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America is doing the nation-building thing again May 21, 2018

Posted by hslu in 特朗普, 石油, 美國, Oil, Trump, U.S. Foreign Policy, 川普.
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https://www.cnbc.com/2018/05/21/us-likely-to-slap-oil-sanctions-on-venezuela-after-maduro-election.html

Source: CNBC

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This time, it’s on Venezuela because Venezuelan President Nicolas Maduro has just won re-election on Sunday. He’ll be in power until 2024.

Trump doesn’t like Maduro’s leftist administration so that he’ll punish Maduro and impose sanctions against Venezuela’s oil exports.

In time, Trump hopes that sanctions will cripple Maduro’s government, devastate Venezuela’s economy and make Venezuelans suffer. With this kind of economic backdrop, Trump hopes that Maduro will not stay in the office too much longer and a new candidate will eventually emerge to form a pro-U.S. government.

America did the same thing to Iran with heavy sanctions for many years. The anti-U.S. Iranian government is still in power but ordinary Iranian people have suffered the most.

Depends on the severity of the sanction on Venezuelan oil, crude oil price will react, possibly very violently. Stocks of oil companies will move and the most likely direction is up.

Buy oil company stocks before they get too expensive to buy.

I worked on Venezuelan heavy oil projects with a Mobil engineer from Venezuelan for more than a year. It was a tough project to work on because, even though Venezuela has the largest oil resources in the world, the quality of Orinoco Belt heavy oil was very low and it required significant up front capital investment to produce and upgrade the oil. For years, only oil refineries in Houston were equipped to handle Venezuelan’s heavy crude. With shale oil production booming in Texas’s Permian Basin, the U.S. no longer needs Venezuelan heavy oil.

Several years after I left the project, Venezuela nationalized the Venezuelan oil industry (for the second time) and the Venezuelan engineer decided to leave Mobil and joined the Venezuelan national oil company, PDVSA. Unfortunately, the state of PDVSA has been going downhill ever since for the lack of technology and necessary capital for upfront investment. Instability of the political system didn’t help either.

A severe sanction against Venezuela oil will kill PDVSA, sink Venezuela into years of depression and take out hundreds of thousands barrels of oil from an already tight world oil market.

What a mess.

What’s going on in Saudi? April 21, 2018

Posted by hslu in 特朗普, 石油, 美國, Economics, Middle East, Muslim, Oil, Trump, U.S. dollar, U.S. Foreign Policy, 川普.
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There is no doubt that the new Crown Prince of Saudi Arabia, Mohammad bin Salman bin Abdulaziz Al Saud has managed to angere many of his rich and prominent step brothers and relatives.

The blessing from Trump for him to put some of his brothers and relatives under house arrests, his close relationship with Trump’s son-in-law Kushner, his willingness to counter Iranian aggression in the Middle East, his new plans for the oil-depedent country, his not-very-successful military actions against Yemen, his attempt to open the door of the Islamic country to western culture and his grab of power inside the royal family are things which could create havoc to the country in the hands of the royal family.

Source: The Drive

I of course do not know what’s taken place near the royal palace. But, any news which rattles the power structure of the Saudi royal family could send crude oil price to level we haven’t seen in years.

We’ll see.

Petroyuan? March 30, 2018

Posted by hslu in China, 石油, Economics, Energy, Renminbi, U.S. dollar, 中國.
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A major step to increase the circulation of renminbi in a big way.

What will year of the monkey bring? December 17, 2015

Posted by hslu in Economics, Election, Energy, Global Affair, Middle East, Military, Muslim, Oil, Politics, Putin.
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This question was bought to me by a friend in Dallas. My response follows:

 

What year of the Monkey will bring is something I cannot predict but I point the following out for you and everyone, including myself, to ponder:

 

