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Tilting at Windmills

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November 19, 2007
By: Kevin Drum

"KILL THE CABLE, KILL THE CABLE!"....From the annals of technological glitches:

On Friday night, during what the participants thought were private talks, Venezuela's oil minister Venezuela Rafael Ramirez and his Iranian counterpart Gholamhossein Nozari, argued that pricing — and selling — oil using the crippled dollar was damaging the cartel.

They said OPEC should formally express its concern about the weakness of the dollar when the cartel makes its official declaration at the close of the summit today. But the Saudis, the world's largest oil producers and de facto head of OPEC, vetoed the proposal. Saud al-Faisal, the Saudi foreign minister, warned that even the mere mention to journalists of the fact that leaders were discussing the weak dollar would cause the US currency to plummet.

Unfortunately his words and those of everyone at the meeting were being broadcast via a live television feed to a group of astonished reporters.

Italics mine. Sadly, Reuters put out a bulletin reporting this in real time, and apparently some OPEC minion with a laptop saw it. The feed was cut off shortly thereafter.

Kevin Drum 2:36 PM Permalink | Trackbacks | Comments (49)

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Comments

Meanwhile, Kirk Kerkorian is predicting auto sales next year will slump to 1993 levels.

Can you say "recession"?

Posted by: SocraticGadfly on November 19, 2007 at 2:40 PM | PERMALINK

To follow gadfly's tangent, why should auto sales be a reliable indicator? Maybe consumer satisfaction has increased to the point where nobody wants to trade up for a new car.

Posted by: Grumpy on November 19, 2007 at 2:45 PM | PERMALINK

What an unlucky accident.

Or was it a lucky accident? I can't remember...

Cranky

Posted by: Cranky Observer on November 19, 2007 at 2:48 PM | PERMALINK

A weak currency means that the dollar has less buying power than it used to, Grumpy. The price of a new car in dollars may be the same next year, but the buying power of the dollars in our pockets is less.

And those cars run on gasoline, made from oil, which is heading toward $100 per barrel and $3 per gallon, prices set largely by OPEC. Combine that with the weak dollar and you get many people who can not afford to take on a higher car payment and their often attendant higher insurance premiums. Especially considering that higher gas prices also leads to higher food prices because of the impact on shipping costs.

$4/gal milk + $3/gal gas = no new car.

In short: good point, gadfly.

Posted by: Constance Reader on November 19, 2007 at 2:57 PM | PERMALINK

Kevin, this is why people like me have been been arguing for years we should open up our Oil Reserves in ANWR and the Florida and California coastlines. This would allow us to sell oil of our own driving down the oil price worldwide. It's even better now because due to the decline in the price of the dollar, we can sell our oil at a cheaper price than we've ever done before. This low oil price would devastate OPEC and make it irrelevent in the future. And all of this would've happened if you had just opened up ANWR for oil drilling.

Posted by: Al on November 19, 2007 at 2:57 PM | PERMALINK

If we put Al in a massive industrial vice, maybe we could crush his hydrocarbons down into oil.

Al, STFU and read about how little oil ANWR likely actually has.

Posted by: SocraticGadfly on November 19, 2007 at 3:19 PM | PERMALINK

Al, you entertaining idiot, for once do your homework. The total oil reserves in ANWR would supply the U.S. oil demand for anywhere from 7 months (low estimate) to 17 months (high estimate). Not a lot in terms of effecting the country’s long term energy situation (let along effecting the world oil price), but enough to make a few people a lot of money.

Posted by: fafner1 on November 19, 2007 at 3:24 PM | PERMALINK

The dollar is falling? Gee, what a surprise. And here I thought we could just stop making things to export.

Of course whenever people, including me, have mentioned this since, oh, the late 1990's, all I've heard is "post-industrial economy", "you can't compete with Chinese labor rates" or some other such head-in-the-sand garbage.

Frankly I think the falling dollar is, on the whole, a good thing. It had to happen anyway - you can't run a 6%+ trade deficit forever. In fact a falling dollar would've been better if it had fallen more years ago.

The only iron-clad law in economics: there's no such thing as a free lunch.

Posted by: alex on November 19, 2007 at 3:25 PM | PERMALINK

Oh yes. By all means we should open environmentally sensitive areas to oil exploration so that they can take advantage of the current weakness of US currency when the oil starts flowing years from now.

