Servias Ministries Blog

This week the airlines were in the news with their massive personnel cuts and downsizing plans.  See: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=als_9FvReWTY  Something just didn’t seem right.  The reason given for cutting jobs, schedules, and increasing fares by up to four times the previous prices just didn’t add up.  Being the financially oriented guy I am I decided to do a little research.  Here is what I found:

One of the most popular airplanes is the Boeing 737.  Southwest Airlines has built its business model around the 737.  Other low cost carriers have done the same.  I have flown hundreds (maybe thousands) of flights in a 737.  The following numbers represent estimates based on practical views of the "fuel issue".

The burn rate of fuel for a Boeing 737-4 is 792 gallons per hour. Source:

http://www.pbs.org/wgbh/nova/teachers/activities/3203_concorde.html

The cost per gallon of jet fuel on May 30th, 2008 was $3.826.  Source:http://www.iata.org/whatwedo/economics/fuel_monitor/index.htm

So, let’s look at the economic comparison versus one year ago:

Oklahoma City to Kansas City on Southwest is approximately 1 hour of flight time.

Current year cost:

There are about 122 maximum seats on the flight.  I have been passenger 122 before.  It was ugly in the very back of the plane!

On a full flight, the cost of fuel to Kansas City was approximately 792 gallons x $3.826 = $2,996.93 or $24.56 per passenger.

On a 61 passenger flight the cost was $49.13.  However, this summer I have not been on a flight half full, most flights were 100% full.

Last year cost (1.99 per gallon):

Full flight:  792 x $1.99 = $1,576..08 or $12.92 per passenger.

61 passenger flight: $25.84 per passenger

Increase in fuel cost per passenger:   Full flight- $11.65    Half full flight- $23.29

CONCLUSION:

The airlines can easily raise fares by $25 per ticket.  They do it all the time.  We are being misled to think that their cutbacks are due to the "fuel crisis".  It would appear that they are using the "crisis" to trim staff, eliminate marginal routes, and erase expansion/aircraft mistakes.  What can the employee unions do about a crisis?  Would they dare strike when everyone knows the losses are due to the price of a gallon of jet fuel?

Let’s assume that my calculations are off by 100%.  A $50 increase would still cover the increased jet fuel cost.

The price of oil will become the excuse for business to downsize and cut staff in many industries.  Inflation actually helps wholesale distributors’ profits.  Current inventory bought at lower prices but sold at higher inflation pricing levels increases the bottom line.  Once again we are given convenient excuses for higher costs and worse customer service.  My heart goes out to the airline employees who lose the job because of this.

We can see the sun and the wind has subsided, the ocean is still, all is calm, or is it?  The following graph illustrates the seriousness of the problem:

http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&width=1000&height=600&preserve_ratio=true&s%5b1%5d%5bid%5d=BORROW

That hyperbolic blue line is the total borrowings from the Fed, now at about $140 Billion.  The gray sections are the recessions with the 1930’s having the greatest recession (depression).  It looks like we may be due for one if cycles hold true.  We are at risk of another credit meltdown, one even larger than the subprime crisis.  Gold and silver are at nice "buy" levels for those who believe that inflation is running at a greater level than reported by the government.

The New York Attorney General is preparing to settle with the ratings agencies who continued to "look the other way" while the mortgage bankers were placing trash as AAA rated securities into the system.  See:http://www.bloomberg.com/apps/news?pid=20601087&sid=aGcUiy5dBBEs&refer=home  The settlement appears to be a slap on the hand and a "wink".  Once again the investing public is dealing with "unequal weights and measures".  How long will the Lord God Almighty allow this to continue?  It would appear that the entire financial system is being set up for a huge fall.  Investors have been replace by gamblers who have stacked the deck against the average investor.  Hedge funds have been allowed to leverage their bets up to 300 to 1.  The average person cannot leverage anything.  Such leverage cannot stand a serious loss. 

