The Change Waves Are Building Rapidly - The Ride Will Get Turbulent Quickly

MWM: I believe that many things will change more in the next 12 months than they have in the past four years.

From - Peoplenomics 9/28

About Our Crash Warning

As we open hump day, facing the prospect of a leisurely trip back to the ranch starting Saturday morning at 0h-dark-thirty, we can see that our Crash Warning issued last Thursday seems more justified now than it was then, based on some developments that just can't be ignored. I mean other than the comments of Alan Greenspan admitting that the U.S. has lost control of its budget deficit because of the costs of war and now storms on top on the housing bubble.

I'd begin by pointing to an article appearing in The Australian today which says the Reserve Bank of Australia - their equivalent of our Fed - is warning of the possibility of a global meltdown. To be sure, Greenspan is lightening up on his warnings a bit, but with storm damage in the billions, one can only look at the weather maps and ask, "Gee, what next?"

While the National Weather Service isn't reporting any new storms in the Atlantic at http://www.nhc.noaa.gov, there are private weather watchers who see the potential for more storms, possibly severe, before this storm season ends. One storm continues, though, and that's the storm over the role of FEMA in New Orleans, and the testimony of Michael Brown is getting some play - as someone has to take the fall.

However, keep in mind the larger context of the federal role in New Orleans - as Alex Jones' site suggests in a dandy Steve Watson read today over at Infowars.net, "Katrina/Rita Fallout Part One Martial Law: Police State America - We're So Close Now".

One reader suggests that maybe, just maybe, the New Orleans response might have something to do with an attempt to nationalize the US oil industry. We think not, but nothing would surprise us anymore.

The Warning from Texodus

America can certainly rebuild from the weather disasters of the past two years - that's no stretch for an economy with the kind of horsepower harnessed self interest under capitalism can turn out. But where things run into a brick wall is if our energy inputs are restrained in a significant way. Our Houston Bureau - in the heart of America's oil patch, offers an assessment today which we fear may prove much more accurate than the happy talk proffered by mainstream media:

"OK, it's bad. There are dozens of rigs and platforms damaged, missing or sunk. Katrina put the whammy on production platforms, and Rita slammed the drilling rigs. I've got some pix to forward to you tomorrow. Some of the rigs are upside down, others are twisted and destroyed, still others are just plain gone...either sunk or drifting.

As I have been telling anyone willing to listen, there really is no such thing as Peak Oil, as far as I can tell. The real problem is a complete lack of infrastructure for moving and refining oil and gas, as well as a serious shortage of drilling rigs, tankers and refineries. The situation was close to dire before the storms. It is critical now.

Over the past couple of decades, there has been little investment in tankers, new drilling rigs and refineries. As a consequence, we may be running out of gasoline while drowning in oil. This is the cause of the disconnect recently between pump price and barrel cost. All the storage areas are full of oil, the problem is there is no scalable means to refine it and/or ship it. Even starting this minute, the supply can not be increased by even one percent for the next three to five years.

Should the next storm
http://www.weather.com/newscenter/tropical/?from=wxcenter_news hit shipping, I can almost guarantee the pump lines we recently saw in Houston will be nationwide. I am fairly sure that we will see them by Christmas, as it is. A cold winter will virtually ensure radical price hikes in natural gas, electricity and heating oil.

While this may sound alarmist, I assure you that I am taking the best information from offshore interests, as well as what I know about the industry into account. The outcome will most likely not be pleasant, and the time frame for the unpleasantness to start is about one month, maybe slightly more. When you hear Bush taking steps to limit gasoline usage in the White House and encouraging people to conserve, you can bet that he knows what's coming.

Your readers should begin to take reasonable and prudent steps, if they have not already. Try to have at least 3/4 of a tank full in your car at all times. Anyone who lives in a city should have several alternative routes out of town that DO NOT utilize the freeways (I tried four of my routes during the Texodus and found them virtually empty). Consider purchasing a good water filter (Big Berkey, for instance) and a small generator to run a deep freeze or refrigerator (never operate one indoors). Keep a good supply of non-perishable food on hand.

