James Howard Kunstler - in a Nutshell [SLIDESHOW]

Cracks Appear in World's Engine

NVDL: Did you know that Saudi Arabia's output is the highest it's been in two years, and even so we're still seeing oil prices go up? The Financial Times reports the following:

Normally it takes a war to lift oil prices $10 a barrel in a week. Not this week.
A market that started on Monday wondering if a fresh record of $125 a barrel was sustainable ended by witnessing spot prices above $135 and, crucially, long-term prices moving as high as $145 a barrel.

... veteran oil traders and analysts still say $150 a barrel is possible as it becomes clear that a supply crunch will hit the market in the next five years if demand growth does not slow.

NVDL: Is demand growth slowing? Did you drive less than usual this weekend? Have China and India said to their 1 billion plus populations, "Sorry guys, guess we're not invited to the party. Let's go back to the farms. Ja, just leave your cars and go back to where you came from. " No, governments and individuals will find any excuse, elect any leader, that allows them to continue consuming as we are now. Even so, it's not going to continue for a lot longer, even if we insist that that's what we want. Demand Destruction is a factor, and we're seeing demand eroding in the collapse of airlines now, but it will take longer to filter through to less vulnerable businesses, but, it will. Recession and the complete collapse of housing/property markets is the long term consequence of these high prices. The markets will choke on them, and globalisation will kick back into reverse.

Kevin Norrish, of Barclays Capital, says: "Strong oil demand, in particular from emerging giants such as India and China, along with disappointing non-Opec supply, continues to underpin oil prices."

Taiwan, Malaysia and Indonesia, [have] started cutting their expensive fuel subsidies, a change that signals that the first cracks in the world's engine of oil consumption are appearing.

Francisco Blanch, head of commodities at Merrill Lynch in London, added: "The oil market is avidly looking for a demand-destruction level." He said that several airlines had started cutting back flights and that high prices were hurting other transportation companies. This week's surge in prices - with spot prices up about 7 per cent and long-term prices up 15 per cent - has triggered concerns that the commodities market has become a bubble, after the booms in dotcom shares and housing.

But Hank Paulson, US Treasury secretary, said high oil prices reflected tight supplies and growing global demand and were not driven by market speculators. "I don't think this is about financial investors," Mr Paulson told CNBC. "This is about long-term supply and demand."

By Javier Blas, more.

Bombing Iran: The Clamor Persists

Who is behind the rampaging mobs, the crazy oil price and the steering wheel?

Oil passes $130; Oil for 2016 Delivery Passes $141

South Africa violence spreads
MARIUS BOSCH
Reuters
May 21, 2008 at 9:11 AM EDT
JOHANNESBURG — Xenophobic violence that has killed at least 24 people in South Africa spilled over to the volatile Zulu heartland on Wednesday and security officials discussed whether to use troops to quell the wave of unrest.
The attacks on African immigrants, accused by many poor South Africans of taking scarce jobs and fuelling crime, have forced thousands of people from their homes, unnerved investors and hit the rand currency.

Local media in the eastern KwaZulu-Natal province said at least six immigrants were wounded in an overnight attack on a Nigerian-owned tavern in the port city of Durban.

NVDL: In South Africa people are cluelessly trying to udnerstand the Xenophobia here. Is that what it is? People suddenly realised they don't like foreigners. Really? I've seen some interesting arguments, all somewhat true, none of them adequate. Here's the best assessment I've read:

There is this competition for resources and things are not good, - Desmond Tutu

Yes the president's policies failed, yes we needed to address Zimbabwe, yes there's rascism...but no, no one goes to the root cause, why are people flaring up now, in such great numbers? What's the root motivation? The level of misery the poor are experiencing has suddenly shot up a few notches, and not only that, they suddenly find themselves sharing their desperate living spaces with ever more people clamouring for meagre resources. Global Food Crisis - the implication of these three words are Poor Rioting Mobs. So please do not mess around blaming politicians - better to blame the weather. This problem is spreading in South Africa (it's already in Durban), and it's going to gain ground around the world too. I'm sorry to say that because of the current fuel price, the poor will suffer even more in future, and the mobs will get worse. No one seems to be seeing this. They're seeing individual trees stems, they're lost in the wood.