There is approximately $180 Trillion in financial assets and there is about $2 Trillion in gold worldwide.  $1 Trillion is held by Central Banks and the other is held by the public.  Can you imagine the price of gold if just a small percentage held in financial assets were to shift to gold as a protection against inflation?  $3,000 per ounce is not unrealistic.  You can also see that when currency was tied to gold, inflation could not occur.  Once the link was removed, Central Banks could inflate their currencies in the name of expansion.  This will help us understand why a load of bread was once 30 cents.  A disconnect from gold evoked a policy of inherent inflation in the globe’s goods and services.

China is concerned about a dollar crisis within 5 years.  See: http://www.reuters.com/article/reutersEdge/idUSL0221460620080603  I believe we are within 36 months.  I have targeted 1/11/2011 as a watch date.  Oil is a world currency.  It has been denominated in U.S. Dollars but that is changing.  Other countries are beginning to move away from dollar denominated oil exchanges (oil bourse[commodity exchange]).  If the U.S. Dollar were not in a crisis and losing value relative to other currencies, there would not be a move away from dollar denominated oil exchanges.  China’s $1,600,000,000,000 USD is losing value.  I expect the value to decrease by another 30% or about $500 Billion.  What can they do to protect themselves?  They can buy hard assets which will not lose value relative to the dollar.

All of the issues point to a highly complex economic challenge to keep the wheels on the wagon.  State revenues are falling.  Some municipalities have filed bankruptcy.  The following graph provides a state by state outlook:

My advice: Simplify your life.  Get rid of things you don’t need.  Pursue love, not things.  Eliminate debt.  Gold and silver are financial insurance.

To borrow the phrase used by Bill Clinton, "It’s the economy, stupid!"  Much has been written about the recent rise in energy prices.  Many writers quote other writers, government reports, and industry statistics.  What most do not consider is overall supply.  Having first hand knowledge of oil well depletion curves helps one to understand the nature of the problem.  Generally speaking,  the depletion curve of an oil well looks like the following:

Your best production occurs when the oil well initially produces.  You can stimulate the producing zone and get a second uplift on the curve, but over the long run this is the curve.  Once the well is producing, you will normally develop the field that it is in and create a more complex production curve:

The Texas Oil Production Curve is a good representation of fields around the world.  The main difference is the size of the field.  If you put all of the oil producing fields together, they might look similar to this graph.  Why do we care?  In basic economics we have a supply & demand curve.  The basic supply and demand graph would indicate as demand increases, causing a price increase, new supply would be brought into the marketplace.  This assumes that supply is unlimited over time.  The following graph depicts this:

Price

Quantity

The blue line indicates supply will increase as demand (red line) shifts.

The following graph illustrates if supply is fixed:

Price

Quantity

If demand decreases (to the lower red line), the price falls.  However, if demand increases, there is a sharp increase in the price.  Today’s demand for oil is 87 million barrels per day.  Today’s supply of oil is 85 million barrels per day.  This 2 million barrel deficit is causing the increased price of oil.  Additionally, the U.S. Dollar has been declining against other currencies:

If your currency depreciates by 25%, the cost of a global commodity goes up by roughly 25%.  If the U.S. Dollar retained its January 2006 value, oil would be priced at about $97.50 per barrel now and we would be paying about $2.78 per gallon for gasoline.

The 2 million barrel deficit is being made up by existing inventories.  Inventories in the U.S. have declined to 2003 levels.  However in the last 5 years, oil demand has increased.  Former exporting countries such as Great Britain and Indonesia who provided 1 million barrels of day are now importing oil.  Mexico’s oil production dropped 13% this year.  Mexico is the 3rd largest exporter to the U.S.

The balancing factor to these reduced supply factors is the price.  Increased prices forces less demand resulting in the movement of the price curve downward toward the supply coordinate.  Classic economics and Western thinking assumes unlimited supply.  Today we have limited supply.  I know there are those who argue that big oil companies are conspiring to withhold supply, technologies, etc.  The big oil companies have less than 15% of the world’s supply of oil.  State run oil companies have the other 85%.

