I think the US CAN be blamed for the oil crisis. Bush has done NOTHING to reduce US "addiction to oil", even after (finally) recognizing it in his 2006 State of the Union message. Bush never even exhorted Americans to save energy, although oil revenues (indirectly) fund Al Qaeda, and Hizbullah. The US has taken NO major alternative energy initiatives, even as BRAZIL showed the way energy independence through ethanol. As a result, low-scale provocation by Iran in the Straits of Hormuz can roil the world economy.

IMHO, I think this "peak oil" is a smokescreen for a cartel that a Paul Volcker like recession would unmask. John Mugararian's post about an article in The American Free Press concerning a humongous oil and gas discovery under Gull Island, Alaska lying there untapped for decades makes a case for manipulated prices. Also, there are new solar panels awaiting production that are super durable and so much more efficient than the older ones, even collecting sunlight energy on a cloudy day. There is a new process using algae like plants that thru photosynthesis collect the sun's energy that scientists say we can harvest efficiently for energy. We also have windmills that can help and, of course, nuclear energy plants which are coming on stream in a major way in the next decade. And if oil prices stay at their currenct levels, in a worse case scenario, the US has enormous reserves of oil shale out west and coal in the east to make us energy independent for centuries.

Here is another opinion for high oil prices:

http://www.fool.com/news/commentary/2006/commentary06080101.htm?ref=foolwatch

Alan -

The essence of the peak oil arguments is NOT that there aren't alternative energy sources, but that they simply can NOT be developed and integrated into society for at least 10-15 years, which virtually guarantees higher energy prices at least over that period.

Check Ken Deffeyes' book "Beyond Oil" for a sober assessment of the cost and timeline required for various alternative sources. (He's a former Shell Oil geologist who worked under King Hubbert - of "Hubbert's Peak- fame", and just who retired from Princeton's Geology Dep't. = not a crazy!)

Another book I found very interesting is "A Thousand Barrels a Second" by Peter Tertzakian. He goes right back to the use of whale oil for energy up to today and shows how one energy source was displaced by the next and how it relates to today and the future. He's not claiming that we're running out of oil today, only running out of the "easy" oil to locate and bring to market. Just like the whalers had to go to the inhospitable oceans of the world after their home bases were whaled-out, so do oil drillers today have to go to the inhospitable areas, on land or in the oceans.

Jock, the "experts" were talking about a shortage of oil in the 70's. That's why Mobil oil started the shale oil development in western Colorado which went bust when oil prices collapsed. Right now oil can be produced from shale for around $50/barrel from what I've read. But how long does it take to put the US in recession and reduce the worldwide use of oil? If there really is "peak oil" and no recession, I think it will be around 5 years before oil starts going down in price because the developed nations cannot afford oil at these prices without inflating and just delaying the inevitable recession. A company is producing highly efficient solar panels that are a mile long and a football field wide right now that they can put in all the deserts of the world or anywhere for that matter.

Right, Alan. Still, per Bill's note of today on China, they'll keep growing. And their oil use - as well as India's - will grow. So, I'd think oil demand will stay strong even if the US goes into recession. Plus, I doubt America will junk all its SUV's right away.

BTW, the first "peak oil" prediction was in 1958 by King Hubbert, that US domestic production would peak in the early '70s, and he was ridiculed, but proven RIGHT.

I think that's one reason today's "peak oil" proponents have credibility when the state that global production is peaking. Deffeyes refined Hubbert's methods, and concluded that oil peaked last Thanksgiving! - with his tongue in his cheek, no doubt ...

Given the instability of many oil producing nations, the increasing demand of China, Americans reistence to conservation oil in the short run will put the US economy down.

Besides inking deals with oil producung countries that hate the US, China also has very ambitious alternative energy goals that are much higher than that of the US. They are probably not for the sake of preserving the earth, but reducing their dependance on oil producing nations. Factor in that China will be building between 20-30 nuclear power plants by 2020 and it becomes even more apparant that the US will be hit exponentially harder than other developed countries when the oil crisis arrives.

