Gas Fillup. Image Courtesy 123RF. Click image for the largest view.

Hypermilers, a term for those working at every inch of travel from every drop aren’t going to get a lift from what follows, but the folks at the University of Michigan have put real research into the basics that hypermilers use to go very far and the rest of us can use to save a bunch of money while gasoline and diesel are over $3.00.

Michael Sivak and Brandon Schoettle have set out to identify and quantify the vehicle operating tasks that can save the maximum amount of fuel.  There aren’t any big surprises here – except that the accumulated savings can be extraordinary.

Their paper in pdf form, available in this link is almost military in tone with strategic, tactical and operational decisions.  It does put things in an organized framework.  If the militarism doesn’t unsettle one, it’s a sound platform.  If it is unsettling, these same terms are effective and honest descriptors.

Right out of the gate the research pair hits us with the primary mistake that most people make – choosing an inappropriate class of vehicle.  Americans are world renown for, honestly, buying way bigger and heavier vehicles than the needs demand.  It’s the psychological demands that push the vehicle choice for way too many people – and the rest of us share some blame, as we admire the big heavy beast and ignore the smart smaller and lighter cars. Egos are salved by the reactions of others.  We’re all in this together.

The scientists then take up the vehicle model and how a vehicle is configured.  This area of strategic choice is much harder for consumers to take command of.  Car manufacturers and dealers tend to sell what sells quickly.  See the previous paragraph, leaving the discerning buyer with limited, if any choice.  If lots more people visited a dealer and complained about the overloaded configurations of the models on the lot and toned down the ego drive to meet practical needs the manufacturers would respond.

The strategic thinking is actually the easy part.  Now we get to tactics, which are about two things.  Choosing the road and the weight of our stuff and us.

It comes as a bit of surprise to read through the research and realize that the shortest route can be the most expensive and time consuming.  As you read through the research it can surprise that as much as 9% more distance with better driving conditions can be faster and cheaper. (page 5).  Then the hills can be a major expense, a flatter route may save – 20%!

With no surprise, it’s the idling in stalled traffic that burns up huge sums of money, as much as 40% more.

Which leads one to wonder how much experimentation would yield looking for a route with less stops, higher speed and less congestion.  On a hard dollar spent quantification and elapsed time used some map checking and re routing might pay off big.

As well as cut one’s stress level down.

On the side, what one carries along can be expensive over time as well.  More stuff is more weight and as all performance folks know – weight is something to lose.

Other stars are comparing driving styles – worth better than 30% when measuring aggressive vs. relaxed driving styles and the obvious tune-up, tire pressure and other maintenance items.

But before your humble writer’s excitement recreates the whole paper – its here.  Less than 10 pages of net text.

Go get a copy.  Save some money, nerves and your vehicle will get you there sooner and cost less to do so.  It might be more fun driving again . . .

There is a lot of money at stake.  Reports vary but about $27 billion seems to be a popular quote.  Just what amount the Ecuador judge comes in with is yet to be announced, but in a world of weak incomes for most, picking pockets of large corporations is picking the pockets of governments’ taxes, employees’ salaries, vendors and contractors’ contracts, and shareholders’ dividends plus everyone they do business with.  It might seem like a $27 billion boon to Ecuador, but the multiplier effect in the U.S. and the other countries where Chevron operates would make the impact way more than $100 billion.  Legal tort actions have dire, if often hard to follow, consequences.

Ms. Hinton does a fairly good job of assassinating everyone over on the Chevron side. While I can’t speak about the opposing PR firms she faces with any authority nor is it worthwhile to review the entire history, she does factually lie about the role of bloggers.  For which I take offense.

I too was asked to take a few days away and visit Ecuador.  No money was offered. Nor has any oil company ever offered cash for their information tours.  Actually they are done well, with good accommodations and cheap airline seats, good food and intense schedules.  They are not “junkets” by any description, rather the tours are short as possible, packed with information and paced to minimize the expenses and intrusion into the business’ regular activities.  Having a bunch of “know nearly nothing” folks at working facilities snapping pictures, soaking up supervisors time and just wandering around the moving or hot or both equipment and flammable products must be nerve wracking.  I wonder what the insurance binders must cost to have events.  Risk must make it unlikely that outsiders will ever see some of the most interesting things.

Hinton says, “Chevron has taken several internet journalists and bloggers on all-expense paid trips to Ecuador in return for favorable coverage on their sites, without disclosing the fact they are paid. The company’s lawyers then cite information on the blogs as “evidence” in their court papers. The practice of paying seemingly independent journalists is considered highly unethical.”

This is false, a lie, I know of no one having been paid, the all expense trip notwithstanding, as if I or any other blogger or journalist is going to pay for such a trip on their own.  Chevron can quote me!

All this leads to a fight out in the open now.  It’s PR vs. PR and Hinton is fielded across from such as Edelman, Hill & Knowlton, and Sard Verbinnen.  Now really Ms Hinton, you’re being funded by the tort lawyers who stand to get 33.33% of the take plus whatever else they have in their deal so they have nearly $10 billion on the line as well.  Maybe Ms. Hinton is alarmed she will have to take a “fourth” seat to some much higher-powered firms paid by her lawyer clients.  That would be a blow to one’s ego.