  1.    Many people in the financial market disregard the geopolitical risk associated with ISIS and other terrorist groups. After all, the Syrian civil war has been going on for four years and al Qaeda, and later ISIS, has been active for many years beyond that. They treat it as a regional conflict which is self-contained in the Middle East or a conflict between Sunni and Shiite, a thousand-year ideological or religion battle no one cares about. But you might want to consider this: the US is fighting a proxy war against Russia in multiple fronts.
  1. In the Middle East, Russia decided to protect Assad and, more importantly, its own interest in the region by responding aggressively against Syrian rebels who, under American’s support, want to bring down the current Syrian government. In essence, the United States is working on its next target (Syria) of nation building which seriously affected Russia’s interest in the Middle East. Russia, or shall we say Putin, took the opportunity of a downed Russian airliner which crushed into Egypt’s Sinai desert bought down by a bomb and sent Russian troops and aircraft into Syria to fight the terrorist groups including the ISIS and Syrian rebels. On one side, we have the U.S., Turkey, Syrian rebels, Saudi Arabia and a few other Shiite countries. On the other side, we have Russia, Syria and Iran. Mixed in the middle are ISIS, al Qaeda, Turks and many other terrorist groups. Don’t forget the conflict between Israel and Palestine. It is still there. We just don’t hear as much as we used to because ISIS is taking all the headlines.
  1.    In Asia, Russia is aligned with China who is American’s primary containment target. America’s pivot to the east foreign policy is aimed to keep China at bay thereby maintains American’s influence in the Pacific region. Japan, Philippine and Vietnam are America’s partners while China is working with Russia closely in the fields of energy, commerce, technology and weaponry. Taiwan is being played by the U.S. which sells obsolete weaponry to Taiwan (Japan is allowed to buy the newest F-35 but Taiwan has been denied a request of an upgrade to F-16 C and F-16/D from its current fleets of F-16 A and F-16/B). The pending $1.83 B arms sale to Taiwan from the United States has no real impact on the balance of military power between China and Taiwan. But America’s intention is very clear. Pretty soon, Japan will send its own navy ship to the South China sea to work with American navy against China’s expansion in the region. There is currently discussion going on in the Pentagon whether to send in another air carrier into the region. But, do you think America has the financial and military capability to face so many enemies at the same time? China will set out to do what it plans to do. But I do not think China will risk a regional war with America because China will play cat and mouse with the United States but at the same time build up its own military as fast as it can to protect its own interests, primarily the flow of energy to China from the Middle East.
  1.    In Europe, America uses NATO to fight against Russia and Russia’s take-over of Crimea was Putin’s first shot against American’s aggression in the region. Of course, Europe has it own problems; recession, low growth rate, high unemployment rates, mounting deficits, high national debts, homegrown terrorists and Syrian immigrants. Greece, Italy, Spain, Portugal, Ireland and France are all in poor economic shape with youth unemployment rate remaining in double-digit levels.
  1.    In the regions of Central Asia and sub-Asian continent, Pakistan treats India as its enemy no. 1. Both countries have nuclear capabilities and probably won’t hesitate to use it against each other. The newly established Afghanistan government is not strong enough to withstand Taliban’s attack. As such, America is keeping approximately 10,000 US troops there. Central Asian countries are heavily relied upon high oil prices to keep the current government in power. With oil trading at sub $40 range, governments in these countries are in danger of uprising too. I have no doubt that Russia is doing its job to destabilize these governments, just like the American is doing the same to other countries in the world, in order to bring these countries into its fold.
  1.    Africa is in a dire situation as well. Ever since the death of Qaddafi in 2011, Libya has been a training ground of terrorists. Currently, the country has no government and a civil war between two groups, one based in Tripoli and the other one based in Tobruk, are fighting it out with no apparent winner. Oil producing countries in the region are facing civil unrest because oil price has collapsed. Others such as Sudan, South Sudan, Yemen, Congo and Somalia are all mired in civil unrest and millions have been killed or displaced. The unstable situation has been a hot bed of terrorists which feeds into ISIS and al Qaeda. It will continue to be a training and recruiting ground for many terrorist groups.
  1.    Then we have OPEC countries to deal with. I am not worried about the Middle East oil-producing countries: Saudi, Kuwait, UAE, Qatar, Iraq and Iran. Others, such as Algeria, Angola, Ecuador,  Libya, Nigeria and Venezuela, are suffering and their governments may buckle under the weight of prolonged low oil prices. The problem is not unstable government itself, the problem is their currencies will lose value against the US dollar. Bond and currency markets may not able to take the blow of defaults and bankruptcies and the snow ball effect that follows.
  1.    South America and Australia are probably the safest places in the world these days in terms of threats of terrorist attacks. But the same can’t be said about their economies. Most depends on high prices of commodities and natural resources to maintain government spending. With demand from China declining, a new equilibrium in the market places will take some time to achieve. Another problem is in the currency market. Weak economies will not able to keep their currencies pegged to the U.S. dollar. Currencies control will fail eventually and some countries will face high inflation, capital flight, reduced living standard and stagnant economic growth for a long time. If these countries have a high amount of U.S. dollar based debt and they don’t have foreign reserves to pay for them, financial crisis will happen. When financial crisis happens, citizens will suffer and countries have to adjust. All these will create uncertainties in the financial world.

