Tag: oil

The Venezuelan Implosion

Holy shit:

Venezuela is about to earn another ignominious distinction.
Long home to the world’s highest inflation rate, the country now is set to become the site of the 57th hyperinflation event in modern recorded history, says Steve Hanke, professor of applied economics at Johns Hopkins University. While the feat may be little more than a formality in a country where Hanke calculates annual cost-of-living increases already run at 772 percent, it’s the latest sign a debt default may be closer than traders previously thought.
With Venezuela’s currency losing 32 percent of its value in the past month in the black market, according to dolartoday.com, and falling oil prices throttling the cash-starved nation’s biggest revenue source, the government may run out of money to pay its debts by year-end, according to Societe Generale SA. Derivatives traders have ratcheted up the probability of a default within one year to 63 percent, compared with 33 percent just two months ago.

“They’re very close to hyperinflation,” Hanke, who wrote a book on hyperinflation in Zimbabwe, said by phone from Baltimore. “When you have a domestic currency that is withering on the vine, it becomes more problematic servicing foreign debt.”

The currency fell so fast on Monday that it implied a monthly inflation rate of 53.98 percent. A full month of days on which the implied monthly rate was faster than 50 percent would meet his definition for hyperinflation.

This is in addition to massive shortages of basic goods, soaring crime, rapidly rising unemployment. So much for Chavismo.

Now this is the point where some well-meaning fool will tell me it’s all America’s fault or something. But the thing is, this economic collapse was predicted by everyone who knew what they were talking about. McCardle:

For about a decade, some sectors of the left hoped that Hugo Chavez represented an alternative to the neoliberal consensus on economic policy. Every time I wrote that Chavez was in fact direly mismanaging the economy, diverting investment funds that were needed to maintain oil output into social spending, I knew that I could look forward to receiving angry e-mails and comments accusing me of trying to sabotage his achievements for the benefit of my corporatist paymaster.

The problem was that the money he was using was, essentially, the nation’s seed corn. Venezuelan crude oil is relatively expensive to extract and refine and required a high level of investment just to keep production level. As long as oil prices were booming, this policy wasn’t too costly because the increase offset production losses. But this suffered from the same acceleration problem that we discussed earlier: The more production fell, the more the country needed prices to rise to offset it.

A little over a decade ago, I had a long car ride with a woman who worked in the oil industry. She said basically the same thing: that Venezuela was sitting on a lake of oil but not investing their massive revenue in sustaining or growing production. High oil prices weren’t going to last forever (Peak Oil hysterics not withstanding). Her particular field was using geological data to more accurately find undersea reserves of oil and she knew production was going to come back up and prices would fall. This would doom Venezuela because their production wasn’t going to be able to keep up: they were entirely dependent on high prices. When oil crashed, so would their economy.

Chavez was riding an asset bubble and claiming it proved his genius. Maybe if Venzuela has used their revenues to develop a thriving private sector of the economy, they could have withstood this. But they didn’t and oil was all they had. So we’re finally into the end game for Hugo Chavez’s “nobel experiment”.

I would like to think that people would learn a thing or two from the smoking crater in Caracas. But they never do. In fact, right now they’re wondering why the hell China is imploding as well. After all, Thomas Friedman’s been writing about sixteen columns a week on how superior their system is to ours. People like me have been pointing out that China has huge problems with corruption, an aging population and an economy that, while growing, had picked all the low-hanging fruit. We’ve been pointing out that China’s “explosive growth” was a result of having been dirt poor in the first place (it’s much easier to grow 10% of nothing that 10% of everything). Eventually, that engine was going to run out of steam. But, no: Very Wise People kept insisting that China had a found an alternative to the free market.

Just like Venezuela had.

And just like Japan before that.

And the Soviet Union before that.

And Germany before that.

Boy. These new economic ideas never seem to work out, do they?

Out the Door, Line on the Left, One Cross Each

Well, this resolved itself before I even had a chance to comment:

The Obama administration’s top environmental official in the oil-rich South Central region has resigned after Republicans targeted him over remarks made two years ago when he used the word “crucify” to describe how he would go after companies violating environmental laws.

Republicans in Congress had called for Armendariz’ firing after Oklahoma Sen. James Inhofe highlighted the May 2010 speech last week as proof of what he refers to as EPA’s assault on energy, particularly the technique of hydraulic fracturing, or fracking.

