DISCLAIMER: This thread is meant to spark intelligent debate, if there is any to be had. It is NOT a thread about which nation is good and which is evil, which country should be loved or hated, or who is going to kick whose ass. What I am putting down here is, for better or worse, reality as I see it at this point in time. Please feel free to disagree. In fact, I encourage it. If I didn't, I wouldn't be posting it on a public forum. However, I implore you, do so in a manner which is intelligent, logical, and well thought-out, or don't do it at all.
A WORLD IN CRISIS
In case you haven't noticed, the world is entering a serious crisis. There are more and more people in the world, and each of them is striving (and mostly achieving) a "higher standard of living". The standard definition of this "standard of living" implies a higher per-capita consumption of commodities such as oil, copper, wheat, rice, palladium, cobalt, uranium... The list goes on. Furthermore, while soft commodities such as rice are considered to be a renewable resource, they are directly subject to a limited resource, which is the amount (and maximum sustainable yield) of available farm land. So while these resources are renewable, they are subject to a maximum rate of production and that places a direct limit on the rate at which we can consume them. We can push this rate up by introducing new cutting-edge agricultural technology, but we cannot improve yields indefinitely. We can also improve agricultural yields by following unsustainable farming practices, which would produce higher yields today, but at the unacceptable cost of destroying the future productivity and usefulness of the affected land. I don't want to get bogged down with the details of how and why, or what exactly is renewable, what isn't, and under what conditions. These are all topics worthy of discussion, but not here and now. Suffice it to say that demand for most commodities is growing rapidly, while the supply is either truly limited, or its rate of production is limited, or in many cases, both. Any way you look at it, supply is constrained.
Some of the above-mentioned demand is coming directly from consumers because, as I said, the world's population is growing quite rapidly, and the consumption of each member of that population is also growing quite rapidly. Some of the demand is coming from speculators who are seeing this trend and want to profit from it. The efficiency of today's markets factors in "likely" future events. If the markets are certain oil will be worth $200 at some point in the future, then the markets will make it worth $200 TODAY. The closer we get to $200, the more strongly it means the market believes this to be the fair price considering all known relevant factors. In other words, if we see $200 oil today, then the market is 100% sure that the real supply/demand-driven value of oil will be $200 at some point in the future. Expectation of "real future demand" creates "speculative present demand". If you are not familiar with this concept, take a second to let it sink in.
The sad, yet undeniable truth is that, unless the world's population decides to stop growing and actually begins to shrink, poor people stop struggling to improve their standard of living, and rich people give up their wasteful and decadent ways, the world is headed towards unparalleled disaster - i.e. resource wars. It is not a question of "if", but "when".
As we all know, there are no winners in war, but there could certainly be various degrees of losers. This is the way I see things unfolding:
RICH (Russia, Iran, CHina)
China, Russia and Iran are currently forming an alliance that is becoming more powerful by the day. This alliance is resource rich - large reserves of oil and even larger reserves of natural gas (in fact, the largest reserves of natural gas in the world are found in Russia and Iran). Russia and Iran are the fuel, while China is the engine. This rising superpower is up against the current world leader, the US of A. While the US has its fingers in a lot of pies around the world, the world has grown weary of its dominance, and as a result, the US appears to be losing its grip on those pies. The US derives its might largely from oil (and other resources) that are imported from increasingly hostile and increasingly more powerful nations. Another large chunk of its strength comes form imported labor from China. However, in recent years the US has had to pay dearly for these imports. The amount of wealth (power) transferred from America to the Middle East and China is already staggering, and growing rapidly. Many of the recipients of this vast amount of recently transferred power smell blood now, and appear ready to take down the wounded giant.
NEUTRALITY
Europe, and some of the more neutral Middle Eastern nations are in the middle of all this. In the midst of all this tension, Europe hopes to be to the world what Switzerland was to Europe in the last Great War. At the moment, Europe cannot afford to choose a side. Europe is not abundant with natural resources, and it doesn't have the strength to take them from anyone else. The neutral Mid East nations have had a long and fruitful relationship with the United States, and are hesitant to risk losing it.
