Military conflicts combine with climate constraints to impede navigation across the globe

Since early March a previously obscure waterway between Iran and Oman that very few people could name has become the subject of daily reporting around the world after Iran closed it as a response to the attack on Iran by the United States and Israel. The Strait of Hormuz, which remains closed to most ships, is now known around the world as the transit point for 20 percent of the world's oil and high percentages of key materials including fertilizers such as ammonia (23 percent), urea (34 percent) and phosphate (20 percent), helium (30 percent), and sulfur (24 percent), all of which are derived from or are co-products of oil or natural gas except phosphate.

On the other side of the Arabian peninsula, a long-festering conflict between Ansar Allah (which controls part of Yemen) and Saudi Arabia has escalated. Not surprisingly, Ansar Allah, also known as the Houthis, have resorted to a tactic used previously in the conflict. They have closed the Bab el-Mandeb Strait near their the territory to Saudi vessels.

The strait connects Red Sea shippers with ocean-going routes to Asia. This includes ships coming through the Suez Canal on the northern end of the Red Sea. The Houthis say that commercial shippers not serving Saudi Arabia may continue using the strait, but many have chosen to avoid it as the Houthis attack Saudi ships. In practice this means primarily a prohibition on Saudi oil tankers which carry Saudi Arabia's main export. For now, the Saudi ships are taking a trip around Africa to reach Asia despite the added costs. But the Houthis have shown they can hit Saudi ports on the Red Sea and could escalate to shut down even this traffic.

As U.S. oil and refined product exports soar, will the Trump administration impose an export ban?

The U.S. oil industry got a scare last week. News reports say that the Trump administration may be considering an export ban on crude oil and refined petroleum products such as gasoline and diesel in order to bring those prices down—prices which have been elevated considerably by the reduction of oil supplies worldwide in the wake of the Iran war. But, a Trump administration spokesperson said the administration has no plans to ban exports of oil or natural gas products.

It's important to note that there is an old adage in Washington, D.C.: "Nothing is true until it is officially denied." The administration has probably discussed such a ban. Whether it will implement one is the question. With exports of distillate fuels (which include diesel and fuel oil) hitting the highest on record and gasoline exports bouncing between about 750,000 and 1 million barrels per day, American consumers may be wondering why the administration doesn't act now.

The answer is complex as I detailed in my piece in May entitled "Will the U. S. curtail oil exports as fuel prices rise?" But the short version is two-fold:

The Iran war is a monkey trap for the United States

A monkey trap offers a reward such as food that when grasped makes the hand too large to withdraw from the hole in the trap giving access to that food. Unless the monkey lets go, the animal is stuck. Now, the obvious choice when danger arrives is to simply let go and run. But, supposedly, monkeys won't let go even as human hunters approach and then club them to death.

The war with Iran has become the Trump administration's monkey trap; potential victory over Iran is the prize in the trap. Strangely, the only prize now available is something that was already available before the war started: freedom of transit through the Strait of Hormuz. But now that Iran has seized control of the strait and effectively closed it to unfriendly traffic, that seizure has become the most important leverage Iran has over the United States and its allies.

As long as the war continues, Iran says there will be no shipments of oil, natural gas, petrochemicals, helium, fertilizers and other key commodities except for its own and a few select shipments from friends of the regime. Since these shipments make up substantial fractions of the world's supplies, closure of the strait has sent prices of these products skyward with shortages already appearing in many places across the globe.

Does Elon Musk think AI is socialist?

Our tech overlords tell us that artificial intelligence (AI) will soon create a world of abundance while solving our major problems such as climate change. Just so you know who I'm talking about, I have previously defined our tech overlords as "a grab bag technology companies, technology scientists and inventors, and technology investors and journalists who have bewitched the modern world through inventions that speed up our daily lives without necessarily making them better."

In a recent interview with The Economist magazine, tech overlord-in-chief Elon Musk explained that "[i]f you have vast numbers of robots with vast amounts of digital intelligence, you have a sort of a quasi-infinite economy." In such an economy, "anyone can have anything they think of." He added that "money won't matter in 2036" because everyone will have a high income without working. This is a Star Trek version of the future, he explained.