On the ground though there are people, real ones who have to cope with the development and the changes made to the landscape.  Rather than follow up with requirements for site cleanup, if any existed, the Ecuadorians have chosen to follow the lead of some U.S. based trial lawyers. That obviously closed the door to negotiations to bring the land back to such a desired condition as done in the U.S. or Canada.  It closed the door to working out assistance for health concerns be they real or imagined, it closed the door to continued development and local economic participation.  The trial lawyer move closed every other door.  Dumb move.  Chevron is a pretty high quality corporate citizen; better a friend than made an enemy by an aggressive third party.

I admit I haven’t seen the work done by the Chevron PR army.  Nor do I plan to bother doing so.  I will offer a couple suggestions to the Chevron people.  Assuming Hinton is truthful about the people the suit represents, which is dubious, but worth consideration in theory is, address them directly. After the lawyers get their cut, the government theirs, and corruption players their due, the local folks will be lucky to get anything at all.  Point one.

Point two. Against that, Chevron has a much more powerful position.  It could to chose to address the people the plaintiffs represent directly offering the people of Ecuador the opportunity to cleanup the sites that say would need attention as in the U.S. or Canada.  That way the multiplier effect takes place there.  If a budget of $5 billion over ten years was spent with Ecuadorian firms the multiplier effect could turn that into $25 to $50 billion, with education, jobs, businesses, a fresh environmental regime, and a new reputation for other investments.  Maybe $50 billion is low.  It could kick start a little economic foundation into some very worthwhile action.

The infection of tort lawyers is dug in deep.  The people of Ecuador have little idea who has resources to bring for development.  Realizing that Chevron treated properly could be a great resource to build out from problems of the past is a difficult thing to explain.  And it all falls on Chevron to lead.  This is not the usual role of stockholder owned companies.

Yet the folks in San Ramon California aren’t your typical corporate types. They take the traits of humanity seriously as their neighbors are down the road in ultra creative Silicon Valley.  One can’t blame them for the route they’ve taken so far, and staying course makes eminent sense.

But I can’t help but wonder, if staying in character might be the best long term route for Chevron to chose, if only to try and see if the people of Ecuador can catch on before its completely too late. Remember one’s enemy’s enemy is your friend, and poverty and corruption in Ecuador could be Chevron’s best resource to solve the old Texaco problem and for both sides to come out with good reputations and new friends as well.

The ladies using data on government R&D investment and technological improvement (in the form of cost reductions), show that both wind energy and geothermal energy are poised to become more economical than fossil fuels within a relatively short time frame. Their evidence further suggests that R&D for wind and geothermal technologies has been under-funded by national governments compared to funding for solar technology and fossil fuel technology, which might be excessive in view of the diminishing performance of those technologies.

The research points up two disadvantageous, one is current production capacity and two is the costs.  The research covers comparisons with hydroelectric power, geothermal, solar power, wind power, biomass energy power, and the transmission issues, intermittency concerns and the for some the fuel costs.

Before I get too wound up I have to point out that these two generous ladies have managed to first get their work that was published by Elsevier in Energy Policy and then in turn post a pdf of it at the NYU site in compliance with the copyright clams of Elsevier.  You might want to click over quick and save one before the volume drives Elsevier to grabbing the work back.  Save the comments of taxpayers’ supported research remaining behind the pay barrier.  Congress tried and failed to get you what you’re paying for.  This time, for a while at least, you have a shot at the good stuff.

And its really good stuff.

Using “S” curve perspectives allows the authors to build out some instructive graphs.  Of note, (and I’m tempted to list them all) are US Renewable Energy Consumption from 1949 to 2005, a US historical cost of receipts, where “cost of receipts” refers to only the price paid for fuels without operating or maintenance, from 1949 to 2003, a US historical cost of renewable energies vs. fossil fuels from 1980 to 2004 and lastly the historical yearly R&D funding of renewables by the US government.

What jumps out at the casual observer is that fuels are market dynamic as those of us old enough to recall the oil, gas and coal supply manipulations since 1970 and that renewable all have a downward slope in costs that are in fact closing in on fossil fuels.  Time is truly on the renewables side.

The length and breadth of the study, which is by the way easily readable by most people, offers some insights.  R&D grants to fossil fuel technologies are mature in that it takes great sums of money to accomplish much where renewable yield a much better grant payback.  Balancing that for now is that fossil fuels are still cheaper.

The main revelation is that wind and geothermal are seriously under funded relative to their potential.  One can note from the research that grants into these two fields show major payoffs with lots of improvement available that may well close the price gap with fueled technology.  The authors note that combining 9 counties research investments in wind of $2.6 billion and geothermal of $4.1 billion is dwarfed by the same countries investing $38 billion into fossil fuel research during the years 1974 to 2005.

Established firms and companies’ may well benefit greatly from direct research investment.  But for emerging technologies performance gains come, as reason dictates from early investment, which the authors indirectly suggest could be a public policy with significant benefits.  The authors do note that public investment does serve to give warning to incumbent firms with old technology to consider adapting.