ACE IN THE HOLE
Many people are predicting, with certainty and a hint of poetic justice in their tone, the demise of the United States of America and its status as the unquestionable ruler of the world. However, if there is anything that the recent world rice shortage has taught us, it is that America still has the world by its balls, and is not about to release its grip. Is America dependent on imported oil? Yes. Is America dependent on imported junk from China? Yes. Is the world dependent at all on America?... Yes. Think of a four-letter word that begins with an "F". This has been discussed here at FF and elsewhere, in particular by clockwork and roro (and others) in the news section, but I would like to dig a bit deeper here, and I would certainly like to cut through as much media bullshit as possible.
The word you should be thinking of, of course, is "FOOD", but I will get back to that in a little while.
CRUDE REALITY
Proven oil reserves in the US are quite low, and domestic crude production has been on the decline since the 1960s. Oil consumption, on the other hand, has grown steadily since the beginning of the Industrial Revolution. The United States is the by far the largest consumer of oil in the world and therefore by far its largest importer. The steady flow of cheap crude oil from the Middle East has been the lifeblood of the American economy for decades. It played a major part in shaping American culture. From muscle cars to interstate highways to suburbia to a lack of decent public transport, American policymakers, and in turn the general public, never showed much restraint when it came to oil consumption. Oil was cheap and abundant. Moreover, it fueled the American automotive industry and kept some very important Saudi friends happy.
With prices rising well over 100% from what were already considered high levels last year, America's debaucherous, oil-guzzling economy is under more stress than those who have built their entire infrastructure based on energy conservation and efficiency - namely the Europeans and Japanese. However, even the utmost in efficiency is simply delaying the inevitable - as long as the world is using non-renewable resources to sustain itself, resource wars will be waiting just over some distant (or not so distant) horizon.
Contrary to the belief of many, alternatives to oil are all riddled with problems. From the total content of energy available, to the conversion cost and efficiency, to the supporting infrastructure and distribution, to technological and political hurdles, to the general denial of the general public, the obstacles are many. Even with gigantic leaps in mindset and huge strides in technology, it is unlikely that the world in general and the United States in particular, will be able to wean itself off oil any time soon, if ever.
So what can the United States do to ensure that it remains the most powerful nation in the world despite so much of its wealth being transferred to its foes?
THE ART OF WAR
According to Sun Tzu, it is important for a good general to make himself appear weak when he is strong. In the background, the US is subsidizing ethanol farming. The reason for this is not so much that this additional fuel will break America’s addiction to oil – it can’t – but it is rather about driving up the price of food. Since oil producing countries have been pretty keen on the high prices everyone is paying for their product, why wouldn’t America make the most of what it produces? Food. By burning a significant amount of food on its highways, America is constraining supply at a time of rapid demand growth. The result, naturally, is rising food prices. While many disagree with the overall moral effect of this practice, it cannot be denied that this is a brilliant move. By subsidising many of its food production industries, America is in effect addicting the world to its cheap food exports before prices skyrocket. Naturally, the weak dollar helps this along. This has the effect of more and more nations becoming increasingly dependent on American food as domestic food production simply isn't able to compete with its subsidized American counterparts. The Philippines is a great example of this. The Korean beef riots are another.
As much as America is dependent on the energy and labor from China/Iran/Russia, and many Middle Eastern nations, these nations will be increasingly dependent on American food imports. In the coming decades, they will have nowhere else to import food from, and certainly will not be able to meet demand with domestic production – growing environmental problems, urbanization and more resource-intensive meal choices are just some of the problems facing Chinese agriculture, for example. America, on the other hand, will have the ability to import oil from Brazil, Colombia, Venezuela, Mexico, Canada, and perhaps even Greenland. Some of these nations may not be thrilled about the idea of American domination of their oil reserves (namely Venezuela) but I believe that current populist policies in Venezuela are going to open people’s eyes to their fallacy as their economy crumbles. And furthermore, let’s face it, if Venezuela doesn’t want to give up its oil, America will come a-knockin’. It is said that when you want to convince a person to do you a favour, you either help them, or you hurt them.
The geographic location of all the above-mentioned nations ensures that they will be friendly to America, or risk getting hurt instead of helped. As much as Hugo Chavez would like to get in bed with Ahmedinejad (figuratively, of course) it is simply not feasible for "RICH" to defend Venezuela when it comes down to it.
In the coming decades, this will leave America with choices, but will leave its new arch-nemeses reliant largely on American food. You don't want to give us your oil? No problem, we can just burn your food instead of your oil.