And who is behind the oil price? The oil companies? OPEC? Greedy politicians? Sorry it's just not that elaborate.

Oil speeds toward $130 per barrel
Adam Schreck
Associated Press
May. 21, 2008 12:00 AM
NEW YORK - Just in time for the start of the summer-driving season: oil near $130 a barrel and gas getting closer to an average of $4 a gallon.

Crude prices spiked to yet another trading high Tuesday as supply concerns mounted. At filling stations across the country, the national average price for a gallon of regular gasoline touched $3.80 for the first time, having followed oil's spectacular rise.

There's your clue. As America embarks on the summer driving season, prices go up. People use more of something, there's not enough, it gets more expensive. So i t's simply too many people consuming too much and there being not quite enough to go around now, and so the squabbling starts. India is very aggressively buying crude and there are recurring rumors than India is planning to set up a Strategic Petroleum Reserve (for hoarding purposes). We may be seeing governments now starting to try to buy any and all crude that they can get their hands on. The sheer pace at which oil just shot up to $130 is staggering. Really. Have a look at this chart, and in particular the price of Oman Crude, already at $140-something. Notice the trned for all those prices - up, up, up. Even for those of us expecting it this is getting frightening. It's also scary seeing how the media and thanks to the media everyone else haven't heard the atom bomb drop. They still don't get it. The way we are living now has actually past it's sell by date. It's gone. Now it's just a matter for it to sink in, for the reactio to filter through to hearts, minds and economies. It's going to be very hard and very painful,and we haven't even started dealing with it!

It's very very scary just how lost and deluded and frankly dumb our clever techno society actually is. A lot of people don't even know - don't even have the information in their heads yet. It is really a case of a big elephant screaming into a speck, and yet nothing is heard. Reality is obvious, unless your eyes are closed, focussed on some sleep-deprived daydream.

And what is NOBODY saying? Nobody is talking about changing the way we live, reconstructing the whole motoring culture. You are simply not hearing that debate. Everyone is trying to find alternatives so that we can just keep on doing what we're doing, keep on motoring. It's not going to happen, and hence we're all in for a very hard landing, and some cruel lessons in REAL LIFE ahead.

Oh and by the way, the answer to the last question, who is behind the steering wheel? You are. You are behind the wheel. It's been you all along. So what are you going to do now?

Boone Pickens On Oil (VIDEO LINK)

In the 1970s, a reduction in supply of just 5 per cent caused a price increase of more than 400 per cent.

Click here for the link.

NVDL: This man's comments have had a tipping point on economics and oil markets and sentiments around the world. Following these comments by Pickens' (BP OIL CEO):

Demand is 87million barrles per day
Supply is 85 million barrels every day, and the two largest producers (Russia and Saudi) are declining, struggling to even maintain these levels.

There is now widespread acceptance that the long term future is higher and higher oil prices.

Boone is actually wrong about Natural Gas being a 'replacement' or an 'alternative' to oil.

Jim Kunstler:
To aggravate matters, American natural-gas production is also declining, at five percent a year, despite frenetic new drilling, and with the potential of much steeper declines ahead. Because of the oil crises of the 1970s, the nuclear-plant disasters at Three Mile Island and Chernobyl and the acid-rain problem, the U.S. chose to make gas its first choice for electric-power generation. The result was that just about every power plant built after 1980 has to run on gas. Half the homes in America are heated with gas. To further complicate matters, gas isn't easy to import. Here in North America, it is distributed through a vast pipeline network. Gas imported from overseas would have to be compressed at minus-260 degrees Fahrenheit in pressurized tanker ships and unloaded (re-gasified) at special terminals, of which few exist in America. Moreover, the first attempts to site new terminals have met furious opposition because they are such ripe targets for terrorism.

No combination of alternative fuels will allow us to run American life the way we have been used to running it, or even a substantial fraction of it.