These are just prudent suggestions. I see no reason to panic about the situation. It will progress quickly, but those who are looking for the signs will know when things start to go down hill. Until you have spent days looking for a gas station, or gone grocery shopping when nothing was on the shelves, or gone five days without electricity during a heat wave, you can not appreciate the situation. I was well prepared for the storm, but even that would get me through a month or so, with serious rationing.

To summarize, the GOM (Gulf of Mexico) oil and gas industry has been hit pretty hard. ALL oil and 80% of natural gas production is shut in. Four refineries are seriously damaged, needing about a month or more to repair. Dozens of rigs and platforms are sunk, missing or damaged. There is currently about a month's supply of refined petroleum products in storage, and they are decreasing rapidly. Your readers would do well to consider prudent preparations for a severe disruption in energy by year's end.

Sorry to bear bad news, but I don't even have the whole picture yet, and it already ain't pretty. More as things develop."

No matter how grim our reports may sound to the "Ain't no peak oil.!" believers, there are others picking up the same information and piecing it together such as the prestigious Financial Times which reports this morning that Rita caused record damage to oil producing infrastructure.

Thanks to the future scanning technology of http://www.halfpasthuman.com and some just plain luck, Elaine and I will be back in Texas in just over a week. As best I can guess, we will be paying around $3.50 a gallon on average as our travels take us along an "anything but direct" route. Naturally, I'll keep you posted along the way, but it could easily be that the web bot "event" which we're in the midst of right now could be nothing more or less than a sudden public awakening over the next week or two that oil prices of $100 a barrel and $4.00+ gas are in sight by Christmas. Elaine & I are looking at locking in holiday travel plans now as costs for airfare for our kids have gone up 20% in the past week (damn!). If you're able to make investments, locking in airfares might be an interesting play, indeed.

Personal Incomes

The Bureau of Economic Analysis today released State Personal incomes for the second quarter of the year (Ending June 30th). If you're keeping up, you should have seen an increase of 1.5% in personal income for the period. if not, you're falling behind:

Personal income for the nation grew 1.5 percent in the second quarter of 2005, an acceleration from the 0.6 percent growth of the first quarter and a return to the average pace of the last six quarters. Almost all states participated in the acceleration, although in three states (Texas, Louisiana, and North Carolina) the growth rate equaled the first quarter’s and in four states (Idaho, New Mexico, Arkansas, and South Dakota) growth slowed from the first quarter. Even so, personal income growth in all states exceeded the second quarter’s 0.8 percent inflation rate (as measured by the national price index for personal consumption expenditure).

Do you notice that Florida, which was hard hit by storms last year, had great gains? That's what I mean when I talk about the resilience of the American economy. It does best when things are bad.


As if to underscore this phenomena, the durable goods report for August out today says there was a greater than expected 3.3% increase in August, rebounding from a big drop the month previous. Problem is the report doesn't cover Katrina or Rita periods, so next month could be a bit of a bummer, or maybe not, depending on how fast rebuilding orders come in.

Ponderable Quake

Our colleagues at http://www.halfpasthuman.com have an interesting observation about the big quake in Peru this week: "an oddity about the Peru quake. no fore or after shocks that I can find. very odd." Yeah, very odd indeed...

Get Jules Verne on the Line!

There's a science report today that yes, giant squid like the one in Jules Verne's novel "20,000 Leagues under the Sea" are real - and pushing 60-feet end to end.

No Snake Conclusion

We have just about an even split on yesterday's excess negative ion induced question, "Can snakes crawl backwards...?" People swear both answers are correct...it's like trying to get a straight answer from an economist, I tell you.

Putin's Next Job?

No, he's not saying what he will do after he steps down in 2008, but Vlad Putin apparently has something up his sleeve. Gee, I thought Putin and and Tony Blair might both hang out shingles at Carlyle... Say, got a fresh cup of coffee and RealPlayer? Take 48 minutes to watch a video online? Skip the first 1 minute 48 seconds...and the English language begins...

Solar Race Results

It's not like the old Tour 'd Sol, but a Dutch Team won the latest big solar-powered car race in Australia. Not much on hills, solar cars are lots of fun on flatlands...but an average speed of 102.75 KPH? That'd be, let me think (ouch!) a bit over 60 MPH? Wowsers...

Best Wishes,
Michael Wells Mandeville,
The Hills of Arizona


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September 2005

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