. And, yes, they are already conditioned to use less oil. Where can they cut back?
Europe is already as efficient as possible; they have a lot less space to cut back as well. In other words, they already ride the bus.

I believe that an oil crisis today will not hit the developed world as hard as the 70s due to the following reason:

1. New technologies - Video conferencing and online services/remote access - probably half of all workers can work from home if necessary. We've seen this happen during the SARS epidemic in Asia, business did not grind to a halt simply because people avoid going for meetings and stay at home when they got the slightest flu.

2. Sedentary lifestyle - Americans are too fat. The car creates health problems. More walking and cycling will help reduce health-care costs. Why waste money at the gym when you can cycle/walk to and from work or school?

3. Service based economy - A service based economy will suffer less in an oil shock than an industrial economy. Programmers don't need to go to work to deliver a project - they can upload the codes to the web server. Bankers don't need to meet their clients, they can call them. On the other hand, a construction driven economy will be badly hit. You can't use electric bike or car to transport cement and steel bars.

4. High cost of shipping goods means more local sourcing - creates jobs.