I’m with Althouse on this one. The problem with Armendariz’ comments wasn’t that they were controversial or offensive to Christians. The problem was that they were true.

This is how the EPA operates. And to be fair, it’s kind of how it has to operate. There aren’t enough regulators to check on everyone and make sure they are compliant with the law. So they compensate by coming down on the miscreants they do catch like a ton of bricks. That’s the entire basis of preventative law enforcement.

The problem is that the EPA can be very arbitrary in exactly who they come down on. His analogy is dead on: they are crucifying the first five people they run into, making examples of them whether they’ve really broken the law or not. They frequently punish people who’ve done nothing wrong and are known to prefer targets that lack the resources to fight an unjust persecution.

I have no problem with “crucifying” companies that flagrantly break the law and pollute the environment (example: BP, still awaiting prosecution). But I do have a problem with crucifying random businesses to make a point. Armendariz was caught revealing the way the game is played. And that bought him an appointment with the undercarriage of the nearest bus.

Oh, nooo!

It looks like the humanitarian “Kintetic Action” in Libya has not solved the problem. Instead of Gaddafi doing the inhumane stuff, the people that replaced him are doing more of the same!

Libya’s regular army and array of militias have been torturing loyalists of slain dictator Moamer Kadhafi, several of whom have been killed in custody, human rights groups charged on Thursday.

Amnesty International said that despite promises, Libya’s new rulers have made “no progress to stop the use of torture”, as Doctors Without Borders suspended its work in the third-largest city Misrata over similar claims.

Their accusations come after a top UN official raised concerns that militias composed of former rebels who helped topple Kadhafi were posing an increasing security risk as they repeatedly clashed with each other.

Shocking! SHOCKING!

Well, no. The lie was that this military campaign we can’t even call a war, because otherwise hypocritical liberals end up with egg on their face, was for humanitarian reasons. The fact is that we finally got us one of those evil “War for oil” wars that the left so claimed to hate and accused the last president of being about. Their accusations where damned lies about that war, BTW. In this case this definitely was a war for oil. Only the oil was for the French, the assholes that through their actions to protect Saddam and their lucrative oil contracts in Iraq, all but guaranteed Saddam would defy the UN and that there would have to be a shoot out.

Now that the guy that promised to end all these wars used our military to kill Gaddafi and made sure he couldn’t sell Libyan oil to China instead, securing the oil for France, there is no more concern for the human equation anymore. But, don’t let the facts get in the way of either the collectivist scumbag narrative or the fact that liberals hate wars and oil only when they don’t control it and get to make money from it.

What a Co-inky-dink!

I was terribly surprised to find out that one of the world’s richest guys whom offered lip service to Obama’s “tax the rich” class warfare nonsense back when his insurance companies stood to make huge financial gains if the Feds jacked up taxes, and especially estate taxes, on the rich, ended up having another one of his companies making out like a damn bandit after the WH killed the Keystone XL pipeline. One of Warren Buffets companies, Burlington Northern, a railroad company in true Monopoly – the game for you illiterates – fashion, which makes oodles of money hailing oil from Canada stands tomake even more money after Obama’s cancelation of the XL pipeline.

Bleh, nothing to see here. It’s not like this WH has a history of such crony capitalism writ large. I mean the billions we sank into so many dubious green companies & technologies, only to see massive failures and no serious positive return of any value to speak of, for example, was actually just another series of “accidental misinvestements”. Yeah, sure. The US administration that has done the most during its tenure to abrogate itself the ability to use the law as a cudgel and allow it to pick which companies and ideas are winners and losers, and which despite all the facts to the contrary has decided they will spurn fossil fuels in favor of unicorn farts – green technology – even if it causes massive pain to the average American they so pretend to care about, just happens to make another decision that hurts the average citizen, but benefits the very people they pretend to so hate for being wealthy.

I see why Buffet loves this guy and feels it is a great idea to back his class warfare shenanigans. There is some huge money to be made here, and all it takes is the kissing of these champions of the little people’s asses. Of course, I remind you all that the only evil entities are these rich oil companies. And then only the “rich oil companies” that don’t end up being the largest contributors to the political campaigns of democrats like BP was for Obama. There is a pattern here, isn’t there? I am sure all the three letter DNC propaganda outlets will be stumbling over each other to report this tidbit or anything like it too. In the mean time, the leftists will tell us that when a rich guy like Buffet tells us we should be happy to get taxed harder, by collectivists that will then piss that money away buying votes with all kinds of stupid schemes, that we should take his advice. That he is actually making even more money because of these schemes, and is also likely to get himself an exclusion from these class warriors for a nice donation to their campaign funds, should not dissuade us people trying to keep government from fleecing us from bending over and liking what follows.