Natural gas is expensive to extract and dangerous to transport, but reserves of natural gas ought to outlast oil by 20 years (according to some estimates). Canada is now needing to use more and export less to the USA. So is everyone else. The UK is a net natural gas importer, after a brief honeymoon period when they earned handsome export revenues.

But Boone's opening statements are at least correct and accurate.

This is a fascinating look back at an article published in The Indepedent in 2007: World oil supplies are set to run out faster than expected, warn scientists

It simply confirms how little we or the so-called 'experts' know.

Am I Psychic?

My sister comes up to me in the Kalahari in January, okay - are you with me - and she starts pitching to me about how we must buy property together. I start a statement that boils down to 'No,' and she immediately backs up her pitch saying that she's discussed it with my father (a successful property developer and investor) and he supports her idea - we should buy a place together. She is going overseas so I can live there, and we can pay it off together and get rich off the investment. Makes sense ne? So here we are, in a lonely Kalahari campsite, the Gemsbok looking like black and white tropical fish swimming on a distant belly dancing pan, and my sister and my father are bearing down on me. Come on son, just sign on the dotted line.

So I say: "Now is not a good time to go into property. The markets are turning. I know it doesn't look that way, but values are going to go down. I'll buy something when it becomes a buyer's market." I know that it sounds incredibly arrogant, especially since it contradicts what 'the expert' has advised.
My dad shakes his head (and I mean, this oke made all his money in the property business over a period longer than my lifetime) and my sister's face looks like a nuclear war has started in her brain. Both of them basically accuse me of being 'doom and gloom' and appear both frustrated, angry and disgusted.

Cut to 4 months later and we're seeing houses in South Africa devaluing. I don't know when the sub-prime crisis hit in the US, I don't remember if I was aware of it in mid-January when we talked about this in Botswana, but I turned out to be 100% on the money. If any possible buyer had known then what we know now (regarding interest rates and all the rest), they would have been nuts to invest. And here I was, with my dad saying, "Go for it son," and my sister saying, "Well if you don't go in this with me, I'll get someone else." Okay then.

I know what you're thinking. That was a one off fluke, a gelukskoot. Ne? Not so fast. On Thursday this week I interviewed Katharine Euphrat, an American intern. We spoke at length about racism in South Africa, and focused in particular on America's dilemma with...are you ready for this...immigrants. One of the questions I asked, last week, was whether there is any Xenophobia in America. I also speculated that this is a problem that is likely to worsen in countries like the USA, the UK, South Korea and South Africa. Two or three days later, all hell breaks loose. And what word gets thrown around? Xenophobia. Racism. I was specifically studying this two days before it erupted.

In a magazine article I wrote as far back as 2006 I advised the following:
- buy gold
- do not buy new property especially if you already have properties that you are already paying off

Go and check yourself to see how the value of gold has climbed since 2006. I think gold was about 1/3 what it is now.
I've made other predictions too, namely the current oil price level I predicted many weeks ago (before the Goldman Sachs gurus did) and I also predicted $150 by the end of this year, also in advance of the Goldman Sachs moment of enlightenment, and I've predicted, along with many other commentators, that our most immediate crisis would be 'starvation'. I know, before this happened it seemed like a crazy statement to make.

So the answer is, if you live in a fool's world, then yes, I am psychic. As far as I'm concerned, I'm just more closely aligned with reality than by far the majority of people, and these people actively resist to even consider 'bad news', to even think (yes, sometimes that's hard) beyond the ordinary paradigms of society. It's laziness.