It not often that one sees a study in an economic framework so devoid of political posturing or editorializing.  It’s a clean work that goes far to inform anyone sharp enough to review it. I’m impressed.

There, I think I have provided enough info for you to go get a look without triggering a copyright-based removal.  Just don’t dawdle.

UN Report Coverpage

Even without a deep exposure of how the numbers and the criteria for what’s included the trend in this series of reports, investment is up a great deal. – the 2008 investment is more than a four-fold increase since 2004 by this report’s calculation.

This is in the face of the extremely difficult financial market conditions prevailing during the latter half of 2008 as a result of the global economic crisis. The 2008 numbers topped 2007′s record investments by 5% in large part as a result of China, Brazil and other emerging economies.

The bulk of the money, some $105 billion was spent directly developing 40 GW of power generating capacity from wind, solar, small-hydro, biomass and geothermal sources. A further $35 billion was spent on developing 25 GW of large hydropower, according to the report.

The $140 billion investment in 65 GW of low carbon electricity generation is included with the estimated $250 billion spent globally in 2008 constructing 157GW of new power generating capacity from all sources. The renewable construction accounted for the majority of investment and over 40% of actual power generation capacity additions for 2008

For observations, Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: “Without doubt the economic crisis has taken its toll on investments in clean energy when set against the record-breaking growth of recent years. Investment in the United States fell by two per cent and in Europe growth was very much muted. However, there were also some bright points in 2008 especially in developing economies—China became the world’s second largest wind market in terms of new capacity and the world’s biggest photovoltaic manufacturer and a rise in geothermal energy may be getting underway in countries from Australia to Japan and Kenya. Meanwhile other developing economies such as Brazil, Chile, Peru and the Philippines have brought in, or are poised to introduce policies and laws fostering clean energy as part of a Green Economy. Mexico for example, the Global host of World Environment Day on June 5, is expected to double its target for energy from renewables to 16 per cent as part of a new national energy policy,” he added.

Breaking out the growth has wind attracting the highest new investment at $51.8 billion for 1% growth over 2007. Solar made the largest gains at $33.5 billion for 49% growth, while biofuels surprisingly dropped some to $16.9 billion for a 9% decrease in dollar volume.

The sustainable energy sector’s total transaction value during 2008 – including corporate acquisitions, asset re-financings and private equity buy-outs – was $223 billion, an increase of 7% over 2007. But capital raised via the public stock markets fell 51% to $11.4 billion as clean energy share prices lost 61% of their value during 2008. The year’s trend is exposed in investments in the second half of 2008 down 17% from the first half, and down 23% from the final six months of 2007, the trend has continued into 2009.

Several large economies such as the U.S. and China have announced stimulus packages with specific, multi-billion dollar provisions for energy efficiency up to boosts to renewable energies. The next six months or so will see more with a climax planned at the UN climate convention meeting in Copenhagen threatening a world wide new climate agreement-one that can bring certainty for enthusiasm or despair to the carbon markets.

The report, paid for by a government type entity, has its obligatory predictions:

“The investment surge of recent years and softened commodity markets have started to ease supply chain bottlenecks, especially in the wind and solar sectors, which will cause prices to fall towards marginal costs and several players to consolidate. The price of solar PV modules, for example, is predicted to fall by over 43% in 2009.” We’ll see.

For alarming consumers and complicating investment that has driven up prices, transaction values in the global carbon markets grew 87% during 2008, reaching a total of $120 billion. Following the lead of the EU and Kyoto compliance markets, several countries are now putting in place a system of interlinked carbon markets and working towards a global scheme under the UN Framework Convention on Climate Change (UNFCCC). That’s a great deal of money to be shifting from consumers to government’s preferred providers. It’s a numbers sure to grow unless consumers become informed voters about such schemes like the U.S. cap and trade swindle.

The report can be downloaded in full with a registration. In shorter forms an Executive Summary, a data set and a PowerPoint are also available.

On the whole the report will have little influence as in prior years. Countries do have a tendency to do what’s in their own interest, UN or not. Yet it is refreshing to see the numbers, however the base assumptions are set up, without a determined and obvious global warming assault in one’s face. Its there of course, just not so abrasive as usual.

The report could be a little comforting; the transition is underway to more sensible fuel and energy production. And try as governments might, the only things that are working for consumers at scale to impact them so far, can only exist with incentives that have had little impact on prices. The hard and damaging impacts really come from the restrictions and limits applied to petroleum exploration and the cartels imposing production cuts.

It’s not so grim yet, nor is it inevitable.

America can still lead by getting squarely in the way of things like the UN’s global warming effort.

The tax base is the local payrolls, property, income, sales and things that local governments use to tax for paying for the services right in front of you, every day, many of those mandated by the Federal government and by the way, keep everyone else employed. Which is why the mad rush to get last week’s massive spending bill passed, before local folks figure out – there isn’t much there for the long term – really almost nothing. In truth, all commentary to the contrary, the “stimulus” bill is a giant special interest and earmark, payoff or buyoff – spending spree.

