Posted on 10/02/2010 8:05:42 AM PDT by blam
The Morality Of Chinese Growth
October 1, 2010
John Mauldin
* Oil at $125 a Barrel, Gasoline at $5
* David Rosenberg and Capacity Utilization
* Gary Shilling: Commercial Real Estate and Employment
* The Morality of Chinese Growth
* Another Birthday? What Happened to My Year?
* Athens and the Barefoot Ranch
This week I am at a conference in Houston. I must confess that I don't attend many of the sessions at most conferences where I speak. But today, the guys at Streettalk Advisors have such a great lineup that I am there for every session. But it's Friday and I need to write. The solution? This week you get a "best of" letter. The best ideas I've heard and the best charts I've seen at this conference. Then we close with two short but very thoughtful essays from Charles Gave and Arthur Kroeber of GaveKal on "The Morality of Chinese Growth." Lots of charts and something to make you think. Should be a good letter.
John Hofmeister is the former president of Shell Oil and now CEO of the public-policy group Citizens for Affordable Energy. He paints a very stark (even bleak, as he gets further into the speech) picture of the future of energy production in the US unless we change our current policies. First, because of the aftereffects of the moratorium. It is his belief that the drilling moratorium will effectively still be in place until at least the middle of 2012. There won't even be new rules until the end of 2011, and then the lawsuits start.
Gulf oil production will be down by up to 1 million barrels a day. Imported oil is now 67% of oil usage but will go to 75% by 2012. He thinks crude oil will be up to $125 and gasoline between $4-$5 at the pump. And it will only get worse.
He describes the problem with the electricity from coal production. The average coal plant is 38 years old, with a planned-for life of 50 years. Our energy production capability is rapidly aging, and we are not updating it fast enough.
He argues that the fight between the right and the left has given us 37 years without a realistic energy policy, as policy gets driven by two-year political cycles but good energy planning takes decades. There are 13 government agencies that regulate the energy industry, with conflicting mandates that change very two years. There are 22 congressional committees that have some level of involvement and oversight of the energy industry.
The following table is from data provided by Triple Double Advisors LLC, an energy specialty investment firm in Houston, Texas. John White was sitting next to me and showed me this table, pointing out the poor performance in terms of investor returns from renewable energy sources and the larger returns from Master Limited Partnerships where investors are seeking yield. It seems the market is voting that it doesn't have much confidence in the renewable energy world. Hofmeister suggests that government subsidies for renewable energy will go away under the pressure to get the fiscal deficit under control. Maybe the market senses that. He says we need to create a 50-year plan for our energy policy that transcends the political cycle. (I am going to get this speech transcribed and will post it so you can read it. This guy talks sense.)
A 'Manhattan Project' type effort to build these plants would probably pull the economy out of its depression.
This would be better than giving taxpayers money 'free' to non-producing leaches.
Eliminate them all, and sell their buildings.
Beck said on radio yesterday that...
1) The Chinese are opening 1 coal plant per month (maybe it was per week)
Beck said on TV yesterday that...
2) The Alaska Pipeline guy has said 0bama & this Administration is going to CLOSE DOWN the Alaska pipeline.
Yes we probably should. At least the investment would produce lasting value.
On the other side of this discussion, my cohorts in the oil industry insist that the moratorium is nearly over and that we will be back to drilling in the Gulf soon. I believe this is a hopeful delusion.
With Salazar saying things like, “we will lift the moratorium when I am comfortable it is safe.” really means “not while I have anything to say about it.” Meanwhile, the administration keeps throwing helpeful tidbits to the industry to keep them disarmed, quiet, off their backs and out of the public eye.
Get ready, BOHICA.
The policies pushed by Obama and the tree hugger lobby will assure that in the near future we will be sweltering or shivering in our darkened homes, standing in long lines for our ration of $5 gasoline and one in five of us will be unemployed.
It's one a week.
Already, 25% of the particles in the air in the Los Angeles basin are from China. I expect that to increase a little each week.
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