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Wednesday, September 18, 2019

IS THIS THE BEGINNING OF THE THIRD OIL CRISIS?

Most don't remember that the last oil crisis was 40 years ago.  This was preceded by the First Energy Crisis in 1973 when the Arab oil-producing states objected to Western support of Israel during the Yom Kippur War.  That 1990 incident when Iraq invaded Kuwait, jumping the price of a barrel of oil from $17 to $36 is only considered to be an oil shock.


The barrel price of oil in 1948 was $2.77, and crept up to $3.60 in 1972.  Following that historic moment, the price of petroleum continued to move upwards to $14.95 in 1978.  Then the Second Oil Crisis skyrocketed the real price to $37.42 in 1980.








Note, however, that the 2019 inflation adjusted price of oil/barrel was $29.13 in 1948, $21.26 in 1973, $57.97 in 1978 and $114.93 in 1980.  Nearly two decades later, in 1998, the price sold then was $11.91, but the inflation adjusted cost was $18.48, the LOWEST PRICE EVER!!!

Why?  The OPEC nations could not agree, and there was particular acrimony between Saudi Arabia and Iran.  Sound familiar today?  Finally, if you want to go as far back as 1861, during the Civil War, the adjusted price is $47/barrel.  For those have no idea, one barrel holds 42 gallons.  Lower down in the right column you see the current price of WTI Crude Oil (the U.S. price of petroleum) per barrel.

Then from 1980 the price of oil shot up, then down, then up, etc., until 2015 when oil settled at $41.84/bbl, about half of what it was the year before.   Why did oil prices sink, then remain stable for five years?  Kind of boring to reiterate, so let me send you to Investopedia for their summary.  Then came the recent Saudi Arabia oil field bombings, resulting in a price bump. 

But to retrogress, ever wonder what happened to Peak Oil?  It was two decades ago, just around the time petroleum was at its lowest historic price, Scientific American published a paper by Colin Campbell and Jean Laherrere entitled The End of Cheap Oil.  They dredged up the contention of King Hubbert, who in 1956 predicted that oil production in the lower 48 states would peak around 1969.  The media picked up on this potentially provocative prognosis and created a new cause to promote global warming.  Blame liberals and the Democrats.

Technology, though, has a way of embarrassing predictions.  Remember Limits to Growth?  That was 47 years ago.  Well, industry produced more than expected.  However, there seems to be some renewed interest in this area.  That's the nature of forecasting.  They tend to be half a century off.

Regarding Peak Oil, the shale industry (the green area) made the difference:


CountryOil Production
(bbl/day)[1]
Oil Production per capita
(bbl/day/million people)[5]
-World Production80,622,00010,798
01 USA[6]15,043,00035,922
02 Saudi Arabia (OPEC)12,000,000324,866
03 Russia10,800,00073,292
04 Iraq (OPEC)4,451,516119,664
05 Iran (OPEC)3,990,95649,714
06 China3,980,6502,836
07 Canada3,662,694100,931
08 United Arab Emirates (OPEC)3,106,077335,103
09 Kuwait (OPEC)2,923,825721,575
10 Brazil2,515,45912,113
11 Venezuela (OPEC)2,276,96769,914
12 Mexico2,186,87717,142
13 Nigeria (OPEC)1,999,88510,752
14 Angola (OPEC)1,769,61561,417
15 Norway1,647,975313,661
The U.S. was a net fossil fuel exporter in 1953.  We are expected to again be a net exporter in 2022.

I must be missing something here, but, according to Wikipedia, the world is consuming more oil than we produce:

RankCountry/RegionOil consumption
(bbl/day)
Year
-World99,558,0002018
1 United States20,000,0002018
- European Union15,000,000[4]2017
2 China13,500,0002018
3 India4,990,0002018
4 Japan3,988,0002017
5 Saudi Arabia3,918,0002017
6 Russia3,224,0002017
7 Brazil3,017,0002017
8 South Korea2,796,0002017
9 Germany2,447,0002017
10 Canada2,428,0002017
11 Iran1,947,0002015
12 Mexico1,926,0002015
13 France1,606,0002015
14 Indonesia1,628,0002015
15 United Kingdom1,559,0002015
80.6 million bbl/day production versus 100 million bbl/day consumption???  All reports show that the world is consuming around 100 million barrels/day.  That U.S. total of 20 million bbl/day appears to be about right. Sure, the USA accounted for 98% of global oil production growth in 2018, but we are only producing around 12 million bbl/day, not 15.  What's happening?  The answer is so obvious that you are hereby anointed to ponder over this question and send in your comment.

But, about Peak Oil? Here is a recent prognosis:

“It is estimated that 2,900 billion barrels worth of oil remain. Currently known conventional reserves should ensure more than 40 years of production. Further discoveries may increase this period to 60 years, while unconventional resources such as shale oil and heavy oil could translate into 90 years,” says Etienne Angl├Ęs d’Auriac in conclusion.6

I suspect what will happen is that oil will be an important part of the energy mix into the middle portion of this country, and will begin to fade as more renewables and fusion expand production.  Global warming should bring an end to coal sooner than later.