When the local mayors, council members and commissioners get to the facts the first sensation will a bit of relief as some money will be coming, the second will be the realization that the sending in of the taxes, or the borrowing, or the inflation to pay for all of this is going to crush their tax base.

Keep in mind, a trillion is a very big number, indeed.

$1,000,000,000,000.00 Count those zeros – a trillion is a Million Millions. Imagine, your have a net income of $100,000, about $2,000 per week. Taking ALL of your money and ALL the money of 10 million more people like you for a year would cover it.

What was over looked in the race to pass the legislation is the increase in the tax base, more investments, more construction, more rebuilding, more jobs, and more economic growth. The lessons about stimulating economies are numerous, across many countries, over the centuries, in various government forms. Only one thing works:

Increase the tax base. Or not . . .

For example Iberdrola of Spain the world’s largest renewable-energy company is scaling back its investment plans in the U.S. in light of the financial crisis. Iberdrola was planning to invest a total of 4.64 billion euros in U.S. wind power between 2008 and 2010, installing a total of 3 gigawatts of wind power. But today (Announced Feb 13, 2009), the executives at Iberdrola’s U.S. unit, Iberdrola Renovables, say the company’s global renewable investments for 2009 would only total 2 billion euros. U.S. wind-power investments would amount to about 540 million euros. Iberdrola expects to install about 500 megawatts of wind in the U.S. this year, down from earlier targets of about 1 gigawatt. Let’s see, a third as much installed capacity would be a third as much equipment, so they’re on schedule for the two-year period to cut by more than two thirds.

The subsidies in the legislation will matter a little bit, Iberdrola executives said the firm would ratchet up investment—maybe about 20% if the subsidies are generous enough. I wouldn’t bet on that.

If you’re not catching on, Iberdrola will go where the tax base grows because that’s where the healthy and the new customers are.

This morning I and everyone else responsible for managing assets will be thinking about the consequences.

More taxes? More government borrowing? A resurgence of inflation? All of the above?

The spending bill isn’t going to stimulate where it matters, in your community. Actually, the customer base, the number of customers, the amount they are willing to spend, is going to shrink, I know mine will, it already has and everything about the giant government spending bill will cause more uncertainty and doubt.

The hard fact is that the Federal government has gone into competition with state and local governments for the nation’s cash flow whether it’s from the income stream of payrolls and profits or in the credit market or in the value of the currency. Even more worrisome is that the Federal government is competing with everything in your life you need and care about that requires money to support.

More energy and more fuels by any topic and description or stage and scale need creativity, genius, innovation, investment, and acceptance of risk, just to get started. A trillion dollars moved by fiat outside the construction and rebuilding of a country will be a huge dislocation of capital and cash flow.

I’m real sure that most everyone I know and I aren’t in place to get anything from the spending bill. The best analysts are saying it isn’t a national economic stimulus; it’s a government stimulus. But with about half of the U.S. population relying on government to send them paychecks the prospects to turn this kind of thing back isn’t real likely.

But eventually the Tax Base issue will get into the media and press again. With over a year of the Obama hysteria behind us, the cooling is getting closer.

Meanwhile, you can start asking local council people, state legislators, commissioners, mayors and others, just how is it that the spending bill rebuilds our tax base? What can be done locally?

Expect to be disappointed.

If you have any ideas beyond recalling the dopes voting for the Giganticus Spending Bill of 2009 please give me a comment. You just might have a great idea – and we sure need ‘em now.

An economy is like a living organism that’s made up of people and businesses, so adding stimulants is just like taking drugs. The people and businesses live by getting what they need trading goods, services, labor, expertise and charitable acts with each other. Money is used to keep count, establish a common value and make exchanges with everyone. Money represents wealth, the paycheck is a summation of work, with the same value across the nation, readily useable to make exchanges with others. It works pretty well. It’s why it is so important that deposits made in banks are safe and guaranteed – so that exchanges can go on with the greatest possible confidence. Deposit banking is about cash, its safety is a prime concern for everyone, not something you would want full of dope.

It’s just a little astonishing that so many believe that more government spending is going to fix an economy or stimulate it in a meaningful way. The notion of taxing, borrowing and creating money and moving it to known losing propositions is a hysteria of a few infecting the economic organism of the many. It seems like the alcoholics or drug addicts have seized control, spending more, seeking a stimulus in a drive to oblivion. It’s time for cooler heads to take control.

There are sound reasons now to get busy on resetting the economy into a healthier condition. This isn’t so hard, what happened is easy to see. Just like economic bubbles through history, the housing bubble was sure to bust, just like the dot com bubble before that. People being people rush at opportunity in large numbers filling bubbles, they are not new and are not bad things when deflated naturally. But pop one and the sound and the instant disappearance are damaging just like an explosion. Pouring in money by government spending stimulus will not make a new balloon, only the slow revaluation of the property involved by cool heads will restore a market, but the balloon is forever gone.

A “fixed” economy isn’t about more government spending. A “fixed’ economy is an organism filled with confident people and businesses. Confidence and certainty in working, spending, saving, investing and building are what make an economy healthy, not quick highs from stimulants.