Other technologies have a promising future.  However, ramping up these technologies will take years before they will substantially impact the current supply dynamics.  You don’t replace 200,000,000+ U.S. vehicles overnight.  Currently, the most scalable solution at our disposal is nuclear.  Without nuclear power, electric cars will be a poor alternative.  It is known among scientists that there is virtually unlimited energy tied up in atoms.  They understand the theory but have been unable to convert the theory into a realistic fuel alternative.

Until the revelation/baptism of Love comes corporately, I believe that the revelation of cheap energy will be withheld.  Love gives.  The "love of money" takes and is never satisfied.  Free energy would drastically change the economic climate around the world.  I believe that Our Heavenly Father will not allow this revelation to be "bottled and sold" by the moneychangers.  It appears that the global community will suffer until there is a corporate movement to turn their attention back to Our Creator.  A cleansing period is ahead and the supply of energy will be the catalyst for refining!

Remember when I wrote: "The Sharks are moving in"? http://www.servias.org/?p=107  They are now beginning to feed.  It will be a great feast.  Lawyers will have record income from the fallout of the sub-prime mortgage crisis.  Directors of Countrywide Financial will be sued along with the corporation.:

Judge Says Countrywide Officers Must Face Suit by Shareholders

See: http://www.nytimes.com/2008/05/15/business/15countrywide.html?_r=2&bl=&ei=5087&en=184fe9e64c13a342&ex=1210996800&oref=slogin&pagewanted=print&oref=slogin

Those who have enjoyed the bonuses and fees of this fiasco are now enjoying sleepless nights.  The judges ruling opens the door for expanded worldwide litigation.  Directors of large corporations are usually among the wealthy and elite and buffered from the risk associated with predatory acts against the average man.  Being a director is a status symbol with perks, easy money.  That easy money is going to be sent to the attorneys to defend these directors against the lawsuits.  The American people will demand their "pound of flesh" after it is all said and done.  Much money will be made during this multi-year frenzy.  Unfortunately, the lawyers will get most of it!

I expect to see pension funds getting in on the action soon with these securities as well as some of the other creative investment vehicles that are now unwinding.  The next president will have his or her hands full with the full blown economic, financial, and energy crisis.

America is now in a window of "crisis".  Financial TV talking heads are telling us the worst is over as they look from inside the eye of the hurricane.  They are attempting to spin every piece of bad news into good news.  I believe it is their heads that are spinning.  There is so much going on, how can the average person view the big picture?  Only the God of Heaven and Earth knows!!!  America has a monstrous ego.  The ego is illusionary at best.  The Lord God Almighty has used this country in the past but it appears that judgment is ahead.  America’s protective covering was lifted at 9/11 if not before.  Rather than repent, the country is fighting wars on two fronts- the war against terror.  Who is against us?  It is anybody that fits the definition defined by those in charge.  The rule of law appears to be broken.  The country is reflecting the hearts of the people.  All people?  Surely not.  Only the majority.

As time passes, the theory that the U.S. invaded Iraq for its oil reserves appears to have more credibility.  The war has now surpassed WWII’s length.  The cost of the Iraq war in American lives, caring for the wounded, and financial impact is staggering.  Are we going to expand the war to Iran?  During President Carter’s Administration the primary issues were Iran, Afghanistan, and inflation.  Déjà Vu!

Energy prices have hit and surpassed my short term target of $125/BBL for oil.  What many don’t realize it that the $11+ natural gas prices will show up on your electric bill soon.  The Green Machine (Environmentalists) has swayed the American public to attack coal as an energy source.  Requests for new coal powered generating plants for electricity are being  rejected state by state.  Coal is currently our cheapest energy source for electricity.

The average American will be hit hard this summer by gasoline prices.  We have been in the "shoulder" season when oil producers switch from winter heating oil demand to summer driving demand.  Historically the price for oil would drop during this time.  Further declines in the value of the dollar and oil production as well as increased demand from China and India have kept the price robust.  The era of cheap energy from oil is at an end.  I recommend trading in your SUV for a Prius or Civic if you can afford it.