Musk's views exemplify the tech industry fantasy of a push-button, voice-activated future world of abundance portrayed in the many Star Trek television series and movies. Any serious viewer of the series and movies knows that in the Star Trek future, poverty has been eliminated, people do not need money and in fact, everything you want or need is available to you.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, July 26.

Plankton decline, 'Soylent Green' and the future of civilization

Last week I watched the 1973 dystopian film thriller "Soylent Green" for the first time in probably 30 years. The film depicts a society in which climate change has put most of the world into a hellish, near perpetual heat wave (at least during the summer), dramatically increased the inequality of wealth (with the fortunate few living in luxury apartments with air-conditioning), and caused a scarcity of food such that most people are reduced to eating what is called "soylent," a processed wafer-like food that supplies essential nutrients (the production of which is monopolized by one huge corporation called the Soylent Corporation).

You don't have to stretch your mind all that much to see that a lot of what is depicted in "Soylent Green" is already coming true. I found one part of the plot particularly prescient in predicting the decline of plankton in the oceans. You see, in the film plankton form the basis for one type of soylent, namely soylent green. (Soylent red and yellow are also available but less desirable.)

Ostensibly a crime drama, the film follows a police detective played by Charlton Heston who is trying to solve the murder of one of the members of the board of directors of the Soylent Corporation. Ultimately, the detective stumbles onto a forbidden secret: The plankton in the oceans are dying thus threatening the worldwide food supply. As the investigation continues, the detective penetrates a production facility for soylent green where he discovers (spoiler alert!) that soylent green is now being made from recycled bodies of the dead, a sort of civilization-wide cannibalism.

Something's gotta give: The American West and the dwindling Colorado River

Depending on whom you talk to the Colorado River serves either 35 million or 40 million people, all of whom are having to reconsider how much water they use and how they use it in the wake of an ongoing megadrought that arrived at the beginning of this century. The changes are no longer in the "let's-discuss-this" phase as the federal government threatens to impose up to a 40 percent cut in river water allocations over the next 10 years if the seven western states—Colorado, New Mexico, Wyoming, Utah, Arizona, Nevada, and California—and the 30 recognized tribal jurisdictions with water rights don't agree among themselves about how to divvy up the dwindling Colorado River.

There isn't as much water as there used to be and that means that not everything people are using water for now will get its previous allotment. No doubt the volume of water representing the 52 percent of the total river withdrawals currently taken for agriculture could be reduced through conservation and efficiency measures. But it turns out that "conservation" in some instances might mean simply leaving fields unplanted for lack of water. And, it's not as if efficiency measures haven't already been implemented as irrigated agriculture in the Colorado basin has been transitioning to the much more efficient drip irrigation away from traditional surface irrigation. I could not find any statistics for this, however. So, it's not clear how much more water savings could be achieved through the installation of additional drip irrigation in place of surface irrigation.

Then, there is the 18 percent of the water withdrawals currently going to municipal water systems. The people in those cities have taken seriously the need to reduce water use. Even though those systems now serve 24 percent more residents today than in the year 2000, those systems use 18 percent LESS water. How much further could these cities reduce water consumption? It's almost certain that the easiest forms of reduction have already taken place. The next leg down in water consumption will be harder.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, July 5.

Why the U.S.-Iran MOU (probably) won't prevent the approaching energy cliff

The outline of conditions and topics for a negotiated settlement of the U.S.-Iran conflict called a Memorandum of Understanding (MOU) and signed by both sides last week in all probability won't prevent the approaching energy cliff. That cliff will be the result of fast-depleting commercial and strategic inventories of oil and oil products around the world that have acted as buffers in the wake of the suspension of almost all tanker traffic through the Strait of Hormuz during the conflict—tankers believed to carry about 20 percent of the world's daily needs of oil.