Posted by: rufustfyrfly on November 19, 2007 at 3:29 PM | PERMALINK

Well, we probably should be studying how to get the oil out of Anwar in the least environmentally-hostile way. Sooner or later we're not going to have the luxury of leaving it in the ground. We should be thinking about how to minimize the impact.

Posted by: demisod on November 19, 2007 at 3:31 PM | PERMALINK

Translation: Saudi's need more time to diversify their holdings into Euro assets.

Oil has been pegged against the euro on a defacto basis for awhile, and by extension is becoming a reserve currency. But the Saudi's know that actually admitting that fact would destroy their political goodwill and further erode their US holdings.

Perhaps they need to at least wait until the Bush family is out of office so that it can be blamed on the democrats.

Posted by: kis on November 19, 2007 at 3:34 PM | PERMALINK

demisod, I agree that any deal opening up ANWR has to involve not only environmental guarantees but I'd also add support for the promotion of alternative energy research and production.

Posted by: David W. on November 19, 2007 at 3:37 PM | PERMALINK

So...Kevin...seriously, when are you going to pony up and admit that Peak Oil and all the associative problems that you blog'd about in the past is here, now, and active; And we're going through what a lot of the modellers said would occur...wars for oil.

Posted by: sheerahkahn on November 19, 2007 at 3:43 PM | PERMALINK

>"The total oil reserves in ANWR would supply the U.S. oil demand for anywhere from 7 months (low estimate) to 17 months (high estimate). "

A far bigger problem is that there's no mechanism for extracting the oil from ANWR at a rate that significantly impacts world demand.

What you would be doing is injecting maybe 5% into the world supply. The OPEC group would simply cut their production by 5% to keep the market prices level... and the reserves would be drained.

All other reasons aside, ANWR should be the very last resort and maintained as a strateic reserve.

Want to cut US oil consumption by 10% in 2 weeks? Bring back the 55 mph speed limit... and make it stick.

Posted by: Buford on November 19, 2007 at 3:47 PM | PERMALINK

Want to cut US oil consumption by 10% in 2 weeks? Bring back the 55 mph speed limit... and make it stick.

That is the stupidest idea I've ever heard.

Posted by: Seriously, Dude on November 19, 2007 at 3:55 PM | PERMALINK

Buford: You're being way too optimistic about ANWR oil.

It wouldn't even meet 5 percent of U.S. demand, let alone 5 percent of global demand.

At the same time, you're not understanding Peak Oil.

It's a simple bell curve, and we're right at the middle of that curve right now.

Posted by: SocraticGadfly on November 19, 2007 at 4:02 PM | PERMALINK

That is the stupidest idea I've ever heard.

You're right - make it 45.

Posted by: craigie on November 19, 2007 at 4:20 PM | PERMALINK

You're right - make it 45.

When passenger trains travel faster then cars, I guess we'll see which one people choose.

Posted by: Wapiti on November 19, 2007 at 4:43 PM | PERMALINK

When passenger trains travel faster then cars, I guess we'll see which one people choose.

Let's ask the French and Japanese about how fast trains can go while we're at it too.

Posted by: David W. on November 19, 2007 at 4:51 PM | PERMALINK

My favorite story out of this meeting is that Chavez broke Saudi law by making the sign of the cross before giving his speach. LOL
http://newsinfo.inquirer.net/breakingnews/world/view_article.php?article_id=101606

Posted by: Northern Observer on November 19, 2007 at 5:03 PM | PERMALINK

Ahh yes, the Alaska National Wildlife Refuge, the panacea to all our energy problems.

Josh Marshall's classic article, "The Post Modern Presidency", explains why it is that these pet Republican projects keep getting brought up as the solution to all our ills.

http://www.washingtonmonthly.com/features/2003/0309.marshall.html

Posted by: Joshua on November 19, 2007 at 5:11 PM | PERMALINK

If we put Al in a massive industrial vice, maybe we could crush his hydrocarbons down into oil.

Posted by: SocraticGadfly

i'd rather squeeze al's head and watch the shit dribble out.

your pal,
blake

Posted by: blake on November 19, 2007 at 5:14 PM | PERMALINK

Saud al-Faisal, the Saudi foreign minister, warned that even the mere mention to journalists of the fact that leaders were discussing the weak dollar would cause the US currency to plummet.