In 15 years we will all be running on Hydrogen but its the gap in between that bothers me.
http://www.thinkhydrogen.com/home.htm

Bill,
Is there a way to send you a private e-mail. I continue to enjoy the blog
Jim

Allen
Obvious question: is that producer of industrial strength solar power publicly traded?
Their very existance points to the important shift that will take place during this next energy squeeze. Alternative energy companies have, so far, been mom and pop "put one on your roof" and heat the swimming pool operations that are to be congratulated for their motive and forward thinking, but have not presented much investment potential.
It has been an "idea" ..."story" environment that has dissappointed the great majority of investors.
I have actually made some money on a few of these stories, but had to be very timely and quick on the trigger.
If you have a company that can economically produce solar energy on a large, commercial scale, please give us a chance to do our own ...diligence.
Could only help you if you have a position.
The image of football field sized solar collectors litering the Saudi dessert is simply too ironic.
Thanks.

One reason might be the simple following one.

Technically speaking:
We are at the end of a monthly cycle. Just at the mean value. It is very probable that it has reached the low of this cycle.

Geopolitical reasons:
What makes the above scenario quite plausible is the geopolitical context.
Much has been said that the major reason why the U.S. went at war with Saddam is that the Rais wanted to open an oil market in Euro. This was his kind of revenge on the first Gulf war. (parenthesis: it then makes more sense that the French refused to go for that one. Considering that they had gone to Lebanon before, got blasted with U.S. troops, retaliated against Syria and stayed in Lebanon while America was pulling out - considering that half of the UN forces that died in the Balkans war was french _ considering that they went to Somalia and considering that they went to the first Gulf war; It was quite "bizarre" that they reacted so harshly).
Now the same story seems to unfold with iran. Iran has decided to open an oil market in Euro at the end of september.
Therefore, we should expect quite a surprise party with persia in the month to come.

For a little reminder on the Lebanon crisis:
http://en.wikipedia.org/wiki/1983_Beirut_barracks_bombing

Rigdon, my source of information was on PBS about a month ago. The owner of the solar panel company is a former engineering professor at a Michigan university who, along with his well educated wife, has been working on this project for about 45 years. I believe the company is private, but has a huge factory in place producing these gigantic panels already. Compared to the old time panels, these are very durable, not easy to break, and with colors that are much more environmentally friendly. Maybe someone could locate this genius and take his company public or at least maybe he could get a little aid from the government. Maybe this could be a huge part of cap ex spending as the housing market ............

Rick, good points! - If the US is hit harder, the only consolation will be financial, i.e. trading wisely. I've been doing a little reading on coal gasification and liquification, which could play a big role in the US response. But, I'm not yet finding a pure play. It seems producers (STO and SSL) have tweaked technology pioneered by two Germans in the '20s (Fischer-Tropsch process)and later used by the Nazis. (SSL is a South African, which developed its expertise during the world-wide boycott of the apartheid regime. (Necessity is the MOTHER!) Anyone know of a firm with new proprietary technology in this area that cuts costs or improves environmental aspect with high-sulphur coal?

A few months ago the Montana governor was seeking national support for starting coal liquification in his state as an alternative energy source. The state's resources offered ample opportunity for coal liquification. I don't recall if there was a local company involved.

FWIW, the news last night had an interview with a University of Illinois chemical engineer who has developed a process of turning pig manure into oil. (I'm not kidding) The news piece acknowledged there was more than enough manure around and concluded it would take more than 5 years to integrate into society.

Needless to say, wind, sun, coal, shale, soybeans, corn, pig manure and who knows what else are on the table.

Nothing short of a major economic down turn in one or more of the major energy consuming countries (the USA, China, India, Japan, or the EU) will permit the price of oil to fall very far.