As I explained in a previous piece, the world is fast approaching "tank bottoms," that is, the depletion of usable oil and oil products inventory. When that inventory effectively runs out, there will be a bidding war for oil and oil products to replace the millions of barrels per day that will still be needed but unavailable from inventories as the drama in the Persian Gulf continues.

As of this writing, the Strait of Hormuz has been closed by Iran in response to continuing attacks by Israeli armed forces in Lebanon. The first provision of the MOU is that hostilities are to cease immediately everywhere including Lebanon as a pre-condition to further negotiations. Just as important as whether the strait is open are what each side means by the word "open" and how shipping companies and the insurance firms who insure their tankers understand the risk of transiting the strait.

Here's comes the AI bailout: Why government stakes in AI companies are a sucker's bet

When Bernie Sanders and Donald Trump agree on something, that agreement deserves examination. Both are touting the idea that the federal government should have an ownership stake in major artificial intelligence (AI) companies. For Sanders this would be a way for the American people to share in the wealth generated by AI companies that those companies accumulated through the theft of other people's writing, art works, photos, videos and recordings. And it would give government a seat at the table as a representative of the public in deciding how AI companies will operate in the future. Just how Trump views the purpose of government ownership of a share of AI companies is not yet clear.

Problem is, AI companies are not really generating any wealth. Right now they are simply burning through billions of investor dollars that are heavily subsidizing users with no clear path to profitability. And no, the AI industry is not following the path of previous technologies such as the internet and the smartphone in which costs will rapidly fall as the technology matures and greater numbers of people adopt AI. Years into the AI boom the cost of providing its promised outputs is going up, again with no clear path to bringing the cost down. Adding users does not bring down unit costs because more users require more resources. It's the opposite of the software model where the cost of distributing a piece of already written software to the next customer is close to zero.

I warned last November that artificial intelligence (AI) companies were setting the stage for a bailout, one that will be the result of their deeply flawed AI models that won't remotely deliver what they are promising. AI critic Ed Zitron said in a recent interview that when he asks AI industry boosters to tell him what AI can actually do without using the word "will," they have little to offer. Zitron agreed that while search engines are using AI to provide more sophisticated outputs, those outputs have become more unreliable. "You have to check every single bloody thing. You can't rely on anything," he said.

Our oil "savings account" is dwindling rapidly, more oil price spikes likely

In the coming weeks readers will increasingly see two rarely used phrases in stories covering our dwindling worldwide oil inventories: "operational minimum" and "tank bottoms." The phrases more or less signify the same thing, though the former is more abstract and precise, while the latter is more visual. They signify rapid depletion of existing oil inventories and presage price spikes to come due to the loss of oil supplies from the Persian Gulf because of Iran's closure of the Strait of Hormuz, the maritime artery through which 20 percent of the world's oil previously flowed.

Think of it this way: Let's say you are currently spending your entire weekly salary for living expenses. Then, you suddenly have your salary cut by 20 percent. Believing that the cut is temporary, you dip into your savings account to make up for the loss of income. At the current rate of withdrawal, your savings will last four months. As the weeks go by, your savings account balance dwindles as you continue to live in the style to which you were accustomed before the salary cut. Your boss tells you (frequently!) that your full salary will soon be restored. So rather than cut back on your expenses, you keep spending down your savings believing that all will return to normal before you exhaust your bank account.

That's what is happening in the global economy which had about four months of buffer stocks—essentially, an "oil savings account"—to draw from at the beginning of March. We are getting closer and closer to using up those savings which are in the form of commercial inventories. We are rapidly drawing down those inventories to make up for the loss of oil and oil products from the Persian Gulf.

In fact, a recent analysis suggests that the world oil system will start to experience "operational stress" sometime in June. Operational stress "is the point at which the system begins to experience significant functional strain: price volatility becomes extreme, rationing of refined products begins in the most exposed markets, and the margin for error in supply chain management drops to near zero." This analysis takes into account ongoing strategic petroleum reserve releases around the globe and states that "[e]ven full deployment of strategic reserves buys weeks, not months, at current drawdown rates."

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, June 7.

