EEM 2-11: The Great Robbery

This second issue of Energy Evaluation Monthly (EEM) will address one of the most significant developments of our time; the growing influence and power of the financial worlds and their effect on countries and people.

It will be attempted to show you how the financial world/institutions of our time are completely controlling whole economies as well as are decisive in determining in direction of developments these countries are taking, and therefore have direct influence on the lives of up to a billion people (and more), as well as are determining future developments of many countries as well as whole world regions.

The reason for this writing lies in the wish to bring more openness in the matter as well as shed a different light on many of the developments that are taken as ‘natural’ or as ‘normal’ whilst they are not.

This assay will try to open up different views and ways of thinking concerning the subject of finance, speculation and development in general.

The Pricing Perception

At the point of this writing (March 9th, 2011), the prices of diesel, gasoline/petrol and heating oil are going up strongly since quite a few months. Also, the price of crude in its many denominations is going up strongly since quite some time.

What is happening? Is Peak Oil arriving?

Is there shortage due to the social and economic uprising in the Middle East and MENA region?

Is the economic growth depleting stocks?

Have there been any substantial cut-offs during the uprisings?

All the above questions can be simply answered with a resounding ‘NO’.

But then it leaves the question: What is the real reason that crude prices have been going up so much and why are the transportation and heating fuels becoming so much more expensive?

To come closer to a real answer we need to look at a much broader picture that is going on already for quite some time.

After the collapse of the oil price after the peak of 2008, much effort has been put in bringing the oil price back to higher levels.
In the beginning this seemed reasonable as quite a few oil producing countries as well as most of the IOCs and NOCs cannot sustain production at price levels of 50 dollar any more.

Partly due to the fact that the easily accessible oil is mostly gone and these days ever greater investments are needed to access the oil, and partly due to the fact that the price of steel has gone up at least 600 % in the last years as a result of speculation, and with it many other prices as well, the needed base-price of oil has gone up substantially over the last years.

And so, by all kind of nudgings, and some media presentations of important people saying that 75 dollars per barrel would be reasonable, slowly the price went up.

Was there any change in the demand/supply balance? No, there wasn’t, apart from the glut in the market and millions of barrels stored on land and on sea everything was ‘normal’. Nevertheless, the price went up, slowly, but steadily.

Of course, the people in the world were continuously bombarded with stories of the growth in China, the dangers of China, as well as the regular hints at Peak Oil.

But was there any shortage? No, there wasn’t.

And so, again, just like the run-up to the 2008-peak, the people of the world are continuously being fed by reasons why oil would need to become more expensive.

The Dancing Prices

Apart from the daily stories of apparent growing economies, we, here in Germany are confronted with ‘dancing’ fuel prices. Every day, and increasingly several times a day, prices are adapted, sometimes down, mostly up, in the well-known ‘dance steps’ of two-forward, one-backward.

And the interesting thing is, that all are almost all the time nicely in step, and slowly but surely increase the prices at the pump.

Is there any shortage? No, there isn’t.

And then the unrest in North Africa started to happen, swapping over to Egypt and other Middle Eastern countries. The media went in frenzy and many pundits and experts are talking about what could happen. But is there any serious cut-off? Is there any shortage in oil or transportation fuels? No, there isn’t. Has there been or is there a real threat of grand-scale cut-off? No, there isn’t.

And even if there would be a cut-off, would this lead to shortage? No, it wouldn’t, as there are many millions of barrels stored everywhere, way beyond what would be the ‘security storage’, and so it would be no problem to compensate for shortage immediately.

As there are also 4-6 million barrels per day of spare capacity that can be activated in relatively short time, there is absolutely no reason to think that a damaging situation of actual oil shortage would start to ensue.

Nevertheless the price is being talked up and is going up ever faster.

The Open Look

Currently, the main focus in the controlled mainstream press is the fighting in Libya, which is being presented as a popular uprising similar to Egypt, but most probably is a well-timed attempted coup d’état that is being promoted as ‘for the people’ but most probably is an attempt to regain control over the vast energy resources of the country whilst getting rid of just another leader that isn’t just as pliable and obedient as is wanted by the corporations.

But is any substantial cut-off happening? Is any real shortage occurring?

No, there isn’t.

Actually not much is happening apart from that actual oil demand will probably be on its way down, as countries that are in revolution or internal fighting do not produce much and have many factories and offices shut-down, with subsequent reduction in demand.