Supply-demand is tight, geo-political tensions high, refining capacity is maxxed out, and world wide new oil finds are not keeping up with rising consumption and depletion of reserves.

Somewhat off topic, I believe we bet at WAR with IRAN within 6 months over IRAN's nuclear program. IRAN cannot be allowed to develop or possess nukes. Since IRAN will not stop trying to develop or possess nukes, the USA and or Israel will launch a pre-emptive strike on Iran's nuclear facilities.

That will rapidly escalate into full scale war and Iran will either be pounded into the stone age with conventional weapons, or, if things don't go well for the USA or Israel, IRAN will be nuked.

Forget Iraq, forget bombs on airplanes, forget Afghanistan, for Hezbollah. Iran is the crown jewel in the satanic heart of world wide terrorism. Wipe out Iran, everything gets better.

Thanks, Alan, any additional information that you could post would be appreciated, and not just by me.
I think we all know that this is a space that holds huge investment possibilities, but has yet to produce any real sustainable winners....but it will, and let's hope we will be ready.
I took a flyer on SYNM some time ago, but it was just a story at that point and turned out to be a $ mistake. Boy do I make'em.
It behooves us all to be sharing insight and research on alternative energy plays and I hope we will continue to discuss possibilities.

stockoptions said:

"Forget Iraq, forget bombs on airplanes, forget Afghanistan, for Hezbollah. Iran is the crown jewel in the satanic heart of world wide terrorism. Wipe out Iran, everything gets better."

This kind of talk is no different than what the Iranian "supreme" leader said about "wiping out" Israel.

I think we need less of this kind of attitude in the world - this kind of talk is exactly what the power elites want - they program this hatred into the masses - it then sustains their power.

I say the world and the capital markets should be ours not theirs. The world should not be a playfield for the elites to engage in power struggles creating needless physical and financial suffering for the rest of us.

tradesman

ALOHA !!

Jock ... Check out Rentech(RTK:AMEX).

Conservation in the USA runs in cycles. It seems us Americans and especially our elected leaders only react to crisis once it is upon us. Recall back in the 70's when the Arab Oil Embargo hit and you had to pump gas based on your license plate number ending in an odd number or even. Then and only then did the BIG talk of conservation and alternative energy began. All of a sudden a Cadillac wasn't worth a $1k and a Honda Civic or VW Bug was priceless! Nuclear, Solar and wind was rushed and the US government gave tax credits for alternative energy like solar hot water and things like caulking and weatherproofing and air conditioner efficiency.

After that crisis passed we got back into our big gas guzzlers like SUVs, RVs and four wheel drive trucks so damn big when you're behind them you can't even see the sky! Some 20 years later now gas is going up and the "crisis" is looming and the politicians talk the credit talk again and off we go into our hybrids dumping the SUVs.

Go to some of the other foreign countries in the World and you'll see they have been paying more for gas for the past forty years and conserving and doing alternative energy non-stop out of pure necessity. Australia is one. When I lived there in the early 70's my family had an old house built in the 1800's that had solar hot water(passive), water conserving toilets and driving Morris minis and VWs and Holdens ... No Cadillacs, huge trucks or gas guzzling SUV types. Those types of gas hogs were the exclusive domain of the priviledged Yanks ...

Americans need to understand there is simply no more cheap anything and I find it insulting that the President of the USA gets on the TV and says "its time" ... Its only time when these short sighted idiots are losing at the polls. Then you have companies like GM and Ford pumping out gas guzzlers like there is no tomorrow. What are the CEOs of those companies paid for? Its repeating again. The Japanese have moved in and are ahead of the US car makers on gas efficiency just like the 70's the US car makers are asleep at the wheel ... again!!! More layoffs please !!! If it were not for the US taxpayer GM would be down the tubes, of course pension and dividend bailouts(under the table)are the order of the day now. Hey Kirk ... buy some more stock at $35!