So with all that above background, what can you make of the latest potential for the next oil crisis?  To summarize:
  • on September 14 a drone attack damaged half the oil production of Saudi Arabia
  • incredibly enough, with all those satellites up there showing us in movies how much we are on top of this kind of provocation, it remains uncertain as I type this bullet about the actual source of that attack
  • Saudi Arabia and the USA immediately blamed Iran, for the inspected damage showed their equipment was used
  • Iran pledged innocence.
  • Houthi rebels (their slogan:  God is Greater, Death to America, Death to Israel, Curse on the Jews, Victory to Islam) in Yemen no doubt were responsible, for they have regularly shelled Saudi Arabia
  • remember, Saudi Arabia has been at war with Yemen since 2015
  • the Houthi movement is in opposition to the current Yemeni president Ali Abdullah Saleh, who is backed by Saudi Arabia--thus the war is now not between governments, but Saudia Arabia and the Houthi
  • everyone knows Iran supports the Houthi

So what will be the SA-US response?  Send drones to Iran's oil fields?  Well, that would surely escalate oil prices.  Oil prices already spiked 15% on Monday.  But settled on Tuesday when SA reported that 70% of the lost production will soon be operational.  There are two prices:

  • Brent (Europe), $63/bbl ...but the price was $85/bbl a year ago
  • WTI (U.S.), $58/bbl 
Anyway, how can SA-US say the source of the problem is Iran? The blame appears to be secondary.  In the 9/11 /2001 attack of the World Trade Center, 15 of the 19 hijackers were from Saudi ArabiaRecent investigations have shown a much closer link between that country and the terrorists.
Sanctions against Iran could already fill an encyclopedia, but I suspect the most Donald Trump will do is mumble something about more severe ones, whatever they can be.  However, if, somehow, the craziness of what is now in the White House does trigger a real Saudi Arabia versus Iran ground war, the price of oil could again reach the $146/bbl all-time high of 2008.  The world will go into recession, and Donald Trump would lose the 2020 presidential election.  Renewable energy will again make a comeback.  Global climate change efforts will expand.  The Blue Evolution will become a Revolution.  Almost sounds like a best case scenario.

However, all odds are that the souring world economy and sufficient distance between Iran and the Houthi are such that an uptick in the volume of diatribe will be the only reaction and the price of oil will remain in the $60/barrel range for a few more years.  The latest projection of the Chicago Mercantile Exchange of petroleum in February 2030 shows a quote of $54/barrel.  Historically, though, no one can predict the next energy crisis.  We get shocked all the time.

Finally, President Trump loved this, for the Federal Reserve cut the interest rate by a quarter point to 2.0%.  The Dow Jones rose 37 to 27,147.


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There are numerous ocean storms all over the map, but only Tropical Storm Imelda, which is dousing the Galveston-Houston area, will be a problem.  Hurricane Humberto, now a Category 3 at 121 MPH, will slide by the Bermudas into the open Atlantic:


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Tuesday, September 17, 2019

TONIGHT: Finals of America's Got Talent

The finals of the 14th season of America's Got Talent is tonight on NBC.  Two hours followed by two hours of results tomorrow night.

At one time, all the judges were non-American.  Today, the two newest, Gabrielle Union (married to Dwayne Wade of the NBA) and Julliane Hough (she and her brother Derek gained fame on Dancing with the Stars), are.  Same for the ten finalists, half are from the United States, although Emanne does now live in the U.S:
  • Benicio Bryant, 14, singer, Germany
  • Detroit Youth Choir, USA
  • Emanne Beasha, 10, won Arabs Got Talent at the age of 8, born in Amman with a Circassian father and American mother, she now lives in Florida, turns 11 on September 18
  • Kodi Lee, 23, blind and autistic, USA
  • Light Balance Kids, youth related to the 12th seasons' act, Ukraine
  • Ndlobu Youth Choir,  all black singers with white director, South Africa
  • Ryan Niemiller, 36, born with ectrodactyly, self-proclaims himself as the "Cripple Threat of Comedy," USA
  • Tyler Butler-Figueroa, 11, beat leukemia at age of 4, USA
  • V.Unbeatable, dance group, India
  • Voices of Service, three veterans and an active-duty servicewoman, USA
As you can see, it helps if you are trying to overcome some misfortune, with V.Unbeatable from the slums of Mumbai or some personal ailment.  Patriotism helps, epitomized by the Voices of Service.

You got half an hour?  Here are the golden buzzers, which normally go a long way in picking the winner.  My favorite to win is Kodi Lee.  He is even more memorable than Susan Boyle from Britain's Got Talent. Kodi's first audition.  If not Kodi, then Emanne.

For those so inclined, there are three ways to vote:  online at the NBC website, through the AGT mobile app and X-Finity set-top box.  Voting is simple, but complicated.  Read this.  While the Hawaii telecast is after certain deadlines, we can still vote.  Best as I can determine, you can register 30 votes, ten each for those three ways.

The winner gets a so-called million dollars.  But do they?  Singer Landau Eugene Murphy, Jr., a car wash dealer then, sung Sinatra's My Way to win, and by choice got $25,000/year for 40 years.  The lump sum could have been $300,000 before taxes.  He did get a gig headlining a show in Caesar's Palace.  However, he gained some unwanted publicity in a girlfriend abuse incident two years ago, and while not homeless, as he once was, is not quite worth a million dollars today at the age of 49.

Ventriloquist Terry Fator of season 2 became a staple in Las Vegas, and is said to have accumulated $120 million.  Singer Jackie Evancho, 10 in Season 5, came in #2, but is said to be worth $2.5 million.  Now 18 (right), she said her youth was traumatically difficult, gaining notoriety singing at Donald Trump's inauguration.

This is Simon Cowell's show, so who knows what he gets, but judge Howie Mandel is said to earn $70,000 per show. When Howard Stern was a judge, he was paid $15 million/year.  Each summer, it is one of the top programs on TV, although the Bachelor/Bachelorette this year might have topped AGT.

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