Long-term: probably by 2040 at the latest: A massive perpetual oil glut will occur, when the century-old idea that oil is created by inner earth molten core forces–rather than dead dinosaurs and rotted vegitation–proves correct.

Regarding the petro- market: one thing I don't see much written about is the split within OPEC between 'hawks' who want higher prices an any cost and 'doves' who don't want to destroy the commercial economy of consuming nations with prices at 'whatever level'.

Iran, Libya, Russia and Venezuela would fall into the hawk category. Saudia, Kuwait, would be considered doves. Brazil, the African producers, Canamex and perhaps Iraq straddle the fence.

The hawks have a lot of power in the market. There is no reason why OPEC producers didn't sell forwards to each other in 2008 churn the market upward. (There is no reason why refiners didn't sell shipments to each other in order to pump the spot market and support futures!)

Refineres pumping the market this way would explain the 'increase in inventories' that seems at times more phantom than real. Producers pumping the futures market would create a velocity bubble, which seems to be forming again, right now. The question is whether the Saudis can modeerate the market power of the hawks by pumping more oil from their spare capacity.

Which leads to the next issue; does Saudi Arabia have enough spare capacity to effect the pricing curve? Jeff Brown discusses the prospects on this program with Jim Puplava:

http://www.netcastdaily.com/broadcast/fsn2009-1...

Mr. Brown describes Saidia's production as declining regardless of price/investment inputs post- 2005. The Saudi's exhibit “the fastest rate of consumption” of all the exporters, which amplifies depletion. The spare capacity the Saudis would claim in 2006 would be shrunken in 2009 as a result of increased Saudi domestic consumption over the intervening period.

“Actually, it's my opinion it's more likely than not … that Saudi Arabia peaked in 2005 …” says Jeff Brown.

What this means is the Saudis can claim to be supportive of OECD economies while being structually unable to exercise their claim. At some point, of course, the producer will decide to use all remaining production to support domestic use, only.

More info @ Financial Sense Newshour:

http://www.financialsense.com/fsn/main.html

Next six months will be intereting …

I think the first step of transition will occur through the transfer of resources to China and India for higher-utility uses. The first step of transition, in essence, is the fading away of the non-transitioning U.S.

I think that falling rents and fading consumerism will mean Americans can pay a higher percentage of GDP for oil, though. And if we can ever get Americans onto healthy food and off their addiction to high-tech health care, we can bid an even higher percentage of GDP for oil. I mean, who would ever have thought that we'd be on the verge of spending 20% of GDP simply to ennable high fructose corn syrup addiction?

G

G

Transition itself is a fascinating issue and so far I'm not really seeing that that US is making the move. True, large systems change most effectively at the margins, and not necessarily b/c of a monolithic government policy.

Just imagine if we spent all the current war expenditure on Rail. I wish that were the case, but as you know, the current spend is a paltry 12-15B

G

I was not saying that everyone should build a bike. I realize that is out of reach. I was saying that having a bike means the price of oil might not seem like an issue, and I certainly don't buy gas. Then I noted that the price and availability of oil impacts my ability to build a bike, even to have the raw materials at all, and being a production builder (instead of a product consumer) I'm very aware of this. Meaning, there is no escape even for builders. But clearly, I'm off the bottom of the chart in terms of my yearly carbon footprint, at least. And that counts for something. Or maybe not. Probably not, actually.

cheers,
cougar