Now, back to the question about what else might happen in 2016? America will elect a new president which is important to millions of people. Taiwan will have a new government. The new government will test out its relationship with China and China will likely give the new government a chance to prove itself. If things don’t work out, the situation will not be pretty. German’s Angela Merkel may not able to hold her seat until 2017. IMF in late 2106 will formally include Renminbi into the SDR basket of currencies if China continues to adapt IMF’s demand to open Chinese financial market. When it happens, trades in Renminbi will increase and China may do away with capital control which will usher in a new era in the currency market. Of course, China has to learn how to release its grip on its currency. If done badly, it might bring more instability in the near term to Chinese economies than what the government wishes.

ISIS likely will gradually fade away and hide under the weight of continuing bombing attacks from many countries. America, France and Britain will declare victory. But ISIS and other terror groups will not go away. They will find a new way to attack western world’s interests and Russia will pop up the Syria’s Assad. Iran will likely get IAEA’s approval and economic embargo will probably be lift. China will continue its progress to move people into urban centers which will create pockets of disconnect in the economy. Whether Chinese government can keep everything under control is a difficult question to answer. If the transition is smooth, we will see less turmoil in the stock, bond and currency markets. If not, we will have a roller coaster ride.

In the oil market, Saudi will not budge on keeping its oil production at a higher level. Russia will raise it oil production too probably under a secret agreement between Saudi’s Crown Prince and Putin when the two met in October 2015. Of course, Russia needs high oil production to grab market shares and to reduce the negative impacts from lower oil prices. The pressure on oil price will not go away until American shale oil producers raise the white flag and declare total defeat. This will happen in 2016 and the dream of America’s oil independence will die for now. Oil price should stay near current lows but most likely will trade within a range of $5 to $15 on the downside and $10 to $20 on the upside from the current level. This is purely a guess on my part. Geopolitical events will dominate short-term trading activities but unless the demand and supply situation reaches a natural or artificial equilibrium in the market place, oil price will not reach a stable trading range. Of course, Saudi can change its mind at anytime. But I think it is not likely.

Commodities prices will continue to drop as demands from China, Europe and Japan continue to drop. America’s economy isn’t out of the woods yet. The commodity cycle is a long way from turning over. We are only half way into the current down cycle. The upside will not come until current production capacities are cut to a minimum level and new capitals are reduced to a trickle. This is still several years away.

One bright spot for 2106 may be the defense industry. America is quickly using up all its bombs (missiles) and new supply isn’t quick enough to replenish inventory. With more ground troops deployed into the Middle East, America probably will allocate more funding just to grab ISIS’s attention away from the America home land. Many nations are building up their military budgets and arms sales should be a good business to be in.

As for another question by Shirley on whether (American) oil drillers can survive this down turn, my answer is no. Offshore drillers have more capacities on hand than contracts. Oil companies have cut their capital budgets and production capacities will decrease. But the effect on the market will not show up until decline from current fields reaches to a level when new investment is required. This will not happen for a few years; not when Saudi and Russia are pumping all they can to flood the market. Don’t forget these two countries can produce oil much, much cheaper than the cost of finding and producing new oil from the ground: offshore where water depth is 8,000 feet or deeper, shale oil where oil in the ground does not flow by itself, heavy oil where steam has to be injected to make oil mobiles. Additionally, oil faces a formidable enemy: cheap gas. Some companies probably will change their company’s make up of gas and oil composition through mergers and sales. In short, it is probably cheaper to buy oil or gas resources on the Wall Street than get it out of the ground.

 

Thanks for the information on Houston real estate market. It will happen but I do not know how bad will the damage be and I do not know how long the market will be depressed. But, I can tell you that 2016 will be worse than 2015 as more layoffs will take place in the oil patch. The guys who got laid off are still claiming unemployment benefits. They are probably still staying in the region. The ones who got laid off in the first wave may find new jobs in a different field. The ones who got laid off later, will not be able to find new employments because by that time, local economy will be negatively affected by budget cuts and lose of employments. 2016 is also a key year for the real estate markets for the greater Houston area.