Of course these Middle East wars slash occupations are not even on the books. What was it Enron did that was illegal? Mark my words the "draft" is coming. Back to the good old days of Vietnam ... Good Morning BAGHDAD-D-D!!! How else can a "democracy" flourish? I personally am done with "democracies" and ready for a republic" where voting is not a "birth right" ...

Jock-
There are some pure plays in the FT/GTL/CTL synfuels niche. They are highly speculative , highly risky plays at that(RTK,SYNM) These companies have questionable balance sheets at best. Some would argue SSL is the world leader in GTL(Gas-to-Liquid)technology on a large scale. I have read that several majors are investing HUGE amounts in GTL refineries in Quatar, to take advantage of the large NG reserves there.Interestingly enough ,I saw Boone Pickens(sp.?) several weeks ago on CNBC and he remarked that ,in his opinion, NG was far too valuable a resource to be burned in power plants and that it needed to migrate into the transportation arena. He may be right.

Studies have shown that you could process every ear or corn grown in the USA and only produce enough ethanol for a tiny fraction of total US gasoline consumption. Of course, we'd have no corn to eat. I think solar, wind, and nuclear power are the most promising alternative fuels. Hydrogen is ideal, but to creat hydrogen gas requires a lot of energy as an input. It's a tough problem.

Thanks, Arete and Kaimu -

I had discovered RTK, but they're small, lose money, and seem to have not technological edge, just to operate former fertilizer plants for gasification and liquification.

Stockoptions -

I think the danger is that Cheney and Rumsfeld (who do Bush'es thinking for him) see Iran as you do (unless you were being sarcastic).

I'm surprised how often I now read that Bush may try to "do something" against Iran before leaving office, "for his legacy" and out of fear that the next administration won't be "tough enough".

If the US or Israel move militarily, wouldn't Iran simply threaten, then block the Straits of Hormuz, through which 2/3 of the world's oil trade flows? What would that do to the price of oil? the world economy? your retirement? your kids' prospects?

Would the US then invade the Straits? force Iran and Saudi to keep supplying oil? make the Gulf the 51st state?

If Algeria, and Vietnam, and Iraq taught the West anything, it's that modern peoples just don't appreciate being invaded or occupied! And they will ultimately drive out the occupiers! Each year weapons get more powerful, portable, and affordable!

The Bush administration loves to threaten Iran with economic sanctions and military action. I think that street actually runs in the opposite direction.

When all else fails, negotiate and live in peace - even with people you don't like !

A few points to consider:

1) Solar power: the cost of electricity from PV panels lies between 35 and 55 US cents per kWh (depending on size, location, manufacturing process, etc.). Wholesale electricity costs lie between 3 and 6 US cents per kWh. PV panels have a long way to go before they can compete (without massive subsidies, which they've gotten in Germany, Japan and some US states).

For more info: en.wikipedia.org/wiki/Photovoltaics

2) As for oil shale, here's an educated (and negative) response to its boosters:

http://tinyurl.com/r56b2

3) Regarding coal to liquid:

"the production and use of gasoline, diesel fuel, jet fuel and other fuels from crude oil release about 27.5 pounds of carbon dioxide per gallon. The production and use of a gallon of liquid fuel originating in coal emit about 49.5 pounds of carbon dioxide, they estimate. Even some boosters of the coal-to-oil plants describe them as carbon-dioxide factories that produce energy on the side." (from a WSJ article: http://tinyurl.com/qnjtz)

4) T. Boone Pickens said that? I'm very surprised, and I would argue he's wrong. An internal combustion engine has a thermal efficiency of between 15% to 20% (at best). A natural gas plant has an efficiency of about 50%:
http://www.greenhouse.gov.au/ges/qa.html

5) Hydrogen: Apart from the fact that we're still 15 to 20 years away from it being a viable alternative, there will always be the problem of actually producing hydrogen in the first place (I know, it's a cliche, but it bears repeating).