Food costs will continue to increase.  We have seen a glimpse of the crisis in the recent upheavals in lesser developed countries.  People need food, shelter, and clothing no matter what country they are in.  The cost of energy to produce and distribute grain has caused food costs to increase by 10-50%.  Home gardens will once again gain popularity as the average person will feel the need to find alternatives to the high cost of groceries.  Restaurants are already feeling the pinch of inflation.  In some areas, restaurant revenues are down 30% compared to last year.

Interest rates are upside down relative to inflation rates.  8-10% inflation compared to 1-3% savings interest rates are causing elderly savers to be punished.  Each year they are losing 5%+ purchasing power.  Social security increases are intentionally tied to a lower index than reality so the government can save money.  This is another example of unequal weights and measures.

I have noticed that the American people are always "too busy".  A great example is the phenomenon of little league baseball.  When I was young I played baseball in the local YMCA league (the only league in town).  We had twelve games in the season.  Our parents came to the game.  Mom was scorekeeper.  Dad was assistant coach.  We practiced every weekday during the 12 week season when we didn’t have a game.  Nowadays little league teams play 40 to 50 games with out of town tournaments.  The season starts earlier and ends later.  The egos of the parents push these poor kids into "burn-out".  This is about to change.  The Sabbath has been watered down to a point where the day of intended reverence and reflection no longer exists in our society.  Man has been "doing what is right in his own eyes" as he did in the Book of Judges.  Since this era of cheap energy is ending,  fifty game seasons for those little leaguers will be pared back to a reasonable season.  Less travel means more time to reflect.  This time of "busyness" will be replaced by a time of repentance.

Compared to our Gross Domestic Product (GDP) our personal debt level exceeds that of the Great Depression.  Financial entities have been predatory towards those who are ignorant of personal financial principles.  Young people are targeted for credit cards.  Generally, they have no business carrying a credit card.  At a recent high school graduation, the keynote speaker urged the graduates to pay cash for purchases and stay away from the trap of buying on credit.  I was expecting to hear the normal "shoot for the stars" motivational speech.  Congress has helped to put us into this mess.  They eliminated our tax deduction for consumer credit thus moving people towards tapping into their home equity for borrowings.  With this larger pool to pull from, consumers responded by increasing their debt.  Congress virtually eliminated the "jubilee" aspect of bankruptcy.  Who do you think lobbied for that change in the law?  The financial institutions, of course!  This nearly guaranteed the credit card companies reduced write-offs.  In the past, their justification for high interest rates was the expected write-offs due to bankruptcies clearing cardholders’ debt.  The laws changed but the rates did not come down.  I suspect that judgment will come to those who exploited the uninformed and immature borrowers.  Personal incomes have not kept up with the increased prices of housing, vehicles, and food.  The consumer is less able to weather a downturn in the economy as in previous times.

Alternative energy has no silver bullet for us.  Scalability is the issue.  For instance, used cooking oil can power a vehicle.  However, if everyone demanded the cooking oil, we don’t have enough supply for the country.  Water can be used as fuel for a car.  However, fresh water is in short supply.  Some states are fighting over the fresh water currently available.  How many autos can tap into the current fresh water supply before you have a water crisis?  Tap water in some areas is corrosive to metal.  Could an engine last for 100,000 miles with this corrosion issue?  Americans have been buying about 17 million vehicles per year.  There are about 250 million vehicles in the U.S.  It would take 15 to 17 years to replace the vehicle fleet in the U.S.  If a silver bullet did surface, it won’t help the next 36 to 48 months.  New refineries can’t be built within the next 48 months.  New oilfields can’t be fully developed within the next 48 months.  New power plants can’t be built within the next 48 months.  Leadership has been asleep at the wheel and  Congress has failed to make the hard decisions in favor of pork barrel pet projects that don’t consider the big picture.

Our Heavenly Father has a plan.  It is being implemented.  Look to HIS guidance.  Walk according to HIS precepts.  As you line up with THE FATHER’S plan, you will prosper during this time of crisis.  After all, HE is not obligated to answer the prayers of your ego, he will only answer the prayers of your heart.  The next 36 to 48 months will tell the tale.  Pray!!