Sounds very similar to how the LGM kids are describing the consequences of discussing "race" and IQ.

We mustn't talk about things we mustn't talk about. We're not good democrats if we do.

Posted by: free speech on November 19, 2007 at 5:21 PM | PERMALINK

demisod and David W. -- "NWR has to involve not only environmental guarantees"

Such as, double-hulls on all oil tankers that receive oil from the Trans-Alaska Pipeline in Prince William Sound? Let me know when that happens.

And alternative energy? Why would "we" (meaning, the energy industry) encourage Americans to use less? "We" just bought a membership at that new country club in Chevy Chase.

Posted by: anonymous on November 19, 2007 at 5:32 PM | PERMALINK

Wow, freespeech, that's quite the deep observation. If you talk the currency down, and you're in a position of power, it will go down. If you tell someone they're stupid all their life, and you're in a position of power...

Is that what you meant?

Probably not, but you're probably too busy drooling on your blindingly white skin to think your analogy through.

Posted by: Tim on November 19, 2007 at 5:38 PM | PERMALINK

So Kevin, what's the fallout? Are you fixin' to be jumping on the Ron Paul Gold Buggers Bandwagon yet?

Seriously though, any immediate repercussions? Please update I don't follow this stuff but it's a good part of why I read you regularly.

Posted by: Barry Freed on November 19, 2007 at 5:42 PM | PERMALINK

As I have posted before, one of the things we should have learned fom 9-11 is how dangerous it is to be dependent on hostile counterparties for a strategic asset. We should have embarked on a crash program after 9-11 to become energy-independent: solar panels on every house and factory, fuel cells and biofuels for our cars, wind, tidal, biomass and exotic (anti-matter, anti-gravity, photon sails) for our other energy needs. Six years later - we could have been well on our way to telling the Middle East to kiss our grits.

Instead, we are going to see a massive recession/depression, due to steeply rising fuel prices and our currency isn't going to be worth the paper it is printed on. Think of how different the world would look if an intelligent man, like Al Gore, would have been president in 2001. Had Bush not been such a sore loser when he lost the 2000 election and gracefully conceded the election and had the five conservative Supreme Court justices not disregarded the law of the land and illegally installed Bush, America might be standing tall. Instead, we are royally f*cked!!!

Posted by: The Conservative Deflator on November 19, 2007 at 5:43 PM | PERMALINK

I tend to think it was a deliberate shot across the bow. Shit like this doesn't happen by accident.

Posted by: Tony Shifflett on November 19, 2007 at 6:02 PM | PERMALINK

....And we're going through what a lot of the modellers said would occur...wars for oil.
Posted by: sheerahkahn on November 19, 2007 at 3:43 PM | PERMALINK


well, when you think about it, this didn't take a genius to predict, seeing as how WWII was about oil (Germany and Japan both started hostilities against us mainly because they needed access to cheap energy; and the UK/USA embargoed their oil supplies). Granted - they were both aggressively trying to build empires at the time (sound familiar?). . .

Posted by: osama_been_forgotten on November 19, 2007 at 6:15 PM | PERMALINK

Also, Señor Chavez also made the sign of the cross when speaking at the conference in Riyadh, an official legal no-no in KSA.

Money (and hence, politics) makes strange bedfellows indeed.

Blake, great idea... and Al's shit probably still has enough methane to power a major city for a couple of years.

Posted by: SocraticGadfly on November 19, 2007 at 6:15 PM | PERMALINK

you can't run a 6%+ trade deficit forever. In fact a falling dollar would've been better if it had fallen more years ago.

Agree...

Though the corrective of a lower dollar may not be as effective a corrective as it would have been years ago. Currently, the U.S. has the unprecendented situation of a declining currency coupled with declining tourism. People simply don't want to visit. This could be repeated to some extent with products if Brand USA has become anathema to enough; customers who won't buy any Torturers-R-Us products even at discount price.

Posted by: snicker-snack on November 19, 2007 at 6:18 PM | PERMALINK

'since 9/11', hell.

We've had since the Oil Embargo(s) of the '70's to figure this out. When we reached our own peak oil in '74 and became a net importer.

Yep, laugh all you want about Jimmy and those sweaters but he tried to tell ya'll...