South by Southwest: Water crises hit America

Policymakers, politicians and the media have been talking about the need for better water policy in the desert southwest of the United States for decades. As the Colorado River, a major source of water for much of that area, continues to shrink, policymakers are having a hard time keeping up with nature. A new 10-year plan contemplates cutting water supplies for Arizona, Nevada and California by up to 40 percent depending on availability. Not surprisingly, these states don't like the plan that the Trump Administration said it will impose on the states since they have been unable to come up with an agreement.

The century-old Colorado River Compact governed water allocations to the upper and lower basins of the river. But the compact overestimated water flows and the states along the Colorado have been dealing with that error ever since. Now, a drought that has spanned more than two decades has made matters worse.

I can remember flying into Las Vegas in 2009, looking out my window and seeing the so-called "bathtub ring" around Lake Mead, the lake created by Hoover Dam. The top of the ring indicated where the water level had previously been before the ongoing multi-year drought noticeably lowered the lake level. Las Vegas was at the time involved in what was essentially an emergency project to build a water intake at a deeper level for fear that the surface of Lake Mead would fall below the current intake and deprive the city of 40 percent of its water.  The water authority succeeded in building the intake, but, of course, that didn't do anything to increase water supplies from the Colorado River.

Fertilizer, Energy and Liebig's Law of the Minimum

The loss of fertilizer shipments coming from the Persian Gulf as a result of the Iran war got me thinking about the chemist Justus von Liebig, a prominent 19th century proponent of the mineral theory of plant nutrition. Liebig is the popularizer of what is now known as Liebig's Law of the Minimum. The law states that the least available essential nutrient limits the growth of plants. This means once a grower runs out of one essential nutrient, adding extra of others will not make up for the lack of the one that is limited.

Liebig's eponymous law is about to assert itself in a big and distressing way in the coming growing season. That's because the Persian Gulf region supplies 36 percent of the world's urea (a form of nitrogen fertilizer), 29 percent of its anhydrous ammonia (another form of nitrogen fertilizer), 26 percent of diammonium phosphate and 13 percent of monoammonium phosphate.

Just to review a little high school biology, nitrogen, phosphorus and potassium are primary nutrients that cannot be obtained from the air or water and must come from the soil. (With regard to nitrogen, legumes such as soybeans are an exception in that they can fix nitrogen from the air for use in the plant.) Adding these primary nutrients to the soil improves the quality and quantity of plant growth. Huge of amounts of two of the three primary nutrients mentioned above are no longer flowing out of the Persian Gulf.

Chinese ag theft, pathogen research only point up dangers of GMO crops and monoculture

I'm shocked, shocked, to find out that the Chinese are stealing America's agricultural technology!

It can hardly come as a surprise that the Chinese government actively encourages and organizes the theft of intellectual property from other nations and their companies, in this case, agricultural technology in the United States. College students are some of the most active players in these thefts as between 250,000 and 300,000 routinely attend U.S. colleges and universities in any given year, most of them studying in scientific and engineering fields.

Not only is the theft of proprietary seeds an issue, but also research on and transportation of plant pathogens. No one has been accused of actively introducing pathogens into America's farm fields so far. But the combined problems of theft and possible biological attacks on crops merely lays bare the bankruptcy of the modern conventional agricultural system.

Will the U. S. curtail oil exports as fuel prices rise?

President Donald Trump may soon feel the need to "blockade" U. S. crude oil exports after those exports hit a record high recently, a trend which, if it continues, will increase the price U. S. consumers pay for gasoline, diesel and other petroleum-related products.

Nations around the world are scrambling to secure oil supplies that have been dramatically reduced by Iran's closing of the Strait of Hormuz to oil tankers of "hostile" countries which include major oil exporters such as Kuwait, Saudi Arabia, and the United Arab Emirates. In addition, the U. S. Navy has placed a blockade on ships from Iranian ports leaving the Strait of Hormuz, though the effectiveness of the blockade is in dispute.