There is a very easy explanation for all these things. For why we have a food crisis. Why the world is entering its worst recession, why we will experience chronic stagflation, why property prices in America will spread everywhere, and be chronic in South Africa too. How I know South Africa will not only lose the fight against crime, but eventually be completely overrun (yes, destroyed) by it. How can I make these sweeping statements with any accuracy? Because it is easy to extrapolate our human psychology in terms of our consumption to a macro-version of demand, to see how individual use of energy by a middle class user magnifies on a daily basis to create a worldwide problem of scarcity. Against the background of these simple facts:

- we are dealing with a finite resource against infinite and growing wants
- we are dealing with severe levels of delusional entitlement, mindsets that are not geared to hearing 'bad news' or 'change your habits'
- we have two of the world's biggest populations attempting to come online simultaneously (China and India together have 3 billion people, both countries are growing economically, India is now the world's 12th biggest Economy ahead of South Korea, and rapidly expanding including its human numbers)
- our psychology of previous investment and the 'growth psychology' make it impossible for people or businesses to begin to see how these investments actually have no future (since cheap oil is presupposed to be the underlying resource that these investments run on)
- many obvious past and present patterns are simply ignored in favour of self-reinforcing evidence that calls into question or contradicts unpleasant news (this applies to markets, climate change etc)

So it is easy to see that the downward spiral cannot easily be improved or interrupted. It is an accelerating breakdown, and one that is endorsed by delusional and protracted 'wishful thinking', by our lifestyles and habits, and by the multitude of systems that function solely on these now critical resources. We need oil for fuel, food, to power our homes, to get around, for plastics, medicines. In short, we need it for everything, and in order to afford everything and to continue to live the way we do, we need it to stay cheap. But that's suddenly changed. So is a high oil price important? It's the most important news for you, and for this world. You and everyone else are immediately going to feel those effects, whether you agree that it is important or not.

Here are a few more predictions:

The violence/criminality in South Africa next year will be at least twice as bad as it is now, affecting many other centres, including Cape Town, and we will see a resurgence in numbers that were decreasing, for example murders, rapes, hijackings, bank robberies, cash-in-transit heists, corruption and all the rest (predictions have been made on many occasions about crime increasing prior to this one today). Crime will get worse very quickly, and very soon, and accelerate.

The 2010 World Cup will be shifted to Australia if it happens at all, but it will not happen in South Africa. Crime and electricity will be cited as the chief reasons.
The Eskom crisis will become permanent within a few weeks from today, and within a few months, large areas will no longer have electricity on a permanent basis.
Instability in Zimbabwe will gradually lead to regional instability in Southern Africa. In other words, in the next 5-10 years the subcontinent (as will other regions in the world) will be plunged into a sort of large internecine conflict. Much conflict will not appear any different to either 'racism' or 'criminality', but its roots will be the same: chronic shortages of services, food, shelter and growing levels of intractable poverty.

I know these are dire predictions, and I know they appear very dark and negative, but I can be confident that they will happen simply because I also know that an oil price of $141 this year will simply produce so many economic losers in South Africa, that the majority of people in this country will be poor, unemployed and getting hungrier and unhappier by the day. Any country that has a vast majority of recently disenfranchised poor is going to be angry and restless. And there will be huge resentment towards the middle class (and anyone else really) sitting prettier. Celebrity and wealth in the next decade will become vulgar and will be hidden, an opposite condition to the present 'showing off ' of wealth.

Is there an antidote to all this misery? There is, but I don't expect anyone to buy into it, and I don't expect it will happen. The antidote is farming. Becoming self-sufficient locally. I don't expect you to give up your job and go and toil in some farmers field. Which is also why I know we are on the road that we are on, and will remain on this highway, wherever it takes us.

World's poor pay price

LOS BAÑOS, Philippines: The brown plant hopper, an insect no bigger than a gnat, is multiplying by the billions and chewing through rice paddies in East Asia, threatening the diets of many poor people.

The damage to rice crops, occurring at a time of scarcity and high prices, could have been prevented. Researchers at the International Rice Research Institute here say that they know how to create rice varieties resistant to the insects but that budget cuts have prevented them from doing so.

NVDL: In exactly the same way are ability to combat H5N1's tricks and manifestations is decreasing by the day. The human race has never been more vulnerable to so many converging catastrophes as it is now, and the majority of people still take great exception to that statement, feeling it to be 'negative' or 'doomsday' or an 'exaggeration'. This willful ignorance drives us even deeper and further into the trouble we're due to face, and are presently facing.

