Energy |

Back to the Past

The Detroit Auto Show has focused even more attention on tumbling energy prices that, suddenly, have American car buyers thinking more about how much horsepower they can get instead of how much gas mileage they’ll need to help make ends meet.

This item at the The Atlantic had a series of pretty interesting photos from the area’s heyday many decades ago that included the photo below. Give the aforementioned energy price slide, we might see something similar to this at gas stations in the not-too-distant future.

These photos from the early-1940s include both race riots and war preparations, a timely reminder that, despite the current problems the world faces, things could be worse.

Trouble in the Oil (and Debt) Patch

This WSJ story ($) detailing the sharp increase in U.S. shale oil related debt along with Texas energy company WBH Energy LP going belly-up prompted this item from Russia Today.

The funny thing is that, absent any coordinated action, oil producers around the world are likely to cause an even bigger glut (and even lower prices) over the short-term as they attempt to compensate for prices that have already tumbled more than 50 percent.

Wither Russia? Oo-Yeh!

John McCain’s quip that Russia is “a gas station masquerading as a country” appears to be more true every day as a failed attempt to prop up the ruble with a rate hike from 10.5 percent to 17 percent is now seen by FOREX markets as sign of desperation rather than strength, leading to more selling of the ruble as the oil price continues to move lower.

This Washington Post story put the two side-by-side as shown below (does anyone care about Ukraine anymore?) as they detailed how doomed the Russian economy is.

According to this Moscow Times report, the Russian people may already be adapting to the new currency realities – as they did in the 1990s – via the reintroduction of:

the u.e. — which stands for the Russian words “uslovnaya yedinitsa,” or “conditional unit” and is pronounced “oo-yeh”

This is a currency unit pegged to the dollar aimed at keeping retailers from having to replace price tags on a daily (if not hourly) basis. About the only thing that seems certain at this point is that this will probably get worse before it gets better.

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Awash in (Expensive) Oil

WTI crude oil is rebounding this morning and the price for one barrel of the stuff now sits at a little over $66 dollars, a number that somehow seems equally odd and menacing.

The financial media is replete with stories of impending doom with the consensus being that marginal supplier Saudi Arabia has taken aim at johnny-come-lately marginal supplier U.S. shale, shown in green below via this offering from Prof. James Hamilton at Econbrowser.

Between Canada’s oil sands production and the boom in U.S. shale oil, North America has foisted upon the world a lot of dear oil and, now, OPEC appears to have seen enough of it.

Obviously, the solution here is for Wall Street and the Fed to provide even more cheap money in order to facilitate even bigger negative cash flows in the shale oil patch that will go on in perpetuity – let’s see how the Saudis like that.

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