In an April 1 televised address Trump said: "To those countries that can’t get fuel — many of which refused to get involved in the decapitation of Iran, we had to do it ourselves — I have a suggestion. Number one, buy oil from the United States of America; we have plenty. We have so much."

The Iran conflict and our Wile E. Coyote moment

I believe the global financial markets are now in what I would call a Wile E. Coyote moment frequently depicted in the old Warner Bros. animated series called "The Road Runner Show."  In this cartoon series a coyote while pursuing a roadrunner would inevitably end up running off a cliff and be suspended in mid-air until he looked down and hurtled to the bottom.

I say this because in case you didn't notice, last week we had the first public admission that fear is starting to grip monetary officials as a result of the Iran conflict. The United Arab Emirates (UAE) asked the United States government for a currency swap line, essentially a loan in dollars collateralized by the UAE's own currency.

I believe this event could be the leading edge of a financial panic that will ripple through the global financial system in the coming weeks, one that will bring various markets back into alignment with physical reality. That physical reality consists of an ongoing serious energy shortage and badly broken supply chains which are only getting worse as Iran continues to prevent critical energy and chemical supplies from exiting the Strait of Hormuz (except for its own).

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, April 26.

Why most economists vastly underestimate the economic damage of the Iran conflict

A priest, an engineer and an economist are stranded on a desert island. The first order of business is to get some food. The priest suggests that they all pray. The practical-minded engineer suggests that the three men make a net to catch some fish. But where will they find the necessary materials? The priest and the engineer turn to the economist and ask him if he has any ideas. The economist replies, "Assume a fish."

This well-worn economist joke summarizes one of the chief flaws in contemporary economic theory. That theory almost completely ignores the role of physical resources, assuming they will always be available in the quantities we need at prices we can afford at the time we need them. When those resources aren't available, that theory begrudgingly accepts that there will be some damage to economic activity, but tends to greatly underestimate the impact. This conceptual flaw explains why economists in most financial institutions and governments and thus investors are not especially alarmed at the loss of energy resources as stock market indices remain not too far from their recent highs.

For a good summary of how contemporary economic theory goes off the rails, Australian economist Steve Keen offers a mercifully brief and comprehensible explanation. Here I will relate one critical part of that explanation. About 5.7 percent of U.S. GDP is devoted to procuring and distributing energy. Most economists will tell you that a 10 percent decline in energy availability would have a small effect on the U.S. economy. They would take the percentage of the economy devoted to energy, in this case 5.7 percent, and multiply it by 10 percent to arrive at a 0.57 percent reduction in economic activity.

Martin Act to the rescue: Insider trading on Trump reversals in the legal crosshairs

Currently unknown investors netted tens of millions of dollars in profit by placing huge trades in the oil futures markets just 15 minutes before President Donald Trump announced he was extending the deadline for strikes on Iran's energy infrastructure by five days to allow for nonexistent "negotiations" (which then turned into an additional 10 days—which meant little since U.S. and Israeli bombing simply continued). Because these investors bet on a fall in oil prices, they made money when the price of oil dropped sharply after the announcement.

The same or other investors traded heavily in stock index futures before the Iran announcement and profited handsomely as stock futures soared. All these investors could end up in legal jeopardy for engaging in insider trading if they were somehow given a heads up about the announcement. Were their trades just coincidental to the announcement? It seems unlikely, but that's the big question an investigation would answer.

Iran to Trump: If you destroy us, you destroy yourself

In the American streaming series "Bosch," the main character, a police detective named Harry Bosch, kills two bad guys in a plane who are trying to kill him. He then goes to the cockpit holding a pistol taken from one of the dead men. The pilot looks at him and says, "You kill me, you kill yourself." Bosch says, "I'm a f--king cop, asshole." The plane lands safely and the pilot is taken into custody.