Evil, Evil Oil

I have no love for oil companies, speculators or Wall Street traders. But I do have a love of constitutional rights and the rule of law. There now seems to be a determined effort to subvert both in the pursuit of … well, anyone who’s unpopular.

First, the oil companies. The Democrats and various people are targeting subsidies for oil companies, which I’m fine with it. But it turns out that much of what they call subsidies aren’t subsidies at all.

Seriously, nearly half the “subsidy” number is the ability of a company to use LIFO accounting on inventory for their taxes? Since the proposition is to eliminate these only for oil and gas, what is the logic that somehow LIFO accounting is wrong in Oil and Gas but OK in every other industry? In fact, at least the first two largest items are both accounting rules that apply to all manufacturing industry. So, rather than advocating for the elimination of special status for oil and gas, as I thought the argument was, they are in fact arguing that oil and gas going forward be treated in a unique and special way by the tax code, separate from every other manufacturing industry.

In fact, many of these are merely changes to the amortization and depreciation rate for up-front investments. Typically, politicians of both parties have advocated for the current rules to encourage investment. Now I suppose we are fine-tuning the rules, so that we encourage investment in the tax code in everything but oil and gas. I will say this does seem to be consistent with Obama Administration jobs policy, which has been to try to stimulate businesses that are going nowhere and hold back the one business (oil and gas drilling) that is actually trying to grow. I am fine with stopping the use of the tax code to try to channel private investment in politician-preferred directions. But changing the decision rule from “using the tax code to encourage all manufacturing investment” to “using the tax code to encourage investment only in the industries we are personally sympathetic to” is just making the interventionism worse.

LIFO is fairly standard accounting practice. It’s just a way of delaying taxes by changing which inventory you claim to be selling. All businesses do it. But as we saw with the “GE pays no taxes” bullshit, accuracy is not the Left’s strong suit.

If you want to get rid of these “subsidies”, simplify the corporate tax code (or better still, eliminate it). But this is not some sneaky under-handed Cheney-concocted plot. It’s tax law.

But that’s not the worst violation that is occurring when oil is involved. The cadmium hat of dishonor goes to Bernie Sanders:

Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.

Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.

The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.

The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.

Sanders is being praised in liberal circles for committing an egregious violation of privacy and bypassing the law. You can be damned sure that if this were private information about anyone other than eevil evil oil speculators, the Democrats would be screaming about privacy. But throw in some greed Wall Street types and their concerns about information safety vanish.

As it happens, speculators did not drive prices up in 2008; the world economy did that. Nor are speculators driving it up right now. Speculators can speculate all they want; it’s supply and demand that ultimately determines prices.

Even funnier is that they can’t decide who to blame. Stock market crashes are always blamed on “short sellers” even though short sellers are taking a risk and are critical to preventing bubbles. Now … are they blaming long sellers?

Maybe we just shouldn’t buy or sell at all. Remember that we are dealing with the only open socialist in Congress. To the likes of Bernie Sanders, finance is not a legitimate way of making money so financiers have no privacy or rights. The only legitimate work is being a prole in a factory. Anything else is evil.

Blood for Oil?

Glenn Greenwald has an interesting piece up on the latest from wikileaks:

The entire article is worth reading, as it details how Gaddafi has progressively impeded the interests of U.S. and Western oil companies by demanding a greater share of profits and other concessions, to the point where some of those corporations were deciding that it may no longer be profitable or worthwhile to drill for oil there. But now, in a pure coincidence, there is hope on the horizon for these Western oil companies, thanks to the war profoundly humanitarian action being waged by the 2009 Nobel Peace Prize winner and his nation’s closest Western allies:

Is there anyone — anywhere — who actually believes that these aren’t the driving considerations in why we’re waging this war in Libya? After almost three months of fighting and bombing — when we’re so far from the original justifications and commitments that they’re barely a distant memory — is there anyone who still believes that humanitarian concerns are what brought us and other Western powers to the war in Libya? Is there anything more obvious — as the world’s oil supplies rapidly diminish — than the fact that our prime objective is to remove Gaddafi and install a regime that is a far more reliable servant to Western oil interests, and that protecting civilians was the justifying pretext for this war, not the purpose? If (as is quite possible) the new regime turns out to be as oppressive as Gaddafi but far more subservient to Western corporations (like, say, our good Saudi friends), does anyone think we’re going to care in the slightest or (at most) do anything other than pay occasional lip service to protesting it? Does anyone think we’re going to care about The Libyan People if they’re being oppressed or brutalized by a reliably pro-Western successor to Gaddafi

Well, yes, I kind of think these aren’t the driving considerations and there are several reasons for this.