My opinion on energy and economy: a dime a dozen December 17, 2015

Posted by hslu in Economics, Energy, Global Affair, Oil.
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A friend in Dallas asked for my opinion about the current state of the energy and stock markets in light of market’s expectation of Feds’ decision to raise the federal funds rate by ¼ of a point. Since opinion is cheap and it didn’t cost me any to express mine, I offered the following a few days ago:

 

There are several time bombs which might make the market ill prepared for the consequence when one or two explode in our faces:

 

  1.    China slowing down resulted in big turmoil in all commodity markets. Many countries which depend on a booming commodity market for growth and spending; all OPEC nations, Canada, Australia and Russia, are facing an uncertain future. Economies will no doubt slow down in these countries. Nations’ wealth will suffer too. This is bad for the growth of world GDP. I am actually not worried about China because China’s economy needs to slow down and the Chinese government is doing something to slow it down. Transformation of Chinese economy has to be done otherwise China will be stuck in the middle class trap. No country in the world can grow at 6 or 7% per year, not to mention 9 to 12%, into infinity and I won’t be surprised if China eventually slows down to 3 to 4% level when China’s economy becomes large. The effect of a 3 or 4% growth with a larger economy will equal to that of a 5 or 6% growth out of a smaller economy. The rate of growth isn’t important. It is the net growth of economic activities that’s crucial in the future. Besides, inflation at a higher economic growth rate is more difficult to control. A growth rate slightly higher than the natural inflation rate, many at the Fed, ECB and BoJ are talking about 2%, would be idea.

 

  1.    The energy market is causing a lot of hemorrhage all over the world. I said it before and I will repeat it now: Saudi has done it multiple times in the past and Saudi can take it. Saudi’s national debt is only 10% of its GDP. All banks will rush to Saudi’s front door and ask Saudi to take their money because Saudi can pay the loan easily. Saudi has 250 billion barrels of oil reserve in the ground. Some say that Saudi can produce its oil at $5 per barrel. Frankly, Saudi is still making money hand over fist. They lowered the oil price to kill shale oil producers in the US. And Saudi is doing a very good job. Russia is taking lower oil price in stride as well. Yes, oil price is lower by a lot. But Russia’s oil export volume hasn’t changed.

 

Russia’s oil export in US dollar terms is lower. But Ruble has dropped by a large amount since the financial crisis. In the end, Russia doesn’t suffer that much in Ruble terms. Don’t forget, Russia can produce its oil at $15/bbl from existing wells. US shale oil companies’ cost is anywhere from $40 to $80 per barrel. There is simply no comparison here. The talk of US will eventually be the largest oil producer in the world a few months ago has disappeared as fast as spring snow on the ground: 曇花一現。Shale oil production in the US will never come back as fast as it did since 2005 and 2006 because Saudi is watching and bank will not lend.

 

You don’t need me to tell you how bad the stock prices are for almost all domestic shale oil producers. These oil producers have to borrow money at 8, 9, 10 or 12% to drill and drill in order to replace their lost productivity. These oil producers have hedged their oil price to a higher level in 2014. As a result, the financial report from these companies isn’t really bad in 2015. These hedges are finishing in the 4th QTR of 2015 and, with WTI settling at around $40/bbl, the financial reports of these companies will be terrible going into 2016 and beyond. The oil in the ground, which these companies used as collateral, becomes less valuable. If these companies don’t have extra credit line waiting in the wing, the loans may be called. With declining oil prices, this equals to death knell for these shale oil companies. Several companies are standing right in front of the gate to hell right now.

 

I have said that Saudi will not back down and they have doubled it down and removed the quota from OPEC production limit. Price will collapse as it is happening now. All oil companies, including ExxonMobil, Shell, Texaco, ConocoPhillips, Total, etc. will suffer mightily. All have cut their capital spending way back to offset the lower oil prices. The next step is to cut back their dividends followed by laying off people. What follow are mergers and take overs. Then there will be more layoffs to reduce redundancy. By that time, capital spending has cut back to the level that production will not be able to meet demand (low oil price is good for economy growth.) Saudi will cut its production to pop up oil price. Price will recover because of market force and Saudi’s action. Saudi will gradually reduce its production further to balance the demand and supply. Saudi accomplishes its objective: regaining market shares. Price will recover. Many shale oil companies will disappear, the new companies will take this slowly and the market will go back to normal. This will take four, five, six or ten years. We are only in the second year. There are a few more years to go yet but no one knows when. I have sold all my energy stocks because I didn’t like what I saw. I will wait for the scenarios to play out before I go back to bottom fishing for yields and future returns.