But the oil price goes up.

So, if we take a hard and neutral look at the matter we can see that:

  • Most OECD countries are in economic trouble and will see their energy consumption go down;
  • The countries in the Middle East as well as most of the emerging economies see growing economies and growing energy demand;
  • Global energy demand seems to be stable and probably is even going down slightly (as the fall in demand in absolute(!) figures in OECD+ is more substantial than the actual demand increase in emerging economies);
  • There are some restrictions in supply during the currently ongoing ‘regime changes’;
  • There is quite some volume in floating or land-based storage;
  • There is substantial spare capacity that can be activated in relatively short time;
  • The global reserves are still large enough to support current supply for (still quite) a few years to come;
  • The issue of Peak Oil will not go away, but is not a near-imminent danger.

So there is no objective reason why the oil price needs to go up in the speed it is going up at the moment.

Unless of course we include a certain ‘working hand-in-glove’ between the media and the speculators and the oil companies, trying to make as much of the situation as they can, making sure everyone is made to pay as much as possible for the resources that are indispensible for living these days (energy, but the same is happening with food and other resources).

So whilst in fact nothing substantial has happened (from the standpoint of actual supply and demand), we, the normal people, are being made to pay much more for the same thing. This is done by a very simple, but effective combination of ‘pundits’ in the news and speculators and traders in the market.

We are all made to believe that it is ‘natural’ that we need to pay more for something, when someone who is called and expert says there might be a shortage possible in the future.

This is just another example of the current movement that sees ever more wealth concentrating in ever fewer hands, and ever more people landing in poverty and misery.

This is an ongoing ‘bottom-up theatre’ that sees ever more money from the bottom of the pyramid flowing to the top of the pyramid (which has a black hole attached to it, siphoning off the vast amounts of money to unknown places/offshore accounts).

The Grand Theft I

What is currently happening at the level of economics with a host of countries, as well as with the prices of resources and commodities, can likely and easily be described as a ‘grand theft’, in which few corporations/banks/financial institutions are raking in billions in profits again (mostly made out of hot air) whilst whole countries and many millions of people are being enslaved for generations to come.

At the same time the social and educational substructures are being eroded and downgraded, ensuring the general debilitation of the people. Combined with controlled media that tell the people exactly what the rulers want them to think or react upon, a whole host of countries is being manipulated with the people’s lives, minds and emotions being enslaved for the purpose of controllability and the continuance of the scheme.

We can see these developments currently going on in Europe, where, due to mismanagement of the politicians, and very much helped by the banks, reality is catching up with the finances and most countries find themselves deeply indebted for generations to come (as the coming generations may be less in number, the situation may well be much more dire than currently realized or accepted).

But whilst the banks have encouraged much of the (partly hardly legal) financial juggling of quite a few countries, as well as unloaded many billions of dollars ‘worth’ of toxic acids in European (partly state-owned) banks, it is the people that are made to pay for this, by increase of taxes, reduction of social security, reduction of salaries, reduction in schools, universities and other education, increase in prices, all this in the already hard economic environment that was (deliberately or not) created by the banks, whilst at the same time it is being made sure that the money lenders who caused it all get fully paid and can make their excessive profits.

Grand Theft II

Another example, even more striking, can be seen in the US around what is known under ‘Quantitative Easement’, the action that by now officially 1,2 trillion dollars (but probably much more) has been created out of thin air to ‘help the banks’ that are ‘too big to fail’ to keep standing.

The irony of the situation is that the US government needs to go to the Federal Reserve (not a state institution but the central bank of the private banks!) to lend the money to help the banks to stabilize and ‘prosper again’.

Thus, the US government is lending money from the Federal Reserve, who creates it out of thin air, but which will need to be paid back by the people, and then gives it to the banks to make sure they keep functioning.

From one standpoint one can say that the banks, in their ‘over-eagerness’ and ‘over-creativity’ created many developments that had all the hallmarks of a pyramid scheme (the housing bubble, the dot-com bubble, the resource bubble, the derivatives and so much more). When it all went wrong and it seemed as if reality would surface, trillions of dollars are being lent ‘by the people’ to make sure the banks can continue to play roulette and distort the market.

Another point of view could be to look at the fact that somewhere between 1.2 and 2.5 trillion dollars have been created (and are lent by the people) and the words are of QE3 coming, but that apart from the return of excessive profits and preposterous bonuses, not much is happening in the country in the sense of substantial improvement of either services, infrastructure or job markets.