This is why America is trying to secure as much Middle Eastern oil as it can, for as long as it can, regardless of price. All the power that America transfers to these other nations will come back when those nations’ food supplies begin to dwindle.
A WORLD IN CRISIS
In case you haven't noticed, the world is entering a serious crisis. There are more and more people in the world, and each of them is striving (and mostly achieving) a "higher standard of living". The standard definition of this "standard of living" implies a higher per-capita consumption of commodities such as oil, copper, wheat, rice, palladium, cobalt, uranium... The list goes on. Furthermore, while soft commodities such as rice are considered to be a renewable resource, they are directly subject to a limited resource, which is the amount (and maximum sustainable yield) of available farm land. So while these resources are renewable, they are subject to a maximum rate of production and that places a direct limit on the rate at which we can consume them. We can push this rate up by introducing new cutting-edge agricultural technology, but we cannot improve yields indefinitely. We can also improve agricultural yields by following unsustainable farming practices, which would produce higher yields today, but at the unacceptable cost of destroying the future productivity and usefulness of the affected land. I don't want to get bogged down with the details of how and why, or what exactly is renewable, what isn't, and under what conditions. These are all topics worthy of discussion, but not here and now. Suffice it to say that demand for most commodities is growing rapidly, while the supply is either truly limited, or its rate of production is limited, or in many cases, both. Any way you look at it, supply is constrained.
Some of the above-mentioned demand is coming directly from consumers because, as I said, the world's population is growing quite rapidly, and the consumption of each member of that population is also growing quite rapidly. Some of the demand is coming from speculators who are seeing this trend and want to profit from it. The efficiency of today's markets factors in "likely" future events. If the markets are certain oil will be worth $200 at some point in the future, then the markets will make it worth $200 TODAY. The closer we get to $200, the more strongly it means the market believes this to be the fair price considering all known relevant factors. In other words, if we see $200 oil today, then the market is 100% sure that the real supply/demand-driven value of oil will be $200 at some point in the future. Expectation of "real future demand" creates "speculative present demand". If you are not familiar with this concept, take a second to let it sink in.
The sad, yet undeniable truth is that, unless the world's population decides to stop growing and actually begins to shrink, poor people stop struggling to improve their standard of living, and rich people give up their wasteful and decadent ways, the world is headed towards unparalleled disaster - i.e. resource wars. It is not a question of "if", but "when".
As we all know, there are no winners in war, but there could certainly be various degrees of losers. This is the way I see things unfolding:
RICH (Russia, Iran, CHina)
China, Russia and Iran are currently forming an alliance that is becoming more powerful by the day. This alliance is resource rich - large reserves of oil and even larger reserves of natural gas (in fact, the largest reserves of natural gas in the world are found in Russia and Iran). Russia and Iran are the fuel, while China is the engine. This rising superpower is up against the current world leader, the US of A. While the US has its fingers in a lot of pies around the world, the world has grown weary of its dominance, and as a result, the US appears to be losing its grip on those pies. The US derives its might largely from oil (and other resources) that are imported from increasingly hostile and increasingly more powerful nations. Another large chunk of its strength comes form imported labor from China. However, in recent years the US has had to pay dearly for these imports. The amount of wealth (power) transferred from America to the Middle East and China is already staggering, and growing rapidly. Many of the recipients of this vast amount of recently transferred power smell blood now, and appear ready to take down the wounded giant.
NEUTRALITY
Europe, and some of the more neutral Middle Eastern nations are in the middle of all this. In the midst of all this tension, Europe hopes to be to the world what Switzerland was to Europe in the last Great War. At the moment, Europe cannot afford to choose a side. Europe is not abundant with natural resources, and it doesn't have the strength to take them from anyone else. The neutral Mid East nations have had a long and fruitful relationship with the United States, and are hesitant to risk losing it.
ACE IN THE HOLE
Many people are predicting, with certainty and a hint of poetic justice in their tone, the demise of the United States of America and its status as the unquestionable ruler of the world. However, if there is anything that the recent world rice shortage has taught us, it is that America still has the world by its balls, and is not about to release its grip. Is America dependent on imported oil? Yes. Is America dependent on imported junk from China? Yes. Is the world dependent at all on America?... Yes. Think of a four-letter word that begins with an "F". This has been discussed here at FF and elsewhere, in particular by clockwork and roro (and others) in the news section, but I would like to dig a bit deeper here, and I would certainly like to cut through as much media bullshit as possible.