No amount of government spending will restore the price of houses; only an addict could believe that. But fixing the problems that created the bubble are exactly in the province of government. The government’s own businesses known as Fannie Mae and Freddie Mac both engaged in funding loan products that drove home prices so high. The money they used from selling securities made up of sliced diced chopped and reformed mortgages, was simply a securities fraud with the complicity of rating agencies. The only way back is to unslice, undice, unchop, and truthfully reform the securities so securities holders know what they have. They’re going to lose some capital.

The homebuyers have a role, too. Everyone across America has seen a drop in property values; lots of home equity just disappeared. But to have law that prohibits writing down loan principals, so insuring the lender at the full expense of homeowners is fraud too. Lenders as well as buyers both assumed risk in the mortgages, forcing one side only to a loss doesn’t even save the other as a foreclosure itself likely will involve a loss of capital, further depressing prices for everyone across the nation, and the loss of a customer. Even bankruptcy courts are prohibited from readjusting mortgage terms – an idea from the false belief that home prices would never go down and the pressure from the “special interest” of mortgage companies to gain an advantage in bankruptcies. These situations harm everyone, and destroy the confidence in the housing market with deep repercussions across the entire planet. No fix in sight from Congress – just more stimulant spending.

The other dominating issue is the “credit crises.” Well, it’s not a “credit crisis” after all. It’s a securities value crisis. The plunge of mortgage-backed securities affected all forms of securities; this time much more than usual as the mortgage backed securities are a huge market. But the only reason that the mortgage securities crisis affected banks is that the “banks” aren’t really just banks. They are “bank holding companies.” The facts are that most deposit taking and loan making banks weren’t in any particular trouble, but the holding companies who own the deposit banks and the securities firms and insurance businesses lost huge amounts of money, far, far beyond what the deposit and loan making banking businesses could make.

Bank holding companies are a renewed mistake. America learned during the Great Depression that allowing the combining of businesses such as deposit and loan banking with securities firms, insurance and other financial activities was a mistake. But clever lawyers, special interest pressure and relaxed interpretation of regulations opened the door for the fiasco to happen again. Deposit and loan banking is well known as a business that’s critical for an economy, it’s the cash and cash flow mechanism the moves the money from one cell in an economic organism to another, that’s why deposits are insured, guaranteed to depositors so the economy does not simply lock up in a seizure.

These facts make it clear that “bank holding companies” must be dissolved as soon as possible. The risks to everyone from the combining the risks of securities to the cash deposits of people and businesses is grossly irresponsible. Deposits being cash are of the full faith and credit of the nation, legal tender both private and public, and exposing them to risk is the highest form of foolish irresponsibility. Have I made the point? Banks must stand free of commingled ownership.

Securities businesses or, ugh, investment “banking” is a topic in and of itself. For today I’ll just remind that securities are not cash money, they are investment tools to gain value or earn an income. They are not cash deposits, so they can and must go up and down in value, pay an income or fail to do so. They are connections to the business or government that use the money paid for the security so making the security owner directly tied to the fortunes of the security issuer. But here the “confidence” is supposed to be about the individual business or government. The trouble started when the securities business and investment “bankers” invented new products that mixed together a purée of interests and in some securities even packaged the risk itself. Now all that’s fine, but no one explained that those are not securities in some one real thing, they are just gambling on the perceptions of the market. To call them and treat them as a unit of wealth known as securities is another fraud.

There are this humble writer’s opinions on the fast moves for an arrest of the economic fall and setting a minimum stage for a recovery. Meanwhile we are being entertained at great expense in boondoggle spending by politicians addicted to easy answers instead of doing the public’s work. Well, if they’d been doing the public’s work none of this would have happened.

Keep in mind there are only three known ways from history to act: boondoggle spending, a known way to fail to address the problems and just aggravate the misery, inflation which only serves to again fail to address the problems and aggravate the misery in a much more difficult and damaging way and lastly, fix the problems that caused the collapse in the economy and its confidence, absorb the losses and get back to work.

Prof Chris Rhodes

Professor Chris Rhodes writing in Scitizen has offered the idea that “Gap Oil” could or should replace “Peak Oil.”

It’s a concept that I could agree to, if the premise fit reality a little better. Professor Rhodes seems to like the idea that his thought of the “Gap Oil” label comes from him first, and I wish him luck with that. But.

Gaps, whether oil or any product is two gaps, one being the demand driving gap that offers more buyers than sellers can supply and second, the supply gap that is way more supply than the buyers can use. I.e. demand gaps push prices higher, supply gaps push prices lower.

In fairness, is could be explained other ways but for simplicities’ sake lets just let each excess, whether demand or supply do the price pushing.

If the world has, or could learn anything over the past year it’s that both kinds of market pressures taken to excess have bad effects, higher prices will crush economies and that price collapses can crush suppliers. It’s easy to see that a tripling of raw energy prices would devastate a wobbly economy built up over decades. Suppliers can be less affected as they only had months to settle into very high prices so carrying less of a commitment to expenses. What hasn’t been discovered is the true economic value of crude oil. We’ve gone from over priced to under priced in a matter of months and the spread isn’t just a few percentage points it’s a multiplier factor of 3 –4 fold than then a divider factor of 3 – 4 fold.