But a simple calculation shows that if the current ‘official’ 1.2 trillion dollars would have been handed out to the people directly, this would have meant 4,000 dollars for each living individual in the US. In a country that is for 70 % dependent on its consumer market, this would have meant an enormous boost for the economy, as well as a resultant boost for the morale of the people.

But the money is given to the banks that inflate market with it, create more bubbles, creating more ‘hot-air profits’ and at the same time buying real assets with the money created out of thin air.

As other countries are faced with an unending stream of cheap money, they are forced to also create money out of thin air to somehow balance the markets or protect their markets.

However, this causes of course inflation, excessive speculation and increase of prices on the one hand and an increase of costs of living and mobility on the other, whilst getting depressed on salaries and services.

So whilst the banks are being saved and stabilized and lent money ‘from the people’, they thank their ‘rescuers’ by enslaving them more.

The depth of this distortion goes, however, much further.

The Economic Rationale

Several decades ago, the US economy was a producing economy with a rich and varied small-, medium- and major producing entities-landscape. Unemployment was very low, salaries were medium to good and many people were able, by endurance, ingenuity and hard work, to substantially improve their circumstances.

What then happened is that the balances shifted from producing, hard work, earning well (at all levels) towards ‘maximizing shareholder value’ and ‘maximizing profit’. This caused that over time ever more production was ‘sourced out’ and that the profits rose, but the people were fired.

As in the beginning there was enough work or opportunity, this seemed part of the ‘American Dream’, so all was still well.

The outsourcing however continued and ever more small- and medium companies came under pressure due to cheap imports, started to lose work, came into trouble, went bankrupt or were bought up, then emptied out, with the work going to cheap labour countries and the people ending up at social security.

As social security is quite limited in the US, in line with the incentives leading to the ‘American Dream’, currently well over 50 million people, one in every six people, in the US are dependent on foodstamps with millions more trying to make ends meet by two or more jobs and many others just being dumped, foreclosed and after some time abandoned (and falling off the statistics, which then nicely can be kept good-looking).

The current ‘growth’ figures of the US economy, indicating a growing economy, just give off a distorted picture (as currently do many statistics).

Whilst the country is hollowed out and on a seemingly sure way to mass poverty and probably mass social uprising, the official data indicate a growing economy.

Taking into consideration that well over half of the US economy is based on ‘Financial Services’, it becomes clear that the real growth is from the phoney money that is created out of thin air and the profits taken from the bubbles created with this ‘hot air’ money.

This is why the figures are distorted, because it is just a very small group of people and a very small group of companies that is making excessive profits (again), but as the wealth created by this is ending up with only a small group of people, there is no substantial increase in either consumption, transportation, employment or energy usage.

As apparently the economy is going up, energy demand will keep going down, as almost none of these excessive profits is ending up with the people at large.

This is why in the medium term, the outlook for the US as a country is very insecure. Not only has it become hijacked by the financial institutions which, in conjunction with the media, food, pharmaceutical, energy and military giants and some others (in the end it is just a few hands-full of people), are working hard to make people dependent, financially, mentally and bodily and in many other ways.

The ever further going on take-over of the country by the corporations (very much helped by the recent ruling that corporate donations to politicians is an expression of ‘free speech’) sees a future in which these dependencies will only become deeper entrenched.

As already mass demonstrations are taking place (interestingly not reported here by the media) and electronic control and police brutality is on the rise, the medium-term outlook for the USA may be one of revolt and revolution, fed by the deep-seated scepticism towards overburding government, in combination with the millions of weapons that are amongst the people.

The picture that is generally presented of the US outside of the US is fundamentally (and deliberately) flawed.

Whilst it is presented as the homeland of ‘freedom and democracy’, it itself is neither.

With well over 2 million people in prison, almost 1 % of its total population, it has by percentage the largest prison population of the world. Its human rights records (that it puts together for most other countries in the world but not for itself), is, by any standard, not very good (China did the Human Right records of the US, based upon US data).

Taking the different pictures all together, we see an empire that is engulfed in several wars, a whole lot of terrorism, has up to 1,000 ‘outposts’ for its military, is occupying or controlling a host of countries (including many of its ‘friends’) and is preparing for more wars (Libya, Venezuela, North Korea/China) in its quest for total control, but at the same time sees its home base crumbling and its standing in the world collapsing, as the revelations about the many lies and double-dealings and double-crossings are reaching shrieking heights.