 

  1.    The Fed is expected to raise the federal funds rate this week. Once the Fed starts to raise the short-term interest rate, it will rush the US and world economies and financial markets into a new era. I don’t think the Fed will stop at just one interest rate hike because the Fed wants some cushion room (i.e., a few rate hikes) to be able to fend off another financial crisis which may be lurking just around the corner. Let me ask you this: do you think Europe is ready to take a rate hike in the largest economy in the world? The answer is of course a resounding “NO.” Take a look of Taiwan. Taipei’s real estate market rose 3.46 times (something like this. Don’t quote me) over the last three years. Many other countries saw similar rises. In Taiwan, many if not all mortgages have floating rates because first time buyers couldn’t afford a much higher 30-year fixed rate. The negative impact of higher interest rates on the real estate market all over the world will be obvious. Many commodity dominated countries are in the same boat. They are ill prepared to take a higher interest rate.

 

  1. The high yield market, those with 6, 7, 8, 10% or higher interest rates, is collapsing under the weight of Fed’s interesting rate hike. Bankruptcies will happen. Takeover will accelerate. Junk bond market will implode. Many hedge funds have stopped clients’ withdraw of their investment funds in the junk bond market because as many wealthy and not so wealthy people try to get out of this narrower and narrower door, junk bond price will drop to an unspeakable level. The effects will be devastating. The energy companies account for about 15% of the junk bond market.

 

  1.    The US is facing a higher rate environment but central banks all over the world are printing money as fast as they can as if a competition for the first place is going on right now. US dollar will strengthen due to a perception of higher interest rate in the future. Many emerging countries’ currency will not be able to keep their values against the US dollar. If a country has borrowed too much US dollar denominated loans when interest rate was low, it may have trouble paying the loans back when rate is getting higher. Its currency will drop in value. Inflation will spike. Interest rate will follow. Economy will tank. Real estate market will collapse. Living standard will suffer. Country may bankrupt because no bank will lend to this poor country so that they can’t pay back their US dollar denominated loans. We might have another financial crisis as fast as we can write it down on a piece of paper.

 

  1.    Division of rich and poor has reached unprecedented level in many countries in the world. The risk of civil unrest, like those happened in Taiwan and Hong Kong, may be a common scene soon. The result is capital flight, stagnation of local economy, depreciation of currency and inefficient government.

 

  1. Then, we have rising geopolitical unrest to deal with. The market has more or less ignored the geopolitical risk since Hillary and Obama abandoned Qadhafi which led to his death, the revival of al Qaeda, eventual birth of ISIS, terrorist incidents all over the world and millions of Syrian immigrants evading certain deaths to Europe, England and other western countries. No one knows what’s going to happen next. Many dictatorship countries in the Middle Eastern might be in danger of losing their strong hold of their countries. If this happens, it will certainly be qualified as a black swan event for sure. The market will crush and gold price will soar.

 

Now, Google 1994 bond and stock markets and you’ll see the bond market was under a lot of pressure from Feds’ rate hike and the stock market suffered some loss too. Other research pointed out that the first-rate hike hasn’t been a major market mover and market usually will recover from the initial shock. But, I rather wait on the side line and look for opportunities when the market presents itself.

 

I do not know when it will happen but I will be watching. I will stay away from high yield bond market now. The next run of stock buying will be energy stocks with good dividend yields because oil price will for sure closer to the bottom than to the top. Once the round of dividend cutting is over and once the oil price is staying at the bottom of the U long enough, the next move on oil will be up.

$43.18/bbl and heading lower August 11, 2015

Posted by hslu in Economics, Oil.
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WTI lost 4% today and it appears that it Is heading lower. There is simply no positive news which can push the black gold higher.

OOEC is pumping more than its target. Other nations are holding production for fear of losing market shares. US shale producers have already sunked their capitals and productions from Bakken and Eagle Ford will plateau and fall slowly. Iran is eager to raise its production once the sanction is lifted.

On the demand side, the situation is equally dire for crude bulls. China Is trying to hold its GDP growth rate at 7%. EU, Japan, Great Britain, Canada and Australia are all suffering slow growth. As for the U.S., a strong U.S. dollar and low quality job creation keep its economy growing at sub-par level.

Yesterday, China surprised the world and lowered Renminbi by 2%. Its short term and long term  implications on every assets are still being analyzed by the financial industry all over the world.

So, what is the next level for WTI?

I can’t tell you because I don’t know.