That’s not what one would call a healthy market for price discovery.

What isn’t going to happen is that those gaps disappear. Instead its likely that volatility will continue with longer time periods between peaks of high and low. What isn’t being said is that demand has just been shown to be much more elastic than the “experts” declared – pushing the price of oil off the proverbial cliff.

The next lesson that consumers need to grasp is that oil lifting, or pumping from reservoirs will not grow at the rates that demand can grow. Or let’s just say that supply cannot with high confidence stay ahead of demand. It is much faster to get the second car out of the garage, resume driving more miles or other ways to use more fuel than find, develop and expand fuel production.

In the early 1970s the major oil companies had control of massive reservoirs and National Oil companies or really governments barely had influence. By the end of the 1970s the nations of OPEC discovered that by banding together they could affect the price of oil. They could have learned then that price shocks were not good for one’s customers. It took almost thirty years to get a few years of higher prices only to have it blow up (down) again in 2008.

The “gap” Professor Rhodes hopes to sell seems tied to those estimates of things like population, oil use, reservoir use and so forth which while “true” are not facts yet and when we get to the moments of those “yets” the circumstances at the time are simply unknown today. It’s really easy to forecast, but forecasting approaches near certain fallibility at points in time further out for any subject.

So professor Rhodes gets halfway to a conclusion that makes sense, concern about those periods when supply cannot meet demand, igniting a big price run up. The solution is to do your investing into more supply, efficiency and conservation while the supply gap is large and prices are low. Just because fuels are cheap now isn’t a reason to relax, rather it’s a time to use those savings to reduce your demand and increase your supplies.

Professor Rhodes opens a door with the gap oil idea. And it does offer some worthy arguments to cast off peak oil as an idea with merit. Keep in mind that peak oil will be a reality someday, not that it matters. What matters is if peak demand meets peak oil, whether or not the peak is an all time high or not. If demand overshoots, which it likely will for a brief period, the oil price swings we saw over the past year and a half might seem small.

The title today is a take off Shakespeare’s oft quoted, “lets kill all the lawyers,” which has a certain appeal right now. The very large banks are busily driving themselves deeper into holes only the taxpayers can extricate them from. But first, before we bail them out or think to kill them just who are these bankers?

Real bankers, the ones who take deposits and make loans are the classic and likely only factual form of bankers. Lets call them “DLBs’ for deposit and loan bankers as we go along. DLBs are not the problem today even though they are being blown about by the economy, the basic business of accepting deposits and returning the money to the economy in loans isn’t in much trouble, yet. But losing these business would be a serious economic problem.

The next group that claim to be bankers are not bankers by half. These businesses sell securities and then use the money from the securities sales to make loans, usually in credit cards and lines of credit. Lets call them SCCBs using securities to credit card bankers for short. They aren’t on the economic list of problems yet, but can reasonably and deservedly expected to be anytime now. These are the “bankers” who invented the loan agreement that changes at their whim with a gangster like approach to business. One should expect they will try that “change the deal” technique on their investors any moment now. Losing these businesses would be a disaster to the buyers of their securities, not the economy as a whole if the system is fixed in time.

The third group isn’t banking at all. They call themselves “investment bankers” who act as middlemen between investors wishing to place money into income generating securities and those businesses and governments wishing to get money by issuing securities. Lets call them ISBs as they are actually investment to securities businesses, not classic bankers. We’ve have allowed them to kidnap “bank” for decades and they have managed to grow hugely only to become a disaster of unprecedented dimensions today risking everyone’s well being across the planet. I saw a $14 trillion dollar number of what losses might be that need bailed out worldwide. This is a serious problem. It has to be when the business is selling both ways, to investors out of one hand and borrowers out of the other. It’s not banking, it’s brokering at best, a conflicting interest agency operation at worst.

ISBs are who make the list of who should be killed. And getting killed is just what’s happening along with securities buyers who trusted them. Bear Stearns and Lehman Bros are dead, gone and buried. Others have been shot gunned into mergers, sales and other devices to get them on life support and the shots may well kill the new partners as well.

The problem for taxpayers is that much of the barrier between ISBs and the real DLBs formed back in the Great Depression has been avoided by political pressure to remove law and regulations that kept them separated. Hence, as we saw last week, CITI is flying apart; the facts are now driving events at least in that company.

One huge driver of our recession becoming a depression is that money connected to investment has become too incestuous. The variations of money on to safekeeping, then investing has been broken. It had to happen somewhere as markets swing up and down, so when the mortgage securities market got pressured by defaults in one of its segments the whole system crashed. Amazing. Or amazing?