From time to time the market gives us an opportunity to pickup some cheap investments.  The challenge each of us has is to not be moved by the media.  Those in power are well acquainted with the power of persuasion.  Torture is persuasion on steroids.  If you bombard people with a particular view, they will ultimately believe the view you are projecting.  That is why it is so important to "hear" Our Heavenly Father and not be moved by the talking heads on TV.

Isaiah 55:8 For my thoughts [are] not your thoughts, neither [are] your ways my ways, saith the LORD.

The Book of Judges has a consistent theme: the people did evil in the sight of THE LORD, HE delivered them to their enemies, they cried out, then HE sent a deliverer.   The U.S. has moved away from the principles of the Kingdom of God to the principles of Mystery Babylon.  Usury and greed are the basis of the sub-prime mortgage crisis.  Banks, credit card companies and other lending institutions are rationalized why it is good to keep us in financial bondage.  They removed prudent lending practices to ensnare the average person in loans that at best will barely be repaid.  The "Me" generation is quickly moving toward the day of reckoning.  It appears that we are on the same course as in the Book of Judges.  We are shipping over $400 Billion to other countries, some who are potential enemies.  We are paying for their rise to power.  We may be crying out to THE LORD by 1/11/11.

In the meantime, for those who believe that their party will end, the last few days have provided some notable investing opportunities.  Gold dipped to the $870 level.  It sent gold stocks down.  A good example of a gold stock with great potential is Minefinders:

Minefinders is expecting to begin production within months.  The stock is closely held and the management acted responsibly when raising money during the exploration phase.  (See disclaimer on website).  I have invested in this company.  This is not a core holding as would be Goldcorp or Yamana Gold.  However, this stock has dramatic upside potential.  Greater risk but greater reward potential.

Gold and silver bullion were a buy this week.  $870 gold and $16.50 silver are looking cheap now.  Higher energy prices will force metal producers to keep prices higher.  Miners will shut down mining if costs exceed prices of their products.  They have done this in the past.  This creates a floor for metals prices.  China continues to play a major role in prices.  Their new middle class will have a ravenous appetite for goods and services that the West has been accustomed to.  Their meat consumption will rise.  It takes a lot of grain to feed cattle.  Moving from a vegetarian diet to include meat will have an inflationary impact on global food prices and supply.  Americans MUST start thinking globally.  The American-centric world has come to an end.  U.S. companies with employees in other countries are being pressed to pay those employees in Euros or Canadian Dollars.  Those employees are losing purchasing power when paid in U.S. Dollars.

Yamana Gold has had a 33% retracement in price.  From a technical point of view, that is a good buy signal:

I expect gold to push towards $1,600 and beyond.  Yamana and other gold stock are expected to enjoy the ride up.  Goldcorp continues to be a solid stock.  Review of their annual report reinforces my view of their potential.

I expected the natural gas price to take a breather by now.  I was wrong.  Its continued strength simply confirms our view of production declines with increased demand.  Coal is out of favor.  Power companies are starting up their natural gas fired turbines in preparation for the summer heat.  Some of these turbines had been in "moth-balls".  My original 4.25 price floor for natural gas is up to 6.50 now.  However, we might not see 6.50 again in the next few years.

I had projected $125 oil earlier.  $150-160 oil is looking more probable and sooner than I originally thought.  Those who have invested wisely should consider helping those loved ones who are hurting due to the gasoline/energy prices.  In OUR FATHER’S great grace and mercy, our investment successes are to sustain us and those around us, not just "me and my four and no more".

Record oil prices continue!

See: http://online.wsj.com/article/SB120820608486613923.html?mod=googlenews_wsj

Although not the largest exporter of oil, the Russian contribution is just as critical to the overall price structure as any other producer.  You may want to revisit my earlier writing on The Coming Energy Crisis from a Mathematical Perspective at http://www.servias.org/?p=68.