If technical is your forte, watch the $42 level. If WTI can’t hold $42, we might see a 3 handle soon.

Americans: So short-sighted! January 4, 2015

Posted by hslu in Economics, Global Affair, Oil.
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American’s corporations have on average a vision of about 90 days.

That’s one quarter, exactly.

Americans are not any better:
Their car buying habit is dictated by nothing more than the cycle of oil price.

Here is a prove

Through the first 11 months of 2014, according to Autodata, sales of pickup trucks were up 5.4% and sales of SUVs of all sizes were up 11.7%.

But, sales of the hybrid Prius were down 15.8% over the same period.

The reason is the recent drop of gasoline prices across the U.S.

This mentality is no different from GM’s push for luxury gas guzzlers, Hummers, right about the time when crude oil price skyrocketed at the turn of the century. Hummer’s sales tanked and the company bankrupted in 2010 because GM couldn’t find a buyer.

Hmmm, as Americans ditch the hybrids and go for big cars, American car companies will retool their assembly lines to make more SUVs and pickup trucks.

In the mean time, how long will Saudis keep its oil production up this time?

The tide has turned against US $ July 7, 2014

Posted by hslu in China, Cold War, Economics, Energy, Euro, Global Affair, Health Insurance, Islam, Obama, Oil, Politics.
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The US dollar will lose its reserve currency status sooner than many people have expected. Mark my words. The downfall of the US has just been accelerated a bit.

Some ananlysts have suggested 10 to 15 years. A few said 20. In all likelihood it will be sooner now because the world has more or less united against America the bully since the start of  financial crisis of 2008.

China fired the first shot with bilateral trade agreements with many countries and these trades will be settled in renminbi instead of US dollar. The latest was Gazprom’s 30 year, $40 billion gas deal with China which will be settled in renminbi. Not USD.

Today, France has joined the party because it is tired of being jerked around by America also. I guess the Frenchmen have just about had it up to their eyebrows with the $9 billion fine American regulator placed on BNP Paribas.

France call it ‘re-balancing.’ I call it ‘get rid of the US dollars’ because it will lose more value if you decide to hold on to it.

Consider you forewarned.

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Source: CNBC mobile site.

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Source: CNBC mobile site.

Even Total wants to settle its crude oil trades in Euro instead of USD. And what about airplanes made by Airbus? They are now settled in USD even within EU which totally doesn’t make sense.

Well, since France is doing the bidding for the Chinese government, China can sit back and watch the confrontation from the sideline. In the mean time, keep expanding the renminbi agreements with more funds and more countries.

Well, having France in China’s corner isn’t enough yet. If Saudi Arabia decides to use riyal to settle the Kingdom’s crude oil exports, the death of US dollar as world’s reserve currency will be preordained.

Is Saudi happy with the US? Probably not: not when the US abandoned Egypt or after the US allowed Iran keeps its nuclear capabilities. The US isn’t trustworthy. America only looks after its own interest and does what’s good for itself. Just take a look of the recent history of the middle east and you’ll know. Saudi isn’t stupid. They see what every other country see. The day will come.

The plot just got more interesting now.

Energy Independence for the United States June 14, 2010

Posted by hslu in Economics, Energy, Global Affair.
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Simply put: NO WAY! Not in 10 years. Not in 25 years. Not in 50 years.

The oil dependency of the United States, and the entire world for that matter, took 100 years to create. It will probably takes that long to unwind.

Consider the following on crude oil:

  • The technologies required to search for crude oil miles down the surface took decades to refine.
  • The drilling and production technologies needed to bring oil and gas to the surface economically are still in progress. We are still learning how to produce them safely.
  • Hundreds of refineries all over the world are needed to change the crude oil into something we can use.
  • The internal combustion engine is still the cost-effective device to convert crude oil into energy we can utilize.
  • The cars, the 18-wheelers, freight trains, airplanes and ship are required to move people and stuff we consume and use from one point to the other.
  • The pipelines network, giant crude oil tankers and thousands of gasoline tankers form the necessary transportation system to move crude oil from points of production to the refineries.
  • Thousands of gas stations in the United States  and in the world provide a network of reliable refueling points for people to move around economically.

I do not see anything that can replace this system any time soon. No amount of energy conservation, bio fuels, solar energy and technology advancement can change this system in decades.

Not to mention the amount of capital needed to replace this system.

In short, the United States will need increasing amount of oil import for many decades to maintain our current life style and living standard.

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