Dallas Trees' E-News of the Day, June 26 - Climate Bill Passes House

The Global Energy Situation - "Inflection Point?" - Energy Bulletin

THINK PROGRESS
HOUSE PASSES AMERICAN CLEAN ENERGY AND SECURITY ACT

"In a 219-to-212 vote this evening, the House passed the American Clean Energy and Security Act, which will “for the first time put a price on carbon emissions” in the U.S." - It will now go up for a fight in the Senate.

ENERGY BULLETIN
Have we reached an inflection point in economics history?

"A fierce debate now rages among economists, investors, pundits and the puppetmasters of fiscal policy: What’s next, inflation or deflation?

Has the most massive money-printing spree in history successfully stimulated the global economy and put it back on an upward course with rising inflation? Or are we still in a global downturn, temporarily masked by the stimulus, with prices, wages and employment still falling?

A comforting 30% gain in the major stock market indexes since the March lows has given renewed confidence to the “green shoots” trumpeters who dominate the airwaves and the press.

But grayer and wiser heads in the investing community—like Dave Rosenberg, John Mauldin, Nouriel Roubini, Gary Shilling, Peter Schiff, and Dave Cohen—have a more bearish view. The financial sector must now deleverage, they argue, which means liquidating assets, repaying debt, saving instead of borrowing, and contracting in general. In their view, the process will take years, not months, and what we have seen since March is a classic bear market rally.

....We now appear to be bumping our heads against an invisible ceiling, where the decline in real energy meets our pain tolerance for high prices. When gasoline hit $4 last year, it created real demand destruction because people simply couldn’t afford it with their evaporating dollars. Likewise, the spike in natural gas and coal prices ultimately translated into such high prices for basic building materials like cement and steel that demand was curtailed.

It now seems possible that we have reached an inflection point in economic history, where the price at which energy is high enough to sustain new production is the same price at which things become too expensive, leaving us no option but to downsize.

Until we understand this key point, we are going to continue to go through wrenching cycles like we experienced over the last year. Spiking energy and commodity prices lead to destruction of the economy, which then gathers itself at a lower overall level until prices spike again, and back around the wheel we go. As energy declines, the ceiling will get lower and lower, and it will take more and more money to buy the same things.

No amount of tinkering with monetary policy can change that. Unlike money, Btus can’t be printed out of thin air.

Unfortunately, neither the Fed nor Congress seems to have learned this lesson.

....So what does all this mean for investors?

First, it means long-term investing in a diversified portfolio of stocks is probably not going to be a good strategy for a long time to come (if ever); it’s time to play defense and look for low-risk yield. Second, it means that investing in oil and commodities will continue to be the name of the game for many years, but investors must watch the signs I have identified here carefully to know when it’s time to dive in and time to jump out as we churn through these cycles under a dropping ceiling. And third, it means that we all need to learn to live at a lower level, eliminate debt, build savings, and buckle up for a long and bumpy ride."

Peak Oil, Prices and Supplies - June 26
To respond by saying that we have a huge amount of oil and natural gas left in the ground misses the point. The key issue is how fast that remaining underground inventory can be extracted and turned into usable fuel. In other words, it is the size of the tap that matters more than the size of the tank.


Climate and Environment - June 26

THE OIL DRUM
DrumBeat - June 26