Mortgages are wonderful devices that get people into home ownership. Pooling the mortgages, then selling parts of a pool as securities is a good idea that pulled more money in; so making mortgage loans was much easier. But Congress, then regulators leading the securities businesses lost sight of managing the risk while the money poured in, which drove more mortgage (re)financing and drove home prices higher. Absent risk disclosure in a truthful way both in offering mortgages to borrowers and the securities to investors that provided the money, then mortgage products were sure to drive high defaults – destined in the past years’ events to a certain end. This was foreseen by many, in the press by the Wall Street Journal and others, in the banking business that actually made sensible mortgage loans that were non competitive to securities backed mortgages, by the Bush administration who warned the Congress there was a disaster in the making and many in Congress. It was stopped the last time by Sen. Chris Dodd and Rep. Charles Rangel, with a lot of help from the then independent Fannie Mae and Freddie Mac business lobbyists.

Now pooling loans into securities isn’t a bad or good idea. In fact DLB loans have been securitized for centuries by syndicating them, or selling parts of the loan to a wide base of many bankers. The difference is each banker could see the loan details and choose win or lose whether or not to get in. Securitized loans can hide that opportunity of seeing the loan details. It doesn’t have to be that way. Loans by type could have been packaged and the packaging could have increased the availability of money and reduced the risk. It still can if sensible packaging and truthful disclosure is applied.

The lesson isn’t much different than what was learned 70 odd years ago. Separate the risk and separate the businesses that work in the risk fields. Require the risk be disclosed, truthfully. Be sure the blending of the investments is done all the way at the investor’s desk only. Government’s primary job is to keep the risk tied to the reward, visible for everyone to see – failing that is an invitation to criminal activity – which is what happened even though the crime isn’t seen as such even yet.

Sure, it’s a lot of markets, sales types to bother investors, and a bunch of information to wade through. But the investor must choose the risk to reward alone. Doing the risk reward management prior to the securities sale isn’t a management, it is an invitation to a manipulation whether intended or not. A security itself isn’t a dynamic thing, if it was it would be, if possible, priced that way, but the risks behind a security are always dynamic and will find their way into its price someday. That brings us to the closing point.

President elect Obama’s speech today will likely be meant to lift hearts, build confidence and layout a vision for a future for hundreds of millions of people worldwide. I wish him God’s blessing. But I don’t expect that the basics, fragmenting the finance industry again into industrial segments and keeping it that way is going to get mentioned. Nor will we hear that enforcing the law on the books now will be brought back into regulation conduct. Or that certain people should be tried, found guilty and imprisoned for selling mortgages and mortgage securities without the truth being told. There is little chance that certain Senators or Representatives will be expelled for making such huge and damnable acts contrary to the financial security of the nation and the whole world. Not likely to be mentioned, not likely to happen, either.

What might happen, maybe, one can hope anyway is that all those mortgages that are “junk, sub prime” or labeled with a similar meaning will get separated out of the sliced diced and reformed securities in the market now and be fairly priced. It a huge amount of work, something the ISBs should pay for, but they’re essentially broke now, so the taxpayers will get nicked for it, unless the businesses are required to recover those huge bonuses they paid to their executives.

But now the economy needs people’s castles, home sweet home, made safe again. And until that gets done – the recession or depression will stay with us.

Lose the confidence of people in their homes, and the economy might lose everything.

The plan is to get solar photovoltaics to $2.2 billion of sales by 2015. They are following Sanyo and Sharp who are ahead in the business. It’s a raw muscular entry into the business. The numbers must be better than we’re thinking – this is a lot of economic, engineering and manufacturing resources heading to market.

Here, Americans are grappling with rooftop PV cells being just uneconomic without some form of stimulus that needs to be a subsidy measured in cash for them to get sold and installed. Something is way different over there.

I think it is sourced from short-term thinking on our part. The 1980s can be remembered as the period when much of the developed world was aghast at the capabilities of Japanese business to hunker down, plan and execute with precise and successful results. Witness the invasion of top quality automobiles sucking up great hunks of market share, ready with, albeit in short supply, the hybrid Prius model before the great oil price run up of 2008. Planning and long term investing pays when you know where you’re going, particularly long term.

Quarterly results can kill your career in the U.S. So, this Friday will mark the completion of a 90-day quarter since – the DJIA setting it’s 14,164.53 all-time high only back on October 9^th. Since a year ago Christmas oil has gone from under $100 to over $147 and back down under $37. A Bloomberg headline story said, “It has been a year of record misery: the largest bankruptcies, bank failures and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out . . . Plus the Feds have signed up to borrow nearly a trillion dollars in the next six months, before Obama’s stimulus is added in. Just where is all that money going to come from? The hard bad debt writedown doesn’t even come to a trillion dollars.

Do you really believe that the federal government gathering up such sums and passing them out will be a solution that works over time?

It’s a panic response. Led by the mass media and powered up by politicians to become a self-fulfilling prophesy. It’s a huge mistake to effectively seize financial capital and pass it out as disposable income. Market valuations go up as well as down, quickly as we’ve just seen, but its phantom money. The government spending is hard cash, hard debt. The measures may be dollars for either one but they are not the same thing.

While America is deluding itself, following the pied pipers into a self made worsening recession, others are investing, building, designing, selling and making a future – America is indebting herself with freebies for the masses in a short-term convulsion mostly blind to the opportunities that today’s problems offer for the future.

For all of the hype over Obama being a student of history he might want to look into the results of bread and circuses starting with the Romans.

