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giselle from chapter 3
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On a national interest level, particularly for the US, a weakening economy (a deep dive) is a strategic question and a question of national security. From an oil perspective, I think Phillips does a great job of discussing this point in chapter 5 and I think he also demonstrates the fate of those nations who reach the pinnacle of economic achievement, perhaps represented by global dominance, and then decline.
I am not finished this chapter but I am not sure I am understanding it. Does Phillips mean that the world peak oil usage is here, or almost here and that from now on the demand for oil will decrease? This does not make sense to me looking an China and the increasing demand there and the frantic pace at which development and building is going on. Or did he mean the the US oil usage has peaked?
Also, the attachement of US currency to oil, which I know is something that has perhaps been challenged even further since the publishing of this book, is something that I don't fully grasp, or at least grasp the consequences of this dominance being lost.
Phillips, to me, seems to be saying in this chapter that there is no doubt of the US declining as a world power. Does Obama really believe what he is saying, or is he trying to say what Americans want to hear?
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I believe that Peak Oil refers to the supply side, that is, the production of oil not the demand. The problem for many oil producing countries, including the US, is that their oil production has "peaked" and levelled off or is close to that point, even though millions of dollars continue to be poured into oil exploration. Because the US economy (and others incl Cdn) are so oil dependent, reaching peak oil production is considered a sign of weakness to come because the country will have to import mor and more oil to keep growing. Conversely those countries that can show continued increase in oil produciton have the opportunity, say through state run oil companies, to basically hoard or control the flow of oil, driving the prices upward making the imports even more expensive. The combined result is a decline in the economy of the "peak oil" countries. At least that's how I undertand it but I stand to be corrected.
On the tying of currency to oil, I am not too clear. I know that oil is priced and sold in US dollars historically. This creates demand for US currency, keeping the value of that currency up. If oil were sold in some other currency, the US dollar would decline (I think Phillips is saying that this is happening). If a currency loses value, imports to that country (including but not limited to oil) are more expensive adding to the problem above. Ultimately this can lead to a weakening of the economy and a rippling out effect on the tax base and other implications. But as I said I have only a sketchy understanding of this. I'm going to explore it a bit more.
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Thank you, that maybe makes more sense. I'd better go back and reread the first half of the chapter before I finish as my first reading was late last night while waiting for a plane to come in and I think I was not really awake.
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I don't know what I was reading the other night, I guess I was half asleep.
Phillips is saying that US has passed its peak oil production and is relying more and more on imported world oil, which is also approaching peak production. The US dollar which has been the currency for oil trade is also losing its grip. I don't really understand the implications of this other than that the US dollar will become less desirable, and already has, for investment.
So, the US has been relying on imported oil, and also imported cash to buy that oil. If there is not enough oil to go around, is it really possible that China or anyone else will keep loaning their oil buying competitor cash to compete with? And with the increasing debtload of the US government, will the worldwide confidence of the US ability to pay that loan off disappear?
It seems ludicrous that with this information in hand that a government would encourage a population to keep spending money, buying bigger houses...consume, consume.
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It seems ludicrous that with this information in hand that a government would encourage a population to keep spending money, buying bigger houses...consume, consume.
It may be unethical but I'm not sure its ludicrous ... promoting consumption actually makes perfect sense if you buy the capitalist economic model where there are three underlying elements of a healthy, growing economy ... government expenditure, investment and consumer spending ... and they are interrelated and interdependent. If one of these areas fails then the rest are affected and the economy spins downward, or at least, so the model would suggest. Of course, this takes a degree of willfull blindness on the part of many when evidence of systemic problems with the model creep up like those reported in Phillips book.
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depending on who you talk to, innovation can be considered part of investment ... or a fourth element. there will always be corruption and deception (including self-deception) in human systems, economic or otherwise. all they do is warp the basic elements and turn them away from their intended purpose.
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promoting consumption actually makes perfect sense if you buy the capitalist economic model where there are three underlying elements of a healthy, growing economy ... government expenditure, investment and consumer spending ..
But if the economy is NOT healthy and growing, pretending it is will not make it so.