The word you should be thinking of, of course, is "FOOD", but I will get back to that in a little while.
CRUDE REALITY
Proven oil reserves in the US are quite low, and domestic crude production has been on the decline since the 1960s. Oil consumption, on the other hand, has grown steadily since the beginning of the Industrial Revolution. The United States is the by far the largest consumer of oil in the world and therefore by far its largest importer. The steady flow of cheap crude oil from the Middle East has been the lifeblood of the American economy for decades. It played a major part in shaping American culture. From muscle cars to interstate highways to suburbia to a lack of decent public transport, American policymakers, and in turn the general public, never showed much restraint when it came to oil consumption. Oil was cheap and abundant. Moreover, it fueled the American automotive industry and kept some very important Saudi friends happy.
With prices rising well over 100% from what were already considered high levels last year, America's debaucherous, oil-guzzling economy is under more stress than those who have built their entire infrastructure based on energy conservation and efficiency - namely the Europeans and Japanese. However, even the utmost in efficiency is simply delaying the inevitable - as long as the world is using non-renewable resources to sustain itself, resource wars will be waiting just over some distant (or not so distant) horizon.
Contrary to the belief of many, alternatives to oil are all riddled with problems. From the total content of energy available, to the conversion cost and efficiency, to the supporting infrastructure and distribution, to technological and political hurdles, to the general denial of the general public, the obstacles are many. Even with gigantic leaps in mindset and huge strides in technology, it is unlikely that the world in general and the United States in particular, will be able to wean itself off oil any time soon, if ever.
So what can the United States do to ensure that it remains the most powerful nation in the world despite so much of its wealth being transferred to its foes?
THE ART OF WAR
According to Sun Tzu, it is important for a good general to make himself appear weak when he is strong. In the background, the US is subsidizing ethanol farming. The reason for this is not so much that this additional fuel will break America’s addiction to oil – it can’t – but it is rather about driving up the price of food. Since oil producing countries have been pretty keen on the high prices everyone is paying for their product, why wouldn’t America make the most of what it produces? Food. By burning a significant amount of food on its highways, America is constraining supply at a time of rapid demand growth. The result, naturally, is rising food prices. While many disagree with the overall moral effect of this practice, it cannot be denied that this is a brilliant move. By subsidising many of its food production industries, America is in effect addicting the world to its cheap food exports before prices skyrocket. Naturally, the weak dollar helps this along. This has the effect of more and more nations becoming increasingly dependent on American food as domestic food production simply isn't able to compete with its subsidized American counterparts. The Philippines is a great example of this. The Korean beef riots are another.
As much as America is dependent on the energy and labor from China/Iran/Russia, and many Middle Eastern nations, these nations will be increasingly dependent on American food imports. In the coming decades, they will have nowhere else to import food from, and certainly will not be able to meet demand with domestic production – growing environmental problems, urbanization and more resource-intensive meal choices are just some of the problems facing Chinese agriculture, for example. America, on the other hand, will have the ability to import oil from Brazil, Colombia, Venezuela, Mexico, Canada, and perhaps even Greenland. Some of these nations may not be thrilled about the idea of American domination of their oil reserves (namely Venezuela) but I believe that current populist policies in Venezuela are going to open people’s eyes to their fallacy as their economy crumbles. And furthermore, let’s face it, if Venezuela doesn’t want to give up its oil, America will come a-knockin’. It is said that when you want to convince a person to do you a favour, you either help them, or you hurt them.
The geographic location of all the above-mentioned nations ensures that they will be friendly to America, or risk getting hurt instead of helped. As much as Hugo Chavez would like to get in bed with Ahmedinejad (figuratively, of course) it is simply not feasible for "RICH" to defend Venezuela when it comes down to it.
In the coming decades, this will leave America with choices, but will leave its new arch-nemeses reliant largely on American food. You don't want to give us your oil? No problem, we can just burn your food instead of your oil.
This is why America is trying to secure as much Middle Eastern oil as it can, for as long as it can, regardless of price. All the power that America transfers to these other nations will come back when those nations’ food supplies begin to dwindle.
as I see it at this point in time. Please feel free to disagree. In fact, I encourage it. If I didn't, I wouldn't be posting it on a public forum. However, I implore you, do so in a manner which is intelligent, logical, and well thought-out, or don't do it at all.
. Please put forward your reasons as to why you disagree.