Believe me, I'd like to see alternative ways of producing energy (and specificially oil) succeed, but the numbers don't add up for most of the new (and not-so-new) ideas that are tossed around.

As others have mentioned above, efficiency is the key. A generally accepted rule in the energy management business is that it's cheaper and easier to save a kWh of energy than it is to produce one.

Cheers.

Jock,

"When all else fails, negotiate and live in peace - even with people you don't like!"

Yep, and negotiations continue:

http://biz.yahoo.com/ap/060823/oil_prices.html?.v=3

Ok, one last post tonight.

I just want to expand briefly on energy efficiency options.

We all know of the various strides being made on the transportation side (hybrids, clean diesels, and then there's that VC company out of the Silicon Valley "Tesla Motors"), but there are also options in housing.

For example:

http://en.wikipedia.org/wiki/Passive_house

kaimu..you are right on about the cycle repeating itself with energy, cars, etc. It is much more profitable, albeit short sided for a car company to invest in marketing big cars that it knows they can sell b/c gas is at a low, than to innovate new vehicles that will meet the future demands of fuel economy and pollution control. TOyota started development of the Prius in the early 90s and will have a model in 2009 that gets 94mph. WHat was GM doing, designing better cupholders for the Tahoe, or making the Pontiac Aztec?

I think the Iran situation will become a major crisis, given their current leadership and ours. Their commitment to nuclear development and their control of both significant oil reserves and key waterways is scary. All efforts must be done to prevent Iran's nuclear development, and it needs to be done with the cooporation of ALL INDUSTRIALIZED COUNTRIES. China, Russia and France need to see the big picture and take the lead, because the more the US and Uk have to be involved, the less likely a peaceful accord can come about. If those three countries sit on their duff or play their abstain bs, then expect big problems.

Why is preventing Iran nuclear technology so important? because as soon as Israel finds out Iran has come close to gaining nuclear capability, ISRAEL WILL PROACTIVELY STRIKE (given recent comments by Iran can you blame them?) That will lead to all kinds of mess, and the fact that someone is manipulating the DOW 30 to stay above 13000 will be the least of our problems.

Alan, Try (ENER). I think this was the company described in PBS show. This company was founded by Dr./Mrs. Ovshinsky in Michigan, They make solar cells and also hydrogen fuel cells - both hot areas. It went from 30 to 50 and back to around 30. I think they also licenced some memory tech. to Micron. You are much better off buying the alternative energy ETF ( PBW ?). ENER is in this ETF.

Jock, Try HW (Headwater). One of their business is coal gasifiaction via nanotech (two for the price of one). Also FTEK, it makes chemicals to reduce pollution into air from Power companies. I won't be surprised if both of these are in the alt. energy ETF.

Sorry about my orignal post some have responded to above. I inadvertently posted the clarification/apology on the wrong thread.

Like many of you I have concerns about what may be a clash between Iran, Israel, the US, and perhaps other allies. This clash, or even the prospects thereof, will have market repercussions.

Frankly, I was a little upset (not sarcastic, Mr. Cara) when I posted the remarks about Iran. I am an American Jew, and, as such, I sometimes have a somewhat different perspective on some situations than others may have.

I tend to be more hawkish regarding the Middle East because I view Israel as a very small, very vulnerable country founded for the sole purpose of giving Jews worldwide (there are only about 20 million Jews, total, in a world of 6 billion plus people) a homeland.

Jewish history has been marked by oppression and attempts at outright extermination. Honestly, some of us are a bit paranoid. The rhetoric coming out of IRAN frightens us, as does similar rhetoric coming from the Iranian-sponsered Hezbollah in Lebanon.

I would not like to see anything like war occur. But I can say with some degree of confidence that Israel will not allow herself to be destroyed without one heck of a fight. And lets just leave it at that and pray cooler heads prevail.