What happened to those predictions of $40 oil?  Don’t you wish that some of those people who erroneously suggested cheaper oil would have to recant their predictions with an apology?  Those "experts" must have had an impact on the average person who then went out and committed to a 6 or 7 year note for their new gas guzzler.  Unfortunately most of us cannot immediately reverse a decision like that.  I suggest that you take action to become more energy efficient.  $10 natural gas will equate to higher electricity costs.  If we have another Katrina-type hurricane, $150 oil is probable.  $125 oil is inevitable at this juncture.

Don’t let Congress off the hook.  They make money on high priced gasoline in taxes.  It is a very lucrative revenue stream.  The following graph provides a breakdown of the revenue distribution:

The taxes add no value to a gallon of gasoline.  I wonder if the government authorities will reduce their portion of revenue to help the hurting consumer?  Happy Tax day!

Too much debt, higher energy prices, and higher food prices will bring forth downsizing in all areas.  Bigger houses and bigger cars will be a preference of the past.  You only have to go to Europe to see the result of higher energy prices.  The percentage of SUV’S in Switzerland is extremely small.  There are more Smart Cars than SUV’S traveling around Zurich these days.  I would suggest that you have at least one fuel efficient car in your garage, the sooner the better.  As in the early 80’s, large vehicles will depreciate much faster as the mainstream media starts reporting the peak oil issue.  As of this writing, peak supply occurred November, 2005.

Those in the Energy Industry have been surprised by the price of both oil and gas.  Their 20 to 30 years of experience have hindered their view of global demand.  Most of their careers have been dealing with cheap oil and gas.  Prior to this decade, many wells were plugged when exploration companies found only natural gas "downhole".  Natural gas is about double what was predicted by those in the industry.  Times have changed.  Coal is out of favor for generating electricity.  Natural gas is "in".  This will translate to higher electricity costs.  As our monthly utility bills increase, the demand for larger homes will decrease.  People will no longer tolerate the high cost of living in a larger home.  Smaller, efficient houses will be where the housing boom resumes.  There’s an old saying, "It’s easier to obtain than it is to maintain".  Alternative fuels will not solve the problem.  You can’t stick solar panels on our fleet of airplanes.  Our transportation infrastructure was built on the assumption of cheap oil.  Europe’s infrastructure was built on the opposite assumption.  They are in much better shape to absorb the higher cost of energy.

I expect town centers to be revitalized.  For most families, traveling 20 miles to the movie will become history.  The lower and middle class will be hit hardest.  Inflation is going to eat up private savings.  Bible Law demands equal weights and measures.  Playing with the money supply to promote the current financial system will ultimately result in hyper-inflation.  Note the following graph:

Source: http://www.shadowstats.com/alternate_data

The Federal Reserve no longer publishes Money Supply-M3 data.  This number best reflects the increase in overall money injected into the economy.  This number is the root of inflation.  The result is price inflation.  Doubling our money supply growth will surely hyper-inflate the prices you and I pay at the grocery store, department store, and gas pump.  This problem will be systemic.  City, county, and state governments will increase taxes to cover increased costs.  Once a nation defies Biblical Law, judgment prevails.  Mercy first exposes the sin to be dealt with.  If no repentance occurs, judgment ensues.  The decades of American excesses will be cleansed.  The insatiable desire for bigger homes and cars will be quenched… the hard way I suspect.  What were we thinking???

What action should one take?  As I have written in the past, simplify.  Remove excesses from your life.  Reduce your discretionary spending for 30 days.  How difficult was it?  We tend to spend up to our monthly income.  Reinstate that budget that you abandoned a long time ago.  Learn how to grow a garden if you don’t know how.  It may be required soon.  The days of "2,500 mile" salads may be gone soon.  What’s a 2,500 mile salad?  Lettuce is grown in California and shipped to New York to be served in a salad.  The cost of transportation will prohibit many from buying those fruit and vegetables grown in distant regions.  In Switzerland, you find community vegetable garden plots of land.  Each family has a small section for their garden along with a shed to keep the tools and supplies.  They will share and trade with other families so that all will have a variety of vegetables.  I suspect prices will force people to plant vegetable and fruit gardens again.