''It is unclear how much longer the world will trade Americans real goods for pieces of paper that the US economy cannot redeem with tradable goods and services.' - Paul Craig Roberts

Posted by: MsNThrope on November 19, 2007 at 6:20 PM | PERMALINK

Maybe if the whole country has a massive prayer session, led by our President, God will refill all of our oil wells!

Posted by: Not Al on November 19, 2007 at 6:33 PM | PERMALINK

Hell, those Iraqis aren't just going to waterboard themselves, people! It costs money to have a war for oil's sake, and somebody has to pay more to keep our costs down. Or something.

Posted by: Kenji on November 19, 2007 at 6:52 PM | PERMALINK

People familiar with Palast's argument re: peak oil? that it has been a scam that big oil has been perpetuating for decades to ensure that the commodity is always thought of as being scarce.

What's the price of a barrel now? How many billions has the value of the big oil's reserves gone up?

btw Palast notes that worldwide reserves, despite all the talk of peak oil, have almost doubled since 1980 while if you see here: http://www.eia.doe.gov/oiaf/ieo/oil.html
you see reserves have increased 4% since just last year.

To me this is why it is virtually always someone on the payroll of the oil companies who is cited in articles on peak oil.

Posted by: bh on November 19, 2007 at 7:03 PM | PERMALINK

Excuse me, but Chavez didn't spill a damn thing that isn't already known. Roughly a month ago, the word leaked out from Saudi Arabia that they threatened to connect their currency & oil export pricing to the Euro. The US$ has lost almost half its value against the Euro & 1/3 against the Looney since 2000. IOW, the price of oil has gone up about 45% more for the US than it has for Europe since 2000. The value of the USD is falling through the floor & the world already knows it.

Since none of this is news, I have to question the reasoning for the quote from the Saudi Foreign Minister. Why would a closed door high level OPEC meeting have been televised live by the Saudis in the first place? Are we really supposed to believe the Saudis goofed? Sounds more like someone is playing a complicated game to me.

Posted by: bob in fla on November 19, 2007 at 7:15 PM | PERMALINK

Uh, Kevin, the dollar has been collapsing for 7 years.

Everybody hates dollars. That can mean only one thing: sell your yens, euros, and yuans and buy dollars.

Posted by: smedleybutler on November 19, 2007 at 7:30 PM | PERMALINK

Just wondering why lowering the speed limit is a stupid idea. It would also save thousands of lives. More than we lost on 9/11 or in Iraq.

Posted by: ohcomeon on November 19, 2007 at 7:42 PM | PERMALINK

bob in fla,

I agree, although I think the Saudis are probably trying to help out their old friend. Here are some quotes from the AP article on the recent OPEC meeting.

"RIYADH, Saudi Arabia (AP) -- Iranian President Mahmoud Ahmadinejad said Sunday that OPEC's members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a "worthless piece of paper."

"They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bush's policies for the decline of the dollar and its negative effect on other countries."

"A day earlier, Saudi Arabia opposed a move by Iran on Friday to have OPEC include concerns over the falling dollar included in the summit's closing statement after the weekend meeting. Saudi Arabia's foreign minister even warned that even talking publicly about the currency's decline could further hurt its value.

But by Sunday, it appeared that Saudi Arabia had compromised. Though the final declaration delivered Sunday did not specifically mention concern over the weak dollar, the organization directed its finance ministers to study the issue."

OPEC Interested In Non-Dollar Currency, AP

Posted by: nepeta on November 19, 2007 at 8:04 PM | PERMALINK

>"Buford: You're being way too optimistic about ANWR oil. It wouldn't even meet 5 percent of U.S. demand, let alone 5 percent of global demand."

The USA consumes about 20 million barrels per day. Off the top, 5% of 20 million bbl/day is 1 million barrels per day.

Projections of ANWR production peaks are in that ballpark. Would it make any difference? Probably not.

"...55 mph speed limit...
That is the stupidest idea I've ever heard"

ROFL. Seriously, let me guess dude... you weren't around during the 1973 OPEC oil embargo were you? Ever wait in line a couple hours to buy gasoline?


Posted by: Buford on November 19, 2007 at 8:16 PM | PERMALINK

Bush doesn't see any reason to have a strong dollar - hence the reason George Soros got very angry at Bush.

But then again Venezuela and Iran could probably care less about the US Dollar and hateful occupant of Iraq.

And certainly in a global economy it would seem that the "de facto" head of OPEC has other members to be concerned about, not just their owned US interest and investments.