Several commentators have really jumped on stockoptions. They have confused what they think is good for markets with what they think is not good public policy. Public policy is not necessarily moved by the good of world markets. I believe Iran is striving for dominance in at least the Middle East. In pursuit of that goal, they have undertaken a nuclear program, used their proxies, Syria and Hezbollah to retake Lebanon and are promoting sectarian violence through Al Sadr in Iraq. Jane's reported this week that Hezbollah has requested, and Iran has agreed to supply, both Iranian and Russian SAM's. Those missiles could be used not only on Israeli warplanes but also on commercial airplanes. So, the question here is not whether Iran should be attacked, but, rather, what is the likelihood and what happens then.

One commenter claimed that this wouldn't be done because Iran would blockade the Straights of Hormuz. My thinking is only for days, not weeks. Even if Iran sunk ships in the straights, how long would it take to clear a channel and how hard would it be to provide military protection to shipping. Closing the Straights would affect oil from Iran, Iraq, Kuwait, and maybe Saudi Arabia. It is not clear to me from the maps what oil facilities Saudi Arabia has on the Red Sea. I would expect some since the oil could flow more easily through the Suez and into the Med. Another commentator has pointed out that countries are beginning to increase their stockpiles of oil. So, the question becomes what is the effect of, say, a one week closure of the straights on the world supply of oil?

Another commenter has said that 2/3 of the world's oil trade flows the Straights. That sounds very high to me. Was that an off the cuff estimate or is there a source for that?

I will take umbrage at one political comment: “Cheney and Rumsfeld (who do Bush'es thinking for him)�. That is just plain silly. Do not confuse public speaking ability with intelligence. One does not get a Harvard MBA and demonstrate an IQ north of 125 and be a dummy. Just because you don't like a person's decisions does not mean he is the dummy and you are not.

Other commentators have pointed out that the technology for alternative energy is available. But, not much of it is commercially feasible in the near term. So, what happens if Iran is attacked? Is it a one week disturbance in the shipping of oil plus the loss of Iran's oil or is it much larger than that.

But, in any case, we can be pretty sure that the opinion of the financial guys and stock traders are not going to have much influence on the public policy of the US and Israel. Once again, we need to be looking at reality and not what we wish to happen or not happen.

Rick

Khosla : Thinking Outside the Barrel
is worth studying

http://video.google.com/videoplay?docid=-570288889128950913&q=khosla

mano

Good Morning,

As a reminder...those who are holding (GLD) y/y (bullish on Gold) is up 10% for the year(y/y); those holding PetroChina(PTR)(bullish on China)(Cara-100)is up 23% y/y; those holding (EFA) (bearish on $USD)(hedging with foreign investments) is up 8% y/y; and those holding Berkshire Hathaway CL B (BRKB)(hedging the Bear) is up 6% on the year. Will these number hold into the new year is anyone's guess. However, this data once again confirm my strategy of separating my trading dollars (wants) from my investing dollars (needs).

Good trading!

RickC -

The Economist opined a year ago that a terrorist attack on Saudi's main oil processing facility (which was later attempted, albeit amateurishly) or on Ras Ternura main off-shore oil terminal in the Gulf could effectively shut down most Saudi production for 6 months.

The inhabitants of Eastern Saudi Arabia (location of the oil fields) are shiites. Beyond hitting the Straits, Iran would surely enlist local shiites to disrupt Saudi production.

As for Bush'es intelligence and work habits, "legacy" admission to Yale and Harvard Biz School doesn't mean much. I went to Princeton, where I encountered geniuses and dolts, hard-workers and very lazy guys. (I'm not saying I'm smart, but I DO try not to be stupid!)

On the eve of the Iraq war, Bush was unawarae that Iraq had a division between Sunnis and Shia. I don't hate Bush, I just think he owed it to the world to inform himself better and work harder.

Bottom Line: hold gold, hold oil, short US stocks!

Ghosalb -

Thanks for those stock references. Very promising! HW has dropped, seemingly bottomed, and might be bought with a tight stop!