How do I determine what is needed vs. what is excess in my life?  Ask Our Heavenly Father.  He knows your calling and knows what you need to fulfill your calling.  Not all of us need the same size house or car.  There are those who will need a private jet to fulfill their calling.  Others will only need a compact car.  Don’t envy those who have need of more capacity than you.  If they have excess capacity, it will be removed in the upcoming cleansing cycle.  More capacity requires more time and energy to manage it.  Don’t serve structure, serve God!

Oil Demand to Hit 94.3 Million Barrels a Day by 2012, IEA Says

By Mike Cohen

March 17 (Bloomberg) — The International Energy Agency, an adviser to 27 industrialized nations, expects worldwide demand for oil products to increase an average 1.9 percent annually until 2012, driven mainly by expansion in Asia and the Middle East.

“Demand is projected to grow to almost 94.3 million barrels a day by 2012,” Eduardo Lopez, an analyst with the agency, said in a presentation to the Oil Africa 2008 conference in Cape Town today. “By 2012, demand will be a third higher than in 1996.”

http://www.bloomberg.com/apps/news?pid=20602099&sid=aR16.phppLlA&refer=energy

If you are forced to drive a substantial number of miles each month you may want to consider downsizing.  If your vehicle’s gas mileage is less than 25 mpg, you should look at replacing it.  If your job requires a certain vehicle type such as a heavy duty pickup, the upcoming months and years will be a challenge.  The high price of oil appears to be with us for the next 5-10 years at a minimum.  What few people seem to understand is that oil has a much better energy coefficient (energy output vs. energy input to produce) than most alternatives.  On the other hand, ethanol has a low coefficient.  Ethanol requires energy to grow and harvest the crop, transport it to an ethanol plant.  The ethanol plant requires substantial energy to convert the feedstock to ethanol.  Often, the heat source is natural gas.  Oil is still the best deal in town.  Other technologies are just not yet viable.  The world has about 800 million vehicles with 50 million being added every year.  That is a staggering number.  The U.S. vehicle inventory averages 15-17 years to turnover or replace.  If you introduced a new technology today, it would take 30 years or more to move the world to the new infrastructure.  The crisis we are facing cannot wait 30 years.  Late adaptors to energy saving vehicles will be severely impacted.  When we had the oil crisis in the early 80’s, large gas guzzling cars lost substantial value overnight.  For those who owned those vehicles with a substantial loan balance, they were immediately "upside down" on their note.

There have been many inventors claiming a solution to the crisis.  Each invention has its drawbacks.  Ethanol requires a lot of fresh water.  Fresh water may become a scarcity soon.  Wind turbines need a sustaining wind.  Many locations are just not suitable for turbines.  Solar power requires sunlight and land area.  It won’t work in Seattle, Washington or Benton Harbor, Michigan.  They are known to count the days of "no sun".  The biofuels upset our food chain.  You can’t fly an airplane with a giant power cord.  Natural gas is world’s only super-efficient heat source.  It lacks infrastructure to handle current transportation requirements.

Scalability of new technology will be the limiting factor over the next 10 years.  Any alternative will require substantial infrastructure investment.  Infrastructure  development and repair require commodities.  Metals, hydrocarbons, cement, and other products will be in great demand no matter what develops.  Electricity is highly inefficient heat source.  However, nuclear power has tremendous benefits when producing electricity for transportation requirements.  The U.S. infrastructure is based on cheap oil.  The massive highway system is contrasted to Europe’s rail, bus, and subway system.  Blaming the oil companies will not result in any productive change.  The world will need about 10 million barrels of NEW oil per day in 2012.  There is no realistic way to ramp up the supply in time.  A new discovery such as the North Dakota (actually it isn’t new but recently revisited) will require substantial investment and time to develop if found to be confirmed as a major field.  When demand exceeds supply the price goes up to dampen demand.  The decline in the value of the U.S. dollar will only fuel price increases for U.S. domestic consumption.