In the end, it will be the lack of humanity and lack of moral substance that will bring just another empire stumbling down.

The Speculation Drive

Since a few years, there are ever more speculation drives going on, some with permanent effects, some more quickly dissipate.

It started with the dot-com bubble, in which billions were invested to blow up small and often completely irrelevant companies to hitherto unknown size, after which most of them collapsed. Millions of hard working people that were lured into investing in these ‘blow-out schemes’, lost everything when the bubble burst, but the pro’s ‘made a killing’ either before or after the crash.

The building boom or housing bubble was another example of a moral profiteering, in which people were lured into situations beyond their means, then were milked out, left bankrupt and thrown out of their houses, whilst the ‘bundled securities’ were sold off mainly to European banks, that teetered on the brink of collapse when it became clear that all securities weren’t even worth the paper they were printed on, upon which the European people were asked to settle the score, whilst in the US the banks and money lenders were ‘helped out’ by trillions of dollars that were given to them by ‘the people’ (as they will foot the bill).

With the current amount of cheap money, almost all markets, and especially vital resources such as food, energy and metals, are bubbling again.

However, the situation is different now.

Food and energy (and metals and water) are indispensible for living and are used all over the planet by billions of people.

The current speculation in food and food-related commodities is therefore especially devious. As a result of these speculations, which are completely based on the possibility of eventual food shortage in the future (based upon the flawed expectation for population growth) billions of people are forced to pay substantially more for thier food, increasing the daily pressure even more on those that already have difficulties to keep themselves and their families fed.

In this case it is especially the poor people that suffer from these ‘games’ and the high food prices are and will be the cause of much unrest and suffering.

Whilst it is true that in the face of unusual phenomena (for example the excessive heat and subsequent forest fires in Russia or the floodings in Pakistan last summer, of which still is not clear whether this was caused by ‘natural’ climate change or the application of sophisticated weather weapons), some countries decided to stop exporting food staples even whilst there were no real situation of shortage, just as a temporarily pre-caution.

However, due to excessive media attention, as well as due to the fact that the so-called free markets (helped by World Bank & Co.) have actively discouraged storage to enable the ‘free-flow of the market’, the impression was created that food was going to be in short supply.

And therefore open for speculation and price-driving.

The same is now happening with oil.

Due to popular uprisings that found their roots in food speculation, in combination with dictatorial and abusive governments that were either installed or at least maintained by the same people driving the speculation, now several countries are in transition and whilst much of this will be for a good reason, the side effects of it are being used to talk up the price of oil (being one of the main export commodities of the countries now in transition).

However: How much oil has really been taken from the market?

What are the real reasons for increasing the price of oil?

Or is this just again how it works: Create a shortage, or the impression of a shortage, and talk up the danger and drive up the price.

The big question however is: Does it help?

If there is a food shortage does it help to make it more expensive? Or does it only fill the pockets of a few people and puts even more people in economic problems and starvation?

If there would be a real shortage of oil, does it help to make it more expensive? To a certain extent: yes, certainly, as we all will become more careful, hopefully less wasteful and more energy efficient, and so reduce demand.

But at the same time it will cause hardship for countless millions of people.

And there is of course a limit to the effects. As became clear in 2008, when the oil price reached record levels, it caused massive economic side-effects, resulting in amongst other a collapsing US home market and many European economies sliding into severe (and probably long-lasting) recession, exacerbated by the other ‘financial juggling’ that came into the open.

The Hard Foresight

With the growing realization of the limited availability of oil that will start to become a reality in the coming years and decades, the current financial focus on speculation and ever-greater profits, will be a theatre of no rules, in which the financiers and opinion makers will be colluding to squeeze the most out of ‘what the market gives’, creating many situations ‘to make a killing’, whilst causing hardship and poverty for billions of people.

The system has gone haywire and perverse and will, in the end, collapse due to ‘overstretch’, although it may take time before enough people realize that ‘The Market’ is not an amorphous, uncontrollable entity, but is made up of, in the end, just a small group of individuals that can be brought to responsibility and justice.

Read the runes: It is time for change!

Alexander Wöstmann

9th March 2011

Alexander's Commentary

Change of face - change of phase

In the period of July 20 till August 3, 2015, Alexander will be out of the office and the site will not or only irreg

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