This is a stark example of the many problems that are coming to light in the world's agricultural system. Experts say that during the food surpluses of recent decades, governments and development agencies lost focus on the importance of helping poor countries improve their agriculture.

The budgets of institutions that delivered the world from famine in the 1970s, including the rice institute, have stagnated or fallen, even as the problems they were trying to solve became harder.

"People felt that the world food crisis was solved, that food security was no longer an issue, and it really fell off the agenda," said Robert Zeigler, the director general of the rice institute.

Vital research programs have been slashed. At the rice institute, scientists have identified 14 genetic traits that could help rice plants survive the plant hopper, which sucks the juices out of young plants while infecting them with viruses. But the scientists have had no money to breed these traits into the world's most widely used rice varieties.

The institute is the world's main repository of rice seeds as well as genetic and other information about rice, the crop that feeds nearly half the world's people.

But at the International Rice Research Institute, greenhouses have peeling paint and holes in their screens and walls. Hallways are dotted with empty offices. In the 1980s, the institute employed five entomologists, or insect experts, overseeing a staff of 200. Now it has one entomologist with a staff of eight.

"We've had an exodus here," said Yvette Naredo, an assistant geneticist.

Similar troubles plague other centers in Asia, Africa and Latin America that work on crop productivity in poor countries. Agricultural experts have complained about the flagging efforts for years and warned of the risks.

"Nobody was listening," said Thomas Lumpkin, director general of the International Maize and Wheat Improvement Center in Mexico.

Now, a reckoning is at hand. Growth of the global food supply has slowed as the population has continued to increase, and as economic growth is giving millions of poor people the money to buy more food.

With demand beginning to outstrip supply, prices have soared, and food riots have erupted that have undermined the stability of foreign governments. World leaders are scrambling to respond. On May 1, President George W. Bush asked Congress for an extra $770 million to pay for food aid and to help farmers improve their productivity.

But cuts in agricultural research continue. The United States is in the midst of slashing, by as much as 75 percent, its $59.5 million annual support for a global research network that focuses on improving crops vital to agriculture in poor countries. That network includes the rice institute.

Robert Bertram, who oversees the funding for the U.S. Agency for International Development, said he was still trying to stop the cuts and argued that research to improve crop yields was "like putting money in the pockets of poor people, and I mean billions of poor people."

The Agency for International Development is the primary vehicle for the U.S. government to finance development projects abroad. James Kunder, its acting deputy administrator, said the agency hoped to reconsider the cutbacks if Congress allows extra money.

Crop by crop and country by country, agricultural research and development are lagging.

The biggest cutbacks have come in donations to agriculture in poor countries from the governments of wealthy countries and in loans from development institutions that the wealthy governments control, like the World Bank. Such projects include not only research on pests and crops but also programs to help farmers adopt improved methods in their fields.

Adjusting for inflation and exchange rates, the wealthy countries, as a group, cut such donations by more than half from 1980 to 2006, to $2.8 billion a year from $6 billion.

"Agriculture has been so productive and done so well, people have kind of lost sight of how fragile it really is," said Jan Leach, a plant pathologist at Colorado State University who works with rice.

"It's as if we have lost track of the fact that food is linked to agriculture, which is linked to human survival."

More.

What does $120 Oil Mean? Can we carry on as normal? Will it affect me?

These are very important questions, and the answers are of concern. Click on the title of this post to link to a .pdf that addresses this topic. What I can tell you is:

- With oil at $120 a barrel for a year, the world’s oil bill will be about 8% of world GDP.
That means any country growing at less than 8% (South Africa is growing at 3-5%) faces recession, and right now, that's virtually every country except China, and a small handful of others.

The implications of a worldwide recession?
Unemployment.
People unable to pay for their homes.
The middle class being wiped out.
Social unrest on a large scale.
Stock market collapses and the wiping out of money as a unit of value.
Starvation and all those things that follow from these.

Maybe it's time to start thinking about buying that bicycle.