Showing posts with label $140 oil. Show all posts
Showing posts with label $140 oil. Show all posts

Friday, March 27, 2009

Russia to Expand Arctic Military

There is a certain irony to this military nonsense. The battle of the Arctic is at best a war of press releases. I only hope that they establish bases along theirs Arctic coast and discover what has been learned many times in the past. That Mother Nature does a wonderful job guarding the northern frontier.

At least Canada has some Inuit quite happy to form up as a militia unit, whose primary task is likely to prevent anyone sent in from getting killed. You may enjoy this piece on the Canadian Rangers.

In the meantime, Russian arctic presence is at best an excuse to spend your summer sailing around the Barents Sea in thoroughly awful weather. And perhaps invading Novaya Zemlya to tramp around the tundra and perhaps get radiated from the 256 megatons of TNT worth of nuclear blasts conducted there.

Human activity is possible down to temperatures approaching -20 C without been extreme in terms of protection. At -40C you are in trouble doing anything outside, not just miserable. At that temperature, exposed skin is good for ten minutes and you are feeling the cold through the best insulation.

In the Arctic, you are bouncing around these temperatures continuously and conducting any work is a challenge in extensive preparation. In the Tar Sands, which is not yet Arctic conditions, a welding station is set up with a fully enclosed tent and a heater. This obviously allows the metal to warm up to more normal temperatures for effective welding. The welder is delivered to location, does his job and is then picked up an evacuated. In other words, every move is necessarily been planned.

Another favorite of mine is traveling by vehicle in this country. You get a flat tire. If you try to remove the nuts holding the wheel, the brittle metal bolts will simply snap off. Are we getting nervous yet? Oh, and do not ever turn of the engine! Obviously there are ways to overcome these problems but not without forethought and preparation. And if you lose external heat sources, your life expectancy is very short.

That is what defeated the German Army in WWII and defied the Russian Army in Finland.

The Arctic is that bad for longer periods of time in the winter, while the summers are a mere few degrees above zero.

There is no practical reality to an operational military presence in these conditions during the winter, unless you think garrison duty is meaningful and the summer is too brief to accomplish much.

On the other hand, it makes a great press release. Maybe Canada should reannounce its nuclear submarine building program which worked so wonderfully to back the claim we were meeting our NATO obligations back in the eighties.

Russian 'Arctic military' plan

Russia has announced plans to set up a military force to protect its interests in the Arctic.

In a document published on its national security council's website, Moscow says it expects the Arctic to become its main resource base by 2020.

While the strategy is thought to have been approved in September, it has only now been made public.

Moscow's ambitions are likely to cause concern among other countries with claims to the Arctic.

'Military security'

The document foresees the Arctic becoming Russia's main source of oil and gas within the next decade.
In order to protect its assets, Moscow says one of its main goals will be the establishment of troops "capable of ensuring military security" in the region.

With climate change opening up the possibility of making drilling viable in previously inaccessible areas, the Arctic has gained in strategic importance for Russia, says the BBC's James Rodgers in Moscow.

However, Russia's arctic ambitions have already put those with competing claims on the defensive.

In 2007, a Russian expedition planted a Russian flag on the seabed beneath the North Pole.
Russia, Canada, Denmark, Norway and the United States, all of whom have an Arctic coastline, dispute the sovereignty over parts of the region.

With an estimated 90 billion untapped barrels of oil, Russia's strategy is likely to be scrutinized carefully by its neighbours in the far north

Friday, February 13, 2009

Economy Turning

For the past several months, all eyes have been focused on the money printing machine put in motion to salvage the financial credit system. Lots of drama and a lively debate over solutions, but they will grind themselves out the hard way unless congress et al are able to accelerate the healing process. Right now all assets are repriced. The prices are at a level that an intelligent buyer will buy.

More importantly, the lenders are frozen in terms of their liquidation options. They have discovered that when there are no bidders, you are not going to sell at all. Just as the advent of oil at $150 brought the economy to a screeching halt this past summer, present real estate prices have made it impossible for the lenders to liquidate.