What’s different? The others scrimp on spending; then invest in things that save on recurring expenses, and invest in the production of newer better and cheaper products to sell. The other difference is they see things in years – not quarters of a year. It’s a huge advantage.

But when pirates seize and move 2 million gallons of oil, or more than 36,000 tons of wheat we’re talking food and fuel in big quantities. Americans are used to oil coming in from close by – Canada, Mexico and Venezuela with only a small fraction coming across dangerous waters. Demand destruction has pulled so far that for now the shipping and pipeline attacks aren’t having much price effect. This can’t last.

Eventually crews will be killed, cargoes lost or an enormous spill will occur, or likely all three. Then the news will heat up its reporting. For now, it’s a deep concern to the informed few.

East Africa Pirate Attacks Map and Graph

Reports of pirate attacks are solidly unreliable. Pirate pursuits of targets that fail, attacks evaded, fought off and other early event attacks that come to naught aren’t getting counted. So when we see that 2007s number of 31 attacks compared to 2008s attacks at 199 in the first eight months, a bit of statistical glint comes to mind. But the attention to the counts is just warming up now, so the probability is that likely a 6-fold increase is at hand.

The suspected Somali pirates that seized the oil tanker Sirius Star is known to not be the first attempt. We can learn from the story of the Leander, a tanker that was accosted and got away. On October 28^th the ship with 23 crew aboard entered the Gulf of Aden, the water on the north of Africa’s horn, with million barrels of crude aboard.

Moving at 12 knots, through what is called a” safe corridor” set out by NATO, 120 miles out to sea midway between the Gulf’s entrance and the turn up into the Red Sea three skiffs approached. “The center and forward attack vessel was actually a Yemeni skiff fitted with large outboard engine and was being used as a screen to mask the other two craft,” captain Russell Davies wrote in an official report filed to Interorient and the International Chamber of Shipping. Men on the skiffs fired automatic rifles at the side of the ship.

Captain Russell Davies sent a mayday signal, but nobody answered, and then followed the special training paid for by Interorient. He locked his crew in a hold, sped up the ship to 15 knots, blared his airhorn and sailed in furious S-patterns. After 10 minutes, the pirate vessels fell back and disappeared. But at 3 p.m., the pirates reappeared. In an interview via satellite phone, Mr. Davies described three “fast attack boats departing a white mother ship.” Four men were in each boat. Mr. Davies followed the same emergency routine. This time, a Spanish naval carrier responded to the mayday alert. Thirty minutes later, a military plane appeared. “The fire was a lot more intense than the morning attack,” says Mr. Davies. The pirates were approaching when the plane fired back, chasing the pirates away, says Mr. Davies. “The military only responded one out of two times we called.” Mr. Davies says ship captains need “a couple 50 millimeter mounted guns” to defend themselves.

Ship owners and insurers haven’t armed ship with weapons because they fear deadly shootouts. Interorient and other shippers say they’re looking into hiring professional security guards. The next day, three miles from the same spot, pirates successfully hijacked a Turkish bulk carrier.

But the seizure of a giant the Saudi oil tanker Sirius Star with $100 million worth of crude far off the coast of Kenya could enlarge the “war risk” zone of the Gulf of Aden that already is lifting insurance costs for thousands of ships heading west of Africa, further raising the cost of piracy to world-wide shipping.

Some 6,500 tankers, carrying 7% of the world’s oil, used the route in 2007, according to Lloyd’s Marine Intelligence Unit. Pirates attack around one of 10 ships in the area; most attacks are unsuccessful, according to the International Chamber of Shipping. Back in May, insurers declared the Gulf of Aden a war-risk zone subject to a premium of tens of thousands of dollars per day, say insurance and shipping companies. That could now be extended to the east side of the African continent.

The slower-moving tankers and dry bulk vessels that carry oil, chemicals, coal, corn, wheat and other commodities have the most to fear. But the fear needs passed along to the customers who need those commodities for food and fuel and the huge array of products made from the cargoes.

The bewildering thing is governments and shippers are sparring over who should bear responsibility for fending off the pirates, who seized 26 ships in the region during the 2008 summer alone and have collected up to $30 million in ransom so far this year, according to the International Maritime Bureau.

You can just bet that “diplomacy” will be or is being used to get some form of organization going and to cope with the regions countries rights out to sea. One would think that an effort could get underway bloody fast – the ship owners in just the past few days includes Chinese, Turk, Saudi, Norwegian, Hong Kong, among others. Meanwhile, it might be a really good idea for a military plane to obliterate a few skiffs full of armed pirates and make a video of it to go up on the news and youtube.

It’s got to be cheaper than cleaning up 2 million barrels of oil, grieving over 20 plus innocent lives, or paying off a sunken ship.

America is there, even while busy in other places. Special note and thanks needs to go to Spain for being there providing security. But by no means has everyone answered the problem. Russia is busy showing off to Venezuela instead of patrolling for pirates as her station in the world as she asserts her wishes to seen and respected would suggest.

It looks like it’s still up to American and the few “standup to responsibility” allies to police the world.