In this analogy, President Trump is Harry Bosch; the pilot is the Supreme Leader of Iran, Mojtaba Khamenei; and the plane is the world economy. Khamenei can crash the plane, that is, kill the world economy by destroying the oil and gas infrastructure throughout the Persian Gulf so that it would take years to rebuild. Khamenei could go even further and destroy desalination plants in the following countries with noted dependencies on such plants for drinking water: Saudi Arabia (70%), Oman (86%), United Arab Emirates (42%), and Kuwait (90%). Doing this would make these countries largely uninhabitable. It's important to recognize that the Iranian military has demonstrated that it can hit precisely what it wants to hit with missiles and drones and destroy it.

Sticking with the Bosch analogy, it's still possible for Trump to let the plane land and save the world economy from complete destruction. The difference is that the pilot—in this analogy, Iran in the person of its Supreme Leader—must be allowed to go free and live undisturbed. That is what Trump believes he cannot allow because it would be a humiliating loss.

Is the complacency in global financial markets warranted?

Shortly before the war with Iran began, I wrote that the seeming complacency among government officials and financial market participants was based on two assumptions which I argued were unlikely to turn out to be true: 1) President Donald Trump would make a last-minute deal with the Iranians and declare victory and 2) even if Trump didn't make such a deal, the Iranians would not do all the things which they threatened to do if attacked.

Here we are three weeks into the conflict between the United States and Israel and Iran. There was, of course, no last-minute deal and the Iranians have done exactly what they threatened to do. Here is what I reported before the war were Iran's threats:

Those threats include attacking U.S. bases in the region, attacking any country that assists the U.S. and Israeli war effort, attacking U.S. naval vessels, and, most important, closing the Strait of Hormuz through which passes 20 percent of the world's exported oil and liquefied natural gas.

Oil price manipulation, an unrecognized stratagem and an unhinged plan

Governments around the world are desperate to bring down oil prices in the wake of a cutoff of about one-fifth of the world's supply due to the Iran war. Here are some of the moves we've seen so far:

1. The International Energy Agency, a consortium of 32 countries which coordinate energy policy and emergency readiness, called an emergency meeting to discuss release of strategic petroleum reserves to ease prices. The countries agreed to a release of 400 million barrels from reserves held in underground caverns and above ground in storage tanks, the largest release ever of such reserves.
   
   With about 20 million barrels per day no longer available from Persian Gulf exports because of the Iranian closure of the Strait of Hormuz, the narrow passage from the gulf to the open sea, this release represent just 20 days of oil deliveries. But it is unlikely that the daily release of oil will be more than a fraction of the lost barrels given constraints on how fast the reserve can be accessed. So it's not surprising that oil prices actually went up after the announcement.


2. Of course, I would be remiss in not pointing out that Iran's closure of the Strait of Hormuz was the initial manipulation of the world oil price as it vowed to push oil prices to $200 per barrel.

Iran war: What we're in for and why logic is your friend

Two weeks ago I suggested that the complacency regarding war with Iran was misplaced and that that complacency was likely soon to be replaced by panic in the world's capitals and financial markets. The general belief was that President Donald Trump would relent, make a deal with Iran, and declare victory. Even if he didn't, the Iranian regime would be quickly overwhelmed by a combined American and Israeli attack and possibly be overthrown in a popular revolt or in the alternative, sue for peace within days.

Of course, neither of those things turned out to be the case. The complacency has now vanished. Leaders in at least some capitals are panicking though the financial markets continue to respond in a surprisingly muted way to the risks this war poses for the world economy.

Here is the most important thing readers should understand about this war: Iran defines winning the war very narrowly. Victory for the Iranian regime is that the regime survives. Israel and the United States define winning as the fall of the current regime leading either to a new friendly regime or a break-up of the country into various parts. And just last Friday President Trump added that the "unconditional surrender" surrender of Iran is the only acceptable outcome. Now consider the remarks of the Iranian foreign minister to NBC: "We are not asking for a cease-fire and we don't see any reason why we should negotiate with the U.S." He pointed out that the United States has used two previous negotiations as a deceptive cover for attacks. So, it looks like this conflict will be a fight to the finish.

Could AI lead to the destruction of civilization?

When it comes to the dangers of artificial intelligence (AI) and now artificial superintelligence (ASI) (sometimes called artificial general intelligence), I feel as if we've been transported onto the set of the 1983 film "WarGames."