So perhaps doing nothing right now is an excellent option. We sure know that they will all be a lot more realistic next year at this time.

In the meantime, what else has happened? The real global economy slammed on the brakes and shook off excess use of credit and inventory. All commodity prices have collapsed back to painful levels, including that of oil. Surplus inventories and capacity has now built up so we have ample reserves to supply the global recovery.

Global trade has dropped over 15% since September and dropped another 5%, this month, but then reorders must begin to kick in about now and the numbers will be trending upward in the spring. Expect a broad recovery to be fully underway this fall and winter and a recovery to prior levels as early as late 2010.

Capital spending will be led by energy investment as the world now understands that $150 oil is not an option.

Also the American automotive industry needs a trip through chapter 11 to shake off contracts that have made it non competitive even in the USA.

Personally, I have no clue what the stimulus boys think that they are going to accomplish with their money. If they actually can fix the financial system, that will be wonderful. I have already said what needs to be done to bounce out of this rat hole. So far they are on the road to attempt to restore the original bubble. It simply cannot be done because no one is going to buy stupid paper from America anymore. You only get one bite at that particular apple.

The key point that we can make is that the global economy is getting over its funk and finding that they are still in business, and there is still so much real liquidity around that business at least will get financed. I expect all surplus inventories except housing to be cleaned up by the end of the year and everything to be functioning normally if a little less flambouyantly.

Tuesday, July 1, 2008

National Energy Program

Summer is clearly here and in full swing. The press is full of economic angst. People are discovering that $140 per barrel oil matters and a great adjustment is now underway throughout the globe. The most visible effect so far is watching the airline industry downsize. Most of the other costs have yet to push their way through the economy. So far most economic participants are eating some of the losses in order to preserve markets. This obviously cannot last, yet this slow response is likely the best response since we are going to see a sharp retreat in oil prices as the decline in consumption bites into the economy. Who wants to shrink demand for your product that you will be struggling to replace next year?

In the meantime and really in the background, the credit readjustment is also rolling through the US economy and is step by step reducing the supply of lending cash in the global economy. The bubble of excess cash has evaporated and hopefully does not slide below what the market requires. The comment has been made that this crisis is proportionally less than the savings and loan debacle brought on in the mid eighties. We survived that quite handsomely. The important thing to remember is that the sub prime disaster is rather localized and is quite open to smart intervention, even though, we are on the road to getting FEMA instead.

We have explored every energy option that we could get our hands on in this blog for a reason. The core to our global economy is a sufficient supply of usable energy. Nothing else even counts. All other commodities are quickly replaceable with only a modest price shift. In fact the commodity boom of the past three years is promoting a rapid expansion in global capacity that will soon place the entire globe into a permanent surplus position. Recall that today perhaps only a third of the global population is not yet fully participating in the Global economy and that third will finish their transition over the next generation.

In fact, we can expect a sharp expansion in food supplies over the next twelve months as farmers rush to take advantage of the current price regime. The same thing has already happened with the other commodities. The only thing that remains surprising is the apparent willingness of participants to maintain the high price structures so long. The sellers are still making so much money that they are not yet feeling the need to dump excess inventories. They may even believe that prices are going higher.

Right now everything is fully priced and suppliers are filling everyone’s boots while the credit contraction in the USA is shrinking surplus leverage out of the system. This whole situation is one headline away from price breakdown and a global retrenchment. We may have to wait for a strong decline in US demand before the shoe drops.

Returning to the energy market, my posts late last week should make it extremely clear that the first phase of the solar energy transition is now upon us. The initial price is set at $1.00 per manufactured watt. This is already cheap enough for a rapid rollout and a single machine will produce the power equivalent of a nuclear power plant each year.

Since manufacturing is now on internet time, the transition will be utterly swift and powerfully supported by frightened Americans, who never again want to be beaten up at the gas pump.

There may have been no political support two years ago for a national energy policy, but I am certain that the presidency will go to the candidate who enunciates a credible energy program, rather than a carbon tax or its like. Americans are scared and they want relief and reassurance now.