First, the United States was not the driving force behind this war — Europe was. And the Europeans — being older and wiser than us — have a long long history of trying to appease oil-rich potentates. Their lack of support for Israel, for example, is heavily based on oil politics. And it was the UK that specifically released mass murderer Abdelbaset al-Megrahi — against the Obama Administration’s objections — in an effort to appease Libya on trade issues.

Second, the WaPo article that is the basis for Greenwald’s undermines the conspiracy mongering quite a bit. It notes, for example, that this influence process worked both ways. Gaddafi was trying to use oil to influence US policy. He was furious that he wasn’t getting more political consideration in exchange for oil. And the oil company production took a hit, not from nationalization, but from the unrest. Had Gaddafi been allowed to massacre the resistance, oil production would be higher today.

Third, the current action is not good for anyone’s business interests. The Left tried this “blood for oil” logic out in Iraq as well. They didn’t consider that the cost of the Iraq War (so far) would have bought us a quarter of a century of Iraq’s entire oil production. Going to war for Iraq’s oil would have one of the dumbest business decisions of all time. Not that the Last Administration was immune from bad decisions, of course.

Libya has about 40 billion barrels of proven reserves — about $4 trillion at current market prices — and is pumping out about 2 million barrels a day — $200 million worth. However, not all of that production is for Western companies and the marginal difference between what Gaddafi wanted and our supposedly nefarious oil companies would want is not nearly going to be worth the cost of the war (probably around $10 billion so far).

Note also the verbiage used: the oil companies were “considering” abandoning Libyan oil field. Not that they had.

Fourth, this thing did not start with us. It’s not like we started bombing Libya for no reason. His own people started a rebellion. Nor did that rebellion happen in a vacuum — it was part of a wave of political rebellion across the entire region.

Now all this having been said, I haven’t proven that the war didn’t start for oil. All I have done is spelled out four considerations of why this may not be the case. Companies and countries make dumb decisions and there’s no reason for them to have acted rationally.

In fact, I do think it likely that oil is influencing our actions here. But not an evil conspiracy smoke-filled room level. I think it’s more likely that the oil issue brought our particular attention to this country. Oil is why we noticed what was going on; it’s not necessarily why we acted the way we did.

Of course, this is the point where I have to note the inconsistency of the rest of the Left. There is far less evidence that oil interests informed our decision to go into Iraq than Libya, but it’s an article of faith among the Democrats that the former was an evil oil-motivated war while the latter is not. And however much they might be theorizing about oil interests in Libya, they have yet to make anywhere near the ruckus about Libya that they did about Iraq.

In that sense, I actually have to praise Greenwald for, unlike so many, not being a partisan hack. He’s just as conspiracy-minded with Obama as he was with Bush. That’s something, I guess.

Update: I should note that there is a catch-22 here. Had we not acted in Libya, the same people complaining that we acted because of oil would be complaining that we didn’t act because of oil.

Stop that profit!

Unless you live under a rock, you too have seen the massive spike in the price of a gallon of gas. Nationally the average is now $4 a gallon, with many of the liberal bastions having even higher prices. And then you hear news like this:

NEW YORK (AP) — Gasoline futures tumbled almost 8 percent Wednesday after a government report added more evidence that Americans are driving less because of higher pump prices. The Energy Information Administration said that U.S. gasoline demand dropped 2.4 percent last week, the largest drop in seven consecutive weeks of demand declines. Analysts said motorists have been forced to conserve gasoline with pump prices close to a national average of $4 per gallon.

“That $4 number is not just having a psychological impact, but a direct impact on drivers,” energy consultant Jim Ritterbusch said. “Normally, with the economy recovering, you’d expect gasoline demand to go up, but that’s not happening.” Analysts said they’re now predicting a flat driving season this summer. At best, motorists will use about as much gasoline this year as they did in 2010.