In the film teenage hacker David Lightman stumbles onto the military's most sensitive war scenario planning computer while believing he has simply found a soon-to-be-released game called "Global Thermonuclear War" on the server of a computer game company.  Lightman activates the game which ultimately makes personnel at the North American Air Defense Command (NORAD) mistakenly believe that the Soviet Union is preparing for an attack. On big screens throughout the war room, Soviet movements and preparations become ever more threatening by the hour. As we are told later, the object of the game is to win and so the computer sets out to win a thermonuclear war.

When Lightman realizes what he's done, he seeks out the one person he believes can stop the madness. (I'm skipping a lot of steps here.) He catches up with the architect of that war planning computer system, Stephen Falken. Falken is living a solitary, anonymous existence (under a different name) in a home that Falken says is near a primary nuclear target. He explains to the young hacker: "A millisecond of brilliant light and we're vaporized. Much more fortunate than the millions who'll wander sightless through the smouldering aftermath. We'll be spared the horror of survival."

Wars and rumors of wars: Iran edition

Last September I produced a brief survey of major conflict across the globe in which I wrote the following about the conflict with Iran and Israel, one which is now referred to as the 12-Day War: "[T]here is every reason to believe that the conflict between Israel and Iran is not over and that the United States may be drawn in again."

It appears the next phase of this war is about to begin. In fact, by the time you read this, attacks may already have begun.

It puzzles me that the rest of the world has treated the run-up to this second phase of the war as a non-event. Although the vast build-up of U.S. military forces has been covered in the media, other stories concerning the U.S. Supreme Court overturning tariffs imposed by the Trump administration and the ongoing fallout from the Epstein files are covered with equal if not greater weight. The financial markets have been barely roiled except for a relatively small uptick in oil prices.

The chemical society and its discontents: Ozone layer edition

The history of chlorofluorocarbons (CFCs), their danger to the ozone layer, and the drive to replace them reminds me of an observation from former CBS news correspondent and commentator Eric Sevareid: "[T]he real cause of problems is solutions."

When chemists F. Sherwood Roland and Mario Molina asked where chlorofluorocarbons (CFCs) go after leaking from refrigerators and air conditioners or being intentionally released from aerosol cans, they did not know that the answer would lead to the world-shaking discovery that these chemicals were threatening the Earth's ozone layer with destruction. Since this layer protects the Earth's surface from most of the Sun's ultraviolet radiation—radiation that would threaten all life if unchecked—the countries of the world agreed to phase out the use of these chemicals in what is known as the Montreal Protocol.

Substitute propellants for aerosol cans—mostly what is called liquid petroleum gas—represent an explosion hazard, but no longer threaten the ozone layer. But the first substitute for refrigerators and air conditioners, hydrochlorofluorocarbons (HCFCs), still had some potential to damage to ozone layer. So, now those are being phased out and being replaced by hydrofluorocarbons (HFCs) "which contain no chlorine, and therefore pose no risk to the ozone layer."

Taking a break - no post this week

Your humble author has been so overwhelmed with work that he has been unable to find time to write a post this week. He promises to return next week Sunday, February 15.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, February 8.

World oil and natural gas consumption vs discoveries: Diverging trends mean trouble

Herbert Stein was an American economist who served in both the Nixon and Ford administrations. He is probably most famous for formulating Stein's Law, namely, "If something cannot go on forever, it will stop." This is, of course, an obvious statement. But I think it cannot be stated too often in a global society that believes in infinite economic growth.

I propose to take a subset of that growth to demonstrate Stein's point. The subset is world oil and natural gas consumption versus discoveries. It turns out that Rystad Energy, a major consulting firm at the heart of the global oil and gas industry, has taken note of the fact that "just 25–30% of the oil consumed each year is currently being offset by new discoveries."