What am I to do if I can’t change out my vehicle?  One subtle way to offset your energy consumption exposure is to buy "insurance".  How?  Start investing in a dividend paying energy stock.  As energy costs increase, the value and/or dividend of the energy stock should reflect the increase.  Effectively, you become both a supplier and user of energy.  Below is an example of the "insurance":

I know, you don’t have $7,840 to go buy PWE(Penn West Energy) stock.  Open up an account and start buying what you can.  The earlier you start dealing with the energy issue, the better shape you will be in when gasoline hits $4.40 per gallon.

See Disclaimer: http://www.servias.org/?p=56

The term black swan comes from the ancient Western conception that ‘All swans are white’. In that context, a black swan was a metaphor for something that could not exist. The 17th Century discovery of black swans in Australia metamorphosed the term to connote that the perceived impossibility actually came to pass.

Most people today believe that technology and sophistication of thought would prevent any economic catastrophe from happening.  The classic argument of the average man on the street is, "If we can go to the moon and back, surely this problem can be resolved."  What mankind has failed to put into his equation is the sovereignty of God.  Spirit trumps the mind and flesh.

In the Book of Judges,  The Lord would provide a deliverer for the children of Israel.  Each deliverer would defeat the enemy and then peace would be restored.

Judges 3:30 So Moab was subdued that day under the hand of Israel. And the land had rest for eighty years.

Upon reading the Book of Judges, you will notice that after each deliverance, the rest period shortened.  The problem was that each man would do "right in his own sight" rather than following the Word of The Lord.  Our Heavenly Father would evoke a "cleansing cycle" to clean up the mess created by man during the expansion cycle.  In our walk we are to develop consciousness about our relationship with God.  This happens through our acceptance of Jesus Christ.  Another aspect of our walk is to develop faith.  Faith cometh by hearing the Word of God.  This walk of faith and consciousness is tested.  In Hebrews 11:17, Abraham’s faith was tried and tested.

An event known as a "black swan" may be upon us.  However, it is not a black swan to those who are anticipating a cleansing cycle.  Only those who have no clue will view an upcoming negative economic event as a "black swan".  The black swan was created by The Father.  The Europeans in their thinking concluded that there were only white swans.  They had incomplete knowledge.  In the Scripture, Our Heavenly Father reveals His character.  It is one of righteousness and lawfulness wrapped in love, grace, and mercy.  His mercy gives us an opportunity to turn from our wicked ways.  Ultimately we will participate in a cleansing cycle.  The cleansing cycle will be disastrous to many.  Their sand castles will be washed away.  Their reliance on material possessions will be shattered.  The perfect storm is forming.

What should I do?  I believe that it is time to enact a personal cleansing cycle.  Reduce and eliminate debt.  Remove unproductive assets.  Clean out the attic and closets.  Get rid of those things you acquired that you no longer have need of.  Bless someone with those things that are still usable but no longer useful to you.  As they say, "become lean and mean".  I have often thought that the people of the U.S. could empty their storage facilities and bless a third world country in its entirety.  Return to the fundamentals of The Bible.  Reread Scripture with a fresh perspective.  Search for those hidden revelations reserved for this time in history.  Once the global cleansing cycle begins, The Father will raise up those who are ready to receive His power and authority to enter into the fullness of their calling.

Paul Volcker, former Head of the Federal Reserve, recently called the current economic situation "the mother of all crises".  http://youtube.com/watch?v=2opw-iUaezs&feature=user

Jim Cramer (Mad Cramer) is now on the bandwagon for $1,600 gold. http://www.thestreet.com/_yahoo/video/cramerinterviews/10411623.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA#10411623

I expect the US dollar to lose at leat another 30% in value if not much more.  Your savings account will do the same.  You may want to diversify your assets.  A 5 to 10% position (of your liquid assets)in gold and silver is not unreasonable.  This simply acts as an insurance policy to offset the loss in value of your US dollar denominated assets.  You STILL need liquidity.  That is what a savings account is designed for.  For those who are broke, I believe that The Father is raising up those with gifts and callings to minister to those without just as He raised up Joseph.  God loves a cheerful giver.  Mystery Babylon exalts those who have accumulated material wealth, The Kingdom of God exalts those who give and serve.