“My opinion is that they started cutting back when prices hit $3.50″ per gallon, oil analyst Andrew Lipow said. “We haven’t seen the full effect of that just yet.” Decline in demand at the pump has helped offset a variety of operating problems that idled numerous refineries around the country over the past few months.

So Americans are feeling the pinch and driving less, and the price of crude is plummeting. The price at the pump is not going to come down as fast, though. Contrary to the conspiracy theorists though, that’s because the gas dealers charge what they need to buy the next refill, and that’s not going to happen until the gas & other products currently refined at higher costs makes its way through the system and the cheaper oil makes its way in.

Of course, you read the comments, and the moonbats are out in full force blaming the evil oil companies and their profits! I already wrote about putting oil company profits into perspective. It’s ridiculous how these moonbats are angry as hell at the 2 or 3 cents per gallon profit the oil companies make, while ignoring the fact government – federal and state – is gouging people by orders of magnitude more with their gas taxes. They all want more taxes on these evil corporations!

Guess what idiots. Higher taxes will certainly hurt the oil industries total profits, but in the end, especially when you are feeling the pinch at these higher prices, it will hurt you far more. There are several reasons that the current government bosses aren’t talking about anything but more taxes too, but one of the big ones is that they rake in far more income when prices are higher, even when sales drop, because the federal tax rate is tied to price at the pump. Allowing these hacks to jack that income, totally at our expense since the cost will come from our pockets, not the oil companies, and then because you are a spiteful stupid moron that thinks tax hikes or confiscatory taxes stick it to big oil, is not just stupid, but insane.

Want cheap gas? Make supply abundant enough that nobody – well, nobody but a big and intrusive government, hell bent on controlling you, and on a crusade to redistribute wealth, I should say – can artificially jack up the price due to consumer choice, and you will get it. Econ 101. Drill for your own oil, and compliment it with other viable technologies. Sadly the envy cult, they also pretend to be about social justice, would prefer to cut off their nose to spite their face, than to let those they don’t like make profits. All of them know profits are just the rich stealing from the poor anyway….

Obama Punts On Oil

When I gassed up today, the price was $4 per gallon. We’re reaching price levels that, when the evil Bush was in office, were proof of some Cheney-led conspiracy.

It’s quite obvious what’s going on. The recessions is easing, which is driving up energy use. There is instability in the Middle East — well, there’s always instability in the MIddle East, but it’s been unstable even by their standards. You can read Ron Bailey here on the economics of this. Short story: things aren’t as bad as they were in 2008. And we’re actually in a better position to weather it because Americans have shortened their commutes and bought more efficient cars.

There are a few things we could do, long term. Lifting the moratorium on offshore drilling or allowing more work on tar sands would be good. But ultimately, that will just bring the price down a little because all oil adds to the world market. Domestic oil production — which is at a high point right now — doesn’t benefit American consumers directly.

Bottom line: we need to suck up and deal.

Of course, you know where the White House went. After years of telling us that gas should be more expensive to improve conservation, they went for the Full Pander:

In his weekly address, President Obama laid out his plans to address rising gas prices over the short and the long term. While there is no silver bullet to bring down prices right away, there are a few things we can do. This week, the Attorney General launched a task force dedicated to rooting out fraud or manipulations in the oil markets. The President called for finally ending the $4 billion in taxpayer money that the oil and gas companies receive annually. And, we need to continue safe, responsible production of oil at home. But in the long term, we need to invest in clean, renewable energy. That is why the President strongly disagrees with a proposal in Congress that cuts our investments in clean energy by 70 percent.

As Ronald Bailey said, this is the equivalent of saying, “Round up the usual suspects”. Every time gas prices go up, Congress looks into speculation and manipulation. And they always come up empty after wasting a lot of time and money. I don’t think the oil companies should get billions in subsidies. But removing those will not lower the price of gas. And the oil industry, per kwH, does not enjoy nearly the subsidies that solar and wind power do. In essence, Obama has chosen to do nothing. That’s close to what he should do, but the preening and pandering is unnecessary.

And that’s my point. We’re always told that Obama is treating us like adults; that he’s the only adult in the room. Well, I’m sorry. Adult do not tell us fairy tales about evil speculators and rapacious oil companies. Adults say things like: “It’s a limited resource. The economy is growing. The Middle East is crazy. What the fuck do you want? Oil costs what it costs. We could cap the price. And you’ll be standing in line at gas stations again. Drive less.”

But Obama would never say that. His own base would revolt at being told that there is no perpetual right to cheap gasoline.