I feel very sad for my country. In my opinion, there is no Western nation as (infra)structurally vulnerable to this step-change in energy pricing, as the United States. To make matters worse, both the Financial system and the Policy system are currently being run by men and women who, because of the 25 year bull market in bonds and the financial sector, are intellectually handicapped from understanding what's happening. They never saw it coming. And even now are prevented from understanding it, because, ironically, their premiere educational and intelligence levels give them the confidence to totally underestimate their ignorance. Resource scarcity of a finite commodity, in this case Oil, is hitting a cultural understanding and consensus reality completely at odds with that change. The results are not going to be pretty.
Over the past 5 years, I have spent about 5000 hours (by my count) studying and watching everything related to oil. I am certain I have spent more time on Oil, than I spent gaining my undergraduate degree. The process of bringing Oil from a mysterious, unwieldy blob into a quantifiable concept for oneself requires alot of heavy lifting. And the work never ends. You have to keep eating the information every day.
Of course, I am personally benefiting greatly from the change. As I started on this journey 5 years ago, I now have the skills to optimize my advantage--against both the fundamentals, but also, this societal misunderstanding. My schadenfruede has turned to melancholy, however, even for the parade of clowns on financial TV, and the Press. It's now painful to watch these men and women delude both themselves, and the viewers. Essentially, there is no "reversion to the mean" in food and energy costs coming, for the United States. That concept is a myth.
Here is a post I wrote on this board 3 years ago.( Message 21248223 ) It was part of a discussion in which I asserted that the USA was no longer going to set the price of Oil, as it had. The reasons I gave related to the Dollar, and, the fact that the demand shift was migrating to Asia. At that time, only a handful of people thought the price of oil could either maintain, or go higher in the event of a recession in the United States. Naturally, I was ridiculed for making this point. (as was anyone else, making this point. In fact, see who responded to this post, for example, and see what they wrote here: siliconinvestor.com
Here is how I define this moment, right now: tons and tons of smart, thoughtful, educated people running around the markets, TV, government, and the media all thinking that their experience and expertise in other areas (markets, history, policy) is easily transferrable to understanding Oil, and the oil market. It's not. So everytime I hear someone chanting "there are no shortages" or, "this is all speculation", "there's plenty of oil", "reversion to the mean", "technology will produce more", "demand shift will bring on more supply--just like eggs" and so on, all I hear is the problem, of how I define this moment.
In my opinion, the United States is slipping into an Inflationary Depression. It's not a permanent condition. It need not be apocalyptic, either. But, it's combining the deflationary type forces of the 1930's in houses, with the inflationary forces we saw in the early 1970's in food and energy. The results will be non-trivial, to say the least.
I remain very long all forms of fossil fuels, plus, solar, wind, and everything related to the coming migration to The Grid.
Best to all and congratulations to everyone on this board who figured all this stuff out long before me. I tip my cap to you.
Gregor |
