Friday, October 21, 2011

Crude Realities

Click to enlarge.

U.S. crude oil production has been an epic exponential growth trend failure since 1970.

Click to enlarge.

Our reliance on foreign oil currently makes the 1970s look like a picnic by comparison. Was oil the pin that popped the housing bubble or was housing the pin that popped the $145 oil bubble? Does it really matter which was the chicken and which was the [nest] egg?

And what about China?

July 18, 2010
China Tops U.S. in Energy Use

China's ascent marks "a new age in the history of energy," IEA chief economist Fatih Birol said in an interview. The country's surging appetite has transformed global energy markets and propped up prices of oil and coal in recent years, and its continued growth stands to have long-term implications for U.S. energy security.

For what it is worth, I am not and have not been at all convinced that China's miraculous growth theory is compatible with high-priced oil. Savvy investors may think otherwise.

October 21, 2011
China Shares End At Another 31-Month Low; Resources Sector Leads Fall

SHANGHAI (Dow Jones)--China's shares ended at another 31-month low Friday because of concerns over the domestic economy, led by declines in the resources sector due to a dismal demand outlook, but gains in banks pared the losses as worries over the debt levels of local governments eased after Beijing said it would allow some of them to sell bonds directly.

There is a lot to think about. I am a pearmabear since 2004 but in the short-term I often toggle between being a deflationary bear and a stagflationary bear. I don't invest for the short-term though. That's why I like and have liked long-term TIPS. They allow me to be relatively agnostic on both short-term and long-term inflation (barring severe hyperinflation which would ruin me).

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. - George Soros

I'm not looking to make money any longer. Capital preservation is my #1 priority in this "Age of Turbulence". Although I have not read his book, I figure Greenspan should know. His "easy money madness" certainly helped get us here. Sigh.

This is not investment advice.

Source Data:
EIA: Crude Oil Production
EIA: Crude Oil Consumption


mab said...

Does it really matter which was the chicken and which was the [nest] egg?

I think the focus should be on nest yeggs.

It's a system run by and for the benefit of financial thieves.

Stagflationary Mark said...


Yeggs? Nice!

It makes sense. The "safety in numbers" was replaced with the safe-cracking of numbers.