Kunstler: Black Swans Everywhere

It’s too bad the current presidential candidates have been unable to address the unfolding economic nightmare. Their collective silence on the matter suggests that they don’t have a clue what to say about it. As the nightmare plays out and black swans flock in to blot out the sun, and the hedge funds come a’tumbling down, and more big banks blunder into black holes, and businesses big and small across the land shutter up their operations, and the unemployment rolls swell, and families are thrown out of their houses even when bailouts are supposed to be saving them (but the bureaucracy can’t get the paperwork done in time) — well now, they are going to be one pissed off bunch of people. What will they do at the conventions? Our outside the conventions?

In the deeper background of all this is the all-important oil story that nobody in politics or the media wants to pay attention to.
Notice that in the fervid unloading of assets this past week, as investors dumped their positions in the commodities markets, the price of oil remained stubbornly above $100-a-barrel when it was all over on Thursday afternoon. Well, maybe they’ll ratchet down a little further this week, but the trend line will prove to continue remorselessly upward in the months ahead.

Peak oil is for real. The supply can’t keep up with global demand, even if it dips in the USA. And more portentous sub-plots develop in the story every month. Export rates are falling at a steeper rate than depletion rates. The exporting nations are not only buying more cars and running more air-conditioners, they also need to use more energy to lift the oil they’ve got out of the ground.

Another sub-plot is the fact that the equipment used world-wide to drill for oil and recover oil and move oil around the planet — all that equipment is now so old and rusty that it can barely do the job, and it is going to start failing altogether unless investments are made to replace it, which nobody is making.

By the way, Americans blame the familiar private oil companies for all the trouble with oil in their lives — Exxon-Mobil, Shell, et al — but they don’t seem to know that oil nationalism is in the driver’s seat now. The old private “majors” are only producing five percent of the world’s oil. The rest is coming from the national companies — Aramco, Petrobras, Pemex, et blah blah — and the very operations of the oil markets are entering a phase of radical instability as they move away from auctioning their stuff on the futures markets and start making long-term favored customer contracts instead.

The bottom line is that high prices for oil is hardly the only thing America has to worry about. Pretty soon the US will have to worry about getting the oil at any price — meaning, we’re in for shortages and supply disruptions sooner rather than later.

Clusterfuck Nation