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Realiz: "Phillips, to me, seems to be saying in this chapter that there is no doubt of the US declining as a world power. Does Obama really believe what he is saying, or is he trying to say what Americans want to hear"
Phillips does say that no society he has studied that exhibits the signs that the U.S. does, has not been able to regain its dominance. The question that occurs to me, though, is whether that is a bad thing in itself. Phillips addresses this by saying that after a tough period of a few decades, these societies can become actually more prosperous and healthy than in their glory days--just not, presumably, with the world influence they once had.
Giselle: "Conversely those countries that can show continued increase in oil produciton have the opportunity, say through state run oil companies, to basically hoard or control the flow of oil, driving the prices upward making the imports even more expensive. The combined result is a decline in the economy of the "peak oil" countries. At least that's how I undertand it but I stand to be corrected. "
Phillips says that the knowledge on the part of Bush and his people of peak oil having arrived (even if they're not publicly admitting it), led to the invasion of Iraq. They were sure we needed to have at least good access to the oil of a country that has a lot of it. Giving the Iraqis the gift of freedom and democracy would be a noble-sounding way of achieving this access.
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Phillips says that the knowledge on the part of Bush and his people of peak oil having arrived (even if they're not publicly admitting it), led to the invasion of Iraq.
As a Canadian, I think this is valuable information ... because maybe we're next ??!!
(quoting Phillips, US oil imports from Iraq=481K kbarrels/day, oil imports from Canada=1,853 barrels/day .. plus a whole pile of natural gas and hydroelectricity).
Luckily Phillips lists Canada as the only "stable and reliable supplier". But then we do have some other trade disputes (softwood lumber, salmon etc.) .. not sure if these would justify invasion though. Hope not.
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He does say something a bit odd about Canada:
"Threats to U.S. oil interests arose in places Washington had long taken for granted: Latin America, the Arabian Peninsula, in small ways even Canada."
He never elaborates on the Canadian threats, so I'm not sure what he's talking about.
I wouldn't worry though. My fingers are crossed, but I believe we've just about lost our taste for military aggressiveness for a couple of decades, and that distaste will only intensify once our troops start coming back from the Middle East en masse. I think the only invasion you have to worry about from us is retirees seeking affordable medical care.
You've piqued my curiosity as to what Obama will actually do in meaningful terms of military spending. I may be wrong but bailouts aside I understand it is the best funded aspect of American society.
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Peak oil is not a new theory. The guy who basically started the whole thing back in the FIFTIES was M. Hubbert. This individual drew a simple bell curve to show how oil would be found in ever increasing quantities until it became exceedingly difficult to find more reserves.
- all supply side.
There is difficult math involved with the theory but it doesn't take a brain surgeon to figure out that a finite resource such as oil won't be around forever. Once it's consumed it's gone.
So, yeah - if there is incentive to find it, it'll be found till it can't be found anymore. (no shit, right?)
The scary thing is that policy makers worldwide have largely squandered this resource. Instead of saving it to produce things that actually require fossil fuels, we've burned it in cars. That's pretty stupid to burn such a valuable and limited resource to get back and forth from soccer practice or to mow the lawn. RETARDED. (I have a gas powered car and mower by the way)
I agree that we're going to see more and more posturing and aggressive behavior as oil becomes more scarce. The sad thing is - which Phillips stresses - unfriendly nations hold most of the world's oil reserves now. Russia, Venezuela, Iran, and China are a few. They're going to get powerful enough to bring more oil producing countries under their sphere of influence. This is already happening and one of the main reasons I listed China with the others.
It's only a matter of time before Russia does ask for oil to be traded with the ruble as Phillips suggests. The only saving grace is that China has invested so heavily in the United States - they're not going to want to see our dollar decline. They may ask for oil to remain tied to the dollar to save the value of their investment.
All I know is - oil is a finite resource that needs to be replaced immediately for the welfare of the entire world.
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I also meant to add that I thought this chapter was nice fluff but he didn't really tie it into the rest of the book that well. I have a suspicion that this book ended a couple of chapters ago.
I think this book could have been 100 pages. That's what I get so far.
I went ahead and bought The Trillion Dollar Meltdown by Charles R. Morris to compare the two and see if they say the same things. I just don't think Phillips has that strong a grasp on the whole situation and if he does he isn't very good at relaying all the complex information. He hasn't broken it down enough for me. I still feel like I've barely scratched the surface of WHY this has happened. Just not enough of the right information for me.
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