In a separate piece on both oil and natural gas, the advisory firm notes:

Venezuela's goo-in-the-ground isn't usable oil at current prices (and may never be)

In the wake of Trump administration's prosecution of a war and blockade against Venezuela and the administration's promise to vastly increase oil production in the country, it's worth knowing why claims about Venezuela's oil "reserves" being the largest in the world are problematic. It's also important to understand what this implies for the future of oil production in Venezuela.

Consider the following:

1. Official oil reserves are just that. They are numbers reported by official government sources. Where these numbers come from large state-owned oil companies—as is the case with Venezuela—they are rarely verified through independent audits. And, those numbers tell you nothing about the economic viability of the claimed reserves.


2. There is a pattern among several OPEC countries including Venezuela of suddenly claiming vast increases in oil reserves without evidence of additional economically viable discoveries. Just to be clear, reserves are known deposits of minerals demonstrated to be extractable using current technology and profitable at current prices. The term "reserves" does not appear to apply to most of Venezuela's extra heavy crude at current prices which is believed to be 90 percent of its supposed reserves. This is true especially if upgrading facilities have to be built from scratch—Venezuela has only one extra heavy crude facility that began production in 1947. Such expensive long-term investment requires a belief that prices will reach and maintain much higher levels than today and that political and social conditions will remain calm and favorable over long periods. (For a comparison of Venezuelan crude oil with others in the world, see this infographic.)

Venezuela and Greenland: 'Smash-and-grab' diplomacy in the age of scarcity

The United States is now engaged in what I am calling "smash-and-grab" diplomacy in Venezuela, and it will perhaps soon do the same in Greenland, a territory of the Kingdom of Denmark. In case you have never heard the term, smash-and-grab refers to robberies undertaken by smashing store windows and/or display cases and taking what is readily available without concern about alarms going off or people on the street or in the store seeing what the robbers are doing. The phrase seems more descriptive than the older one of "gunboat diplomacy" in which, not infrequently, the mere display of force was used rather than actual attacks to obtain concessions from a weaker nation.

The current practitioners of the U.S. form of smash-and-grab diplomacy leave little to the imagination, prefering big displays of violence and simply taking what they want with no pretext that the target country is accepting terms through negotiation. Witness the brazen taking of all exported oil from Venezuela, the proceeds from which are supposedly going to be used "for the benefit of the American people and the Venezuelan people" (whatever that means), according to U.S. President Donald Trump.

Readers certainly know that in the past there have been other more subtle ways that major powers have taken the resources they need for their industries and militaries. For instance, what followed the era of gunboat diplomacy—which more or less ran from the late 19th century through early 20th century—was a era of less direct bullying of weaker countries by major powers. As empires crumbled, newly independent countries were strongly encouraged to install leadership friendly to American and European foreign policy and economic interests—or else! One of the "or else's" was detailed in a book called Confessions of an Economic Hit Man, written by one of the unofficial emissaries from the United States who carried a message of consequences if the target countries' leaders did not acquiesce. The author began the book with this:

Autonomous vehicles: Is necessity really the mother of invention?

Aesop's Fables date back to the 7th century BCE and may be the first known written expression of an often repeated proverb, namely: Necessity is the mother of invention. In the story called "The Crow and the Pitcher," during a terrible drought a thirsty crow finds water in a partially full water pitcher. But the mouth of the pitcher is too small to allow the crow to reach the water. The crow discerns that if it drops enough pebbles in the pitcher, this will raise the water level. So the crow proceeds with this plan and finally gets a drink.

Aesop's Fables come in many versions which often include a "moral" or "application" at the end. Hence, we have the summary of the lesson of the story that we recognize today.

Trouble is, it's all too easy to apply this idea to any invention and assume that "necessity" refers to some common problem that, if solved, helps the entire community or society. So, when I saw that Waymo's autonomous taxis had shut down, not once, but twice about five days apart in the same city—the first time from a power outage that darkened about one-third of San Francisco and the second due to concerns that a coming storm would create flash floods—I asked myself what necessity is pushing the deployment of autonomous vehicles forward. (To state the obvious, cars with drivers were still able to move about San Francisco during the blackout and adapt to the outage of traffic signals.)