Posted by: Me_ again on November 19, 2007 at 8:44 PM | PERMALINK

"...we should open up our Oil Reserves in ANWR and the Florida and California coastlines....This low oil price would devastate OPEC and make it irrelevent in the future."

Just when you think they couldn't get any stupider, they lean their heads back and let loose again!

Posted by: Bob M on November 19, 2007 at 9:52 PM | PERMALINK

BH: Palast may be right on a number of things, but this ain't one of them. And, this is him at his conspiracy theory finest, or worst.

He is obviously accepting the inflated statements of proven bullshit reserves the Saudis and other OPEC members in the Middle East made 20 and more years ago.

And, if you think it's always "someone on the payroll of oil companies" that's cited about Peak Oil, you know nothing more about the subject than Me Again.

So, take the same advice I gave him.

Go read The Oil Drum (www.theoildrum.com) and see if you can find anybody on the payroll of a major oil company among its bloggers.

Posted by: SocraticGadfly on November 19, 2007 at 9:53 PM | PERMALINK

Buford, I got my first driver's license during the 1973 embargo. My parents just bought a huge 1973 Chrysler Newport with a 400V8 just before it kicked in. However, that land yacht actually got good mileage (for its size) if you drove it at slower speeds. I followed a moving van that had a governor on it and had to drive between 50-55 mph for over 200 miles back in 1974 and it got 22.7 MPG!

Posted by: Doc at the Radar Station on November 19, 2007 at 10:22 PM | PERMALINK

So ya think it's time we had a national energy policy that's not just about how much money the oil companies can make?
How about this we withdraw from Iraq and spend the 100 or so billion dollars a year we're spending there on a comprehensive energy program to get off the oil tit. I know this all seems very obvious but why the fuck aren't we doing this right now?
Let's all fiddle while America goes down the tubes.

Posted by: Gandalf on November 20, 2007 at 9:47 AM | PERMALINK

>"I know this all seems very obvious but why the fuck aren't we doing this right now?"

Just another tragedy of the 'free market'.

Unfortunately for humanity, the 'marketplace' often doesn't respond to changes until conditions are truly disasterous... and then there's a massive over-reaction. Lives are ruined, people die etc.

Many folks figured this out back in 1932... but most of them are dead now and the lessons of that era have largely been forgotten.

>"... huge 1973 Chrysler Newport with a 400V8 "

Ah yes, memories. I was in college... one of my buddies had (unfortunately) just purchased a Dodge 'Roadrunner' or some such... it had a '6-Pack' of carburator barrels sticking out of the hood. I remember passing him on the highway in my modest Mercury 'Comet'.

He was driving his 400 hp car at 45 mph... bucking and lurching down the road trying to get it home on what the slim amount of gasoline he could obtain.

When I see car advertisements touting 300+ hp I realize it's just another lesson that was been forgotten.

Posted by: Buford on November 20, 2007 at 12:41 PM | PERMALINK

Due to reading matter backlog, I'm not sure what the
"Kill the cable, kill the cable" bruhaha is about, as this topic was on the front page of the Sunday Financial Times, which is delivered here on Saturday.

Posted by: JeffII on November 20, 2007 at 2:56 PM | PERMALINK

This could be repeated to some extent with products if Brand USA has become anathema to enough; customers who won't buy any Torturers-R-Us products even at discount price.

Yeah, that's been a huge problem for the Chinese. Unfortunately, we don't actually make much anymore, so it's pretty much moot.

Posted by: just sayin' on November 20, 2007 at 5:43 PM | PERMALINK

SocraticGadfly
Don't know if you'll be back to this thread buy anyway briefly:
it's not a subject i know a great deal about besides the general stuff i've read so it's not a debate i'm looking for.
but i remain unconvinced. According to International Energy Outlook 2007 the story is much as Palast described. Also the idea that an industry would quite eagerly emphasize the scarcity of its product or pointing out how the reseves of major companies have dramatically increased in value as the price rises (coincidentally since the war started)does not seem particularly conspiratorial, and at least worth considering.

Also when i said "cited," I meant in the MSM. A column I read recently by a columnist I usually like perhaps prompted me to mention this. the blog you listed I will certainly read and I'm sure I will find something on peak oil.

Posted by: bh on November 20, 2007 at 8:53 PM | PERMALINK




 

 

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