The Big Secret about Peak Oil and the US Military
Commodities / Crude Oil Jul 11, 2008 - 11:01 AMBy: Mike_Stathis
Those of you who do not believe Peak Oil Theory should first make sure you fully understand it. According to this theory, after a reservoir has been depleted by half of its total volume, the output begins to plateau or remain constant for some unknown period. At some later time (which is unpredictable) the output begins a permanent decline of variable duration (which is also unpredictable) until the remaining quantity of oil is no longer economically feasible to extract with current technology. Therefore, Peak Oil Theory does not state that the earth is running out of oil per say. It states that the earth is running out of inexpensive oil, otherwise known as conventional oil – the high-grade oil that comes out by drilling on land and requires minimal refinement costs.
What this means is that we could have enough total oil (conventional plus non-conventional) say for the next 100 years, but that does not matter. What really matters is how much conventional oil reservoirs remain because this is the lowest cost oil to produce. In other words, Peak Oil is concerned with how much crude we can produce and refine per given day per dollar.
The United States reached its peak oil period in the early 1970s. Ever since that time, we have relied more and more on foreign oil imports. Interestingly, since that time we have also relied more and more on imported goods, while both consumer and federal debt have ballooned. According to many independent (and unbiased) oil experts, the world will soon have reached this peak oil period, causing even more dependence on exploration for non-convention oil.
Over the past two decades, new conventional oil finds around the world have been far and few. And what was once thought as large finds have turned out to yield much less than first thought. Throughout this period oil demand has continued to increase. It has especially strengthened over the past few years due to the rapid expansion of Asia .
As demand has increased and new finds have diminished, OPEC has fudged oil reserves data for many years, causing concerns about Peak Oil to remain hidden up until recently. As a result, oil prices have soared. And this has made exploration for non-conventional oil not only more feasible, but mandatory. Consequently, over the past few years, we have become increasingly reliant on more non-conventional oil sources, such as tar and oil sands and deep water drilling. These are considered non-conventional sources because they require large expenditures of money to produce finished petroleum products. These two variables – increased demand and decreased supplies of conventional oil have been the main forces responsible for record oil prices. Over the past year, oil has also risen due to the inflationary effects from the Federal Reserve, which has weakened the dollar. The dollar-oil link explains many things which you were probably unaware of.
Oil industry giants such as Exxon continue to insist that we have plenty of oil for decades, but then add that more investments are needed for offshore exploration. What they are really saying is that higher oil prices are due to Peak Oil – the decline in conventional oil reservoirs, which is forcing companies to focus on non-conventional oil. They use word games to hide the truth because they realize any possibility of Peak Oil will cause a push for alternative energy, which would threaten their monopoly. OPEC plays the same game. Washington goes along with these fantasies as well for a much bigger reason – the preserve the dollar-oil link.
You see folks, as long as the world is dependent on oil, the dollar remains backed by crude since you can only buy it with the dollar (with one rare exception to be mentioned shortly). This dollar-oil link helps keep the dollar as the universal currency. And because the entire world must use the dollar, you can imagine how that dilutes the inflationary effects seen in America due to the Fed's printing presses. Thus, the dollar-oil link ensures the Fed's inflation machine is spread throughout the globe. Without the dollar's link to oil, the inflation seen in America would be much more severe.
This is the secret that virtually no one realizes. It is not a conspiracy. It is a fact. And the few in Washington who realize it are never going to admit it. But consider why it is that America has such good relations with the Saudis. After all, it was President Nixon who negotiated with the Saudi Royal family to demand dollar payments for oil shortly after severing the finally link to the gold standard. Soon after all of OPEC followed suit. In exchange for the dollar-oil link, the Saudi Royal family receives the protection of the U.S. military. This is why the Saudis are rarely criticized by Washington . They have earned a blanket exception for virtually anything they do, including involvement in terrorism and yes, even including holding down oil output.
The Saudis know well that they have a good deal of control over the fate of the U.S. economy. Given the fact that Iran has now created an oil exchange (Iranian Oil Bourse, March 2006) that accepts only the Euro, you should understand why they want nuclear weapons – for protection against a U.S. attack. As Iran realizes, severing the dollar-oil link is the easiest way to destroy the U.S. And any nation that tries to do this will be dealt with accordingly. Saddam Hussein tried to sell oil accepting only the Euro in 2000 and we know what happened to him. As well, any committed push to transition the U.S. into alternative energy threatens to destroy the global enslavement by the dollar-oil link. Alternative energy will come. But it will come slowly and Washington will make sure of this. Incidentally, I discuss this as one of many critical topics in my book “ America 's Financial Apocalypse.”
By Mike Stathis
Copyright © 2008. All Rights Reserved. Mike Stathis.
Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.
The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.
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America's Financial Apocalypse: How to Profit from the Next Great Depression . Condensed Ed. Copyright © 2007.
Cashing in on the Real Estate Bubble . Copyright © 2006.
America's Financial Apocalypse: How to Profit from the Next Great Depression